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4 Things Business School Grads Need To Know About The Gender Pay Gap In 2024

Payscale’s 2024 Gender Pay Gap Report shows a significant pay gap for MBA grads. Here’s why—and what business school grads can do about it

Thu Mar 14 2024

According to PayScale’s 2024 Gender Pay Gap Report, one of the widest gender pay gaps exists between male and female MBA graduates.

But what is the gender pay gap and where does it come from? And how can business school grads of all genders close the pay gap for themselves and society at large?

We dove deep into gender pay gap examples and consulted business school experts to discover how MBAs can work to close the gender pay gap for good.

What is the gender pay gap?

The gender pay gap is the difference between the average earnings of working men and working women. According to PayScale’s 2024 research, without controlling for factors such as education and job function, women earned just $0.83 for every dollar a man made in 2023.

What uncontrolled gender pay gap data tells us

Because uncontrolled data does not account for socioeconomic factors, it can be used as a broad measure of how society values women’s contributions.

In an equal society, men and women would achieve pay parity, having equal access to all industries and job levels. But in 2024, women are disproportionately likely to work in lower-paying jobs and sectors, thanks to factors such as discrimination and gender norms.

What about when gender pay gap data is controlled?

Uncontrolled gender pay gap data shows us the disadvantages that come from women working in different roles to men—but what about when they work in the same jobs?

To measure whether women receive equal pay for equal work, we need to control the data for factors such as education and job title.

When these socioeconomic factors are controlled, the gender pay gap narrows considerably, to $0.99 cents on the dollar. However, don’t consider the gender pay gap debunked just yet.

Although $0.99 might seem close enough to parity, the gap has never fully closed, even for women doing the exact same jobs as men.

This shows that women still experience limitations on their compensation, despite pay transparency and anti-discrimination legislation coming into effect.

Key gender pay gap facts in 2024

Here are the most important gender pay gap statistics and facts you need to know about for 2024.

The gender pay gap can largely be explained by the 'motherhood penalty'

Mothers earn just $0.75 on the dollar compared to fathers when you don’t control for socioeconomic factors, and $0.98 when these factors are controlled – both big jumps compared to the overall gender pay gap statistics.

Meanwhile, when you control gender pay gap analysis for men and women without children, the gap disappears.

This suggests that for women, having a child, or even just being able to have a child, is the primary cause of gender pay disparities due to factors such as:

  1. Taking on more childcare responsibilities than men
  2. Reducing working hours to take on these responsibilities
  3. Facing biases around parenthood, for instance the belief that they are less committed to their jobs
  4. Working remotely to balance childcare responsibilities—Payscale’s report shows that remote working brings pay penalties for women

The gender pay gap widens as women age 

The motherhood penalty also contributes to how the gender pay gap evolves as women age.

When they work the same jobs, women and men aged 20-29 earn equal pay. However, women aged 30-44 earn just $0.82 on the dollar uncontrolled, or $0.98 when controlled. This gap widens further for those aged 45 and over, who earn just $0.75 on the dollar uncontrolled.

PayScale also found that women’s careers are more likely to stagnate than men’s, and when they do overcome barriers to promotion, they experience a gender pay gap of $0.94 on the dollar.

The gender pay gap persists for highly educated women, particularly MBAs

Shockingly, the gender pay gap is wider among women and men with MBAs, law degrees, and doctorates than among associate, bachelor’s, and master’s degree graduates.

The widest uncontrolled gender pay gap of all exists among MBA students, a trend which has persisted year-on-year, with women with MBAs taking home just $0.76 for each dollar earned by men with MBAs.

It’s not all bad news: The gender pay gap has narrowed for women of color

One improvement on previous years is that, when data is controlled for factors affecting compensation, most women of color are paid the same as men. Only Native Hawaiian and other Pacific Islander women and white women workers did not quite close the controlled gender pay gap this year.

This may be the result of:

  1. Increased emphasis on diversity, equity, and inclusion
  2. Pay transparency legislation
    Organizing around the Black Lives Matter movement

Why is there a gender pay gap for MBA grads?

Research by the Forté Foundation shows that an MBA degree can boost the salaries of women and minorities by 57% or more in their first job after graduation. So why is there such a pronounced difference compared to their male classmates?

Here’s what the experts have to say:

Choosing different MBA concentrations

One of the reasons for the gender pay gap among MBAs is gender differences in the concentrations students choose.

“At most business schools, men are more likely to take finance classes and graduate with a finance concentration,” says Paige Ouimet, professor of finance at University of North Carolina Kenan-Flagler Business School. “Finance tends to pay high wages."

PayScale’s research shows finance and insurance has one of the biggest controlled gender pay gaps, with women in finance earning $0.77 on the dollar.

This is followed by agencies and consultancies—another top industry for MBA grads—where women earn $0.84 on the dollar.

Applying for 'greedy jobs'

The types of roles available in high-paying industries also makes a difference, argues Paige, especially when you consider the motherhood penalty.

“Many jobs that MBAs are aspiring to hold are what we call ‘greedy jobs,’ so-called because they require long and inflexible hours,” she says. “They require someone to become an expert and then be available whenever their expertise is needed.

“These jobs are hard to balance with having small children and given that childcare responsibilities tend to fall more heavily on women, this makes it even harder for women to hold such positions.”

How business school grads can close the gender pay gap for good

MBAs may fall prey to the gender pay gap, but they also have the power to change it – here’s how.

1. Push for more inclusive working practices for parents

“Given their role in corporate management [MBA grads] should be aware of the reasons why male and female labor market outcomes can diverge over time,” says Jesse Davis, associate professor of finance and associate dean of the full-time MBA at UNC Kenan-Flagler.

“My hope is that this awareness will help them design roles which can accommodate parents at different stages in their careers.”

This isn’t just about helping working mothers return to work, but supporting working fathers to take on more childcare responsibilities by pushing for policies such as: 

  1. Extended parental leave for men and women
  2. Sick day allowances for parents to look after their children
  3. Onsite childcare like clothing giant Patagonia

Your business will thank you. Organizations that invest in employees and their families have 5.5 times more revenue growth thanks to increased innovation, talent retention, and productivity.

2. Work with business schools to ask for starting salary equity

Aneeta Rattan, professor of organizational behavior at London Business School, says that business schools have the power to help their students achieve pay parity by sharing data on graduate pay gaps.

“Business schools can catalyze change by taking a data-driven approach, perhaps sharing their data on average pay gaps among their graduating students, and even intersecting with other identities such as race,” she suggests.

“Were companies to know this data analysis would be done, they might be more careful to ensure equal pay offers. If MBAs were equipped with this data, they might be empowered to ask for starting salary equity.”

3. Use your data skills to analyze why pay disparities occur

Aneeta also advocates for using a data-driven approach to not only identify gender pay gaps in their workforce but to analyze why they come about, particularly the motherhood penalty.

“Is it because women’s maternity leaves are held against them in calculating ‘years of experience’? Is it because women are stepping out of the highest-paid roles because [these roles are not] compatible with motherhood?

“Once a company has evaluated where their motherhood penalty comes from, then they can craft targeted interventions to correct it.”

These kinds of data-driven interventions can make a huge difference to morale and productivity. Studies show that for every 10% increase in intersectional gender equity, organizations see a 1%-2% boost in revenue.

4. Implement more inclusive hiring practices

For graduates with hiring power or working in HR, one powerful way to reduce penalties for women, especially those returning to the workforce, is to use a skills-based hiring approach that emphasizes skills testing over traditional resumes.

One study found that the number of women hired into senior roles increased by almost 70% by using this method.

Skills-based hiring not only reduces hiring discrimination but can also encourage more women to apply for roles in the first place.

Research shows that a skills-based approach to hiring increased the number of women applicants by 17%.

Image © Envato, reproduced under this license