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How Motherhood Widens the Income Gap for Businesswomen

Female MBAs from the University of Chicago tend to make less than their male counterparts. Motherhood is the main reason; fatherhood, meanwhile, doesn’t affect men’s salaries, or even how much they work.

Photo: Michael Tercha/Chicago Tribune

Yesterday Netflix announced that it was offering “unlimited” paid parental leave for the first year after birth. (So limited to one year, technically.) This was a big deal, in part, because the United States is alone among developed countries in not requiring any paid parental leave, and last in required unpaid leave—a mere 12 weeks. Which happens to be the same percentage of workers who get paid leave at all. In that sense, it’s something of a step forward, especially in putting maternal and paternal leave on equal footing.

But there’s been something of a backlash, which might seem surprising. For example, Bryce Covert at ThinkProgress, writing about “How Netflix’s New Unlimited Family Leave Policy Could Backfire.” Or Dylan Matthews at Vox, who calls it “a silly Silicon Valley trend that won’t die.”

The gist is this: If you’re offered a seemingly conservative/reasonable/typical amount of vacation time, like two weeks, most people won’t feel weird taking all of it, or almost all of it. A low limit sets an agreed-upon expectation. But unlimited leave or vacation time requires employees to figure out what expectations are, or just guess—and as a result they take less time off. (When Tribune Publishing, which owns Chicagobriefly went with a discretionary vacation period, we went through this debate.)

And there’s substantial evidence that employees have an incentive to take minimal family leave time. Marianne Bertrand, an economist at the University of Chicago, surveyed over 2,000 University of Chicago MBAs who’d graduated over a period of 16 years. She found a big pay gap between the men and the women—the mean annual salary for males was similar to the 90th percentile of annual salary for females. The main cause of that, unsurprisingly, was childbirth.

One interesting thing about the study, however, is that Bertrand and her co-authors investigated whether women are more heavily penalized for taking time off. That result was perhaps more surprising (emphasis mine):

The wage penalty for men, using our standardized career interruption at six years out, is 45 log points, whereas that for women is 26 log points. Taking any time out appears more harmful for men (26 log points) than for women (11 log points). Similar calculations for a standardized career interruption based on the column 3 specification, which does not hold hours constant, result in penalties for taking time out of 48 log points for men and 38 log points for women. For women, but less so for men, a career interruption usually goes hand in hand with a substantial reduction in weekly hours upon returning to work. The data do not indicate that MBA women lose more than MBA men for taking time out. It appears that everyone is penalized heavily for deviating from the norm.

Men respond by rarely deviating from the norm, even after childbirth: “Male labor supply is virtually unaffected by fatherhood in our MBA sample.” In fact, their earnings go up.

Women’s incomes go in the opposite direction, as they’re far more likely—even among MBAs from one of the most prestigious business schools in the world—to reduce their work hours:

Thus, earnings decline linearly with hours worked in the first two years after the first birth, but (hourly) wage penalties (associated with career interruptions) become evident for MBA women about three years after the birth. A woman’s annual earnings (including the nonemployed) fall modestly in the year of the first birth, and continue declining over the next several years reaching a $100K deficit relative to the base period by five years after the birth.

So many drop out of the workforce. Female MBAs are actually more likely to drop out than similarly accomplished peers in other fields: the employment rate for MDs, 15 years after graduation, was 95 percent; for PhDs and JDs, 90 percent; for MBAs, 85 percent.

Again, this is pretty representative of the farm team for America’s CEOs: University of Chicago MBAs who graduated between 1990 and 2006. And it probably helps explain why there are so few female CEOs, and as result, cause, or both, why American companies tend to have stingy family leave policies. Or, as Bertrand and her co-authors put it, “The economic benefits of re-organizing work to reduce the productivity costs of career interruptions, and more flexible work options, may be greater in professions where there is a larger share (or critical mass) of women in the talent pool.”

Netflix’s move is unquestionably symbolic, and it’s an interesting experiment. But whether it becomes something more than symbolism depends less on the family leave than what happens when people come back from it.


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