Comparative Data Analysis Look at Salary and Employment Prospects for MBA graduates based on gender Essay

Comparative Data Analysis Look at Salary and Employment Prospects for MBA graduates based on gender

Abstract

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Available data indicates that average salaries are on an upward trend and that MBAs commonly attract higher starting salaries than other professionals. Additionally, MBAs are also deemed to be generally more attractive than other graduates in the labour market. Consequently, they have a much higher chance of securing meaningful employment. Studies have also affirmed the existence of a huge gender gap with wide variances in salaries between the two sexes. These disparities have been noted to cut across countries and to display great differences. However, few studies have specifically explored the disparities in employment and remuneration of MBAs based on gender, an issue that begs a lot of questions. Is there a gender wage gap among MBA graduates? To what extent does gender determine the desirability of MBA graduates? Is gender a factor in awarding of salaries? The purpose of this paper is to critically analyze relevant data in an effort to answer all the foregoing questions.

Introduction

Basic considerations

            Gender

Employment prospects and salaries earned by individuals are to a large degree influenced by their gender. This is an assertion that has been tested and enumerated severally by many studies on gender pay gap and employment. Blau & Kahn (106-144) documented the existence of marked global disparities in the gender wage gap.  It is estimated that a gender pay gap of close to 20% exists in the European states of Belgium, Italy, Poland, Sweden, Hungary, Italy, and the Czech Republic (OECD, “OECD Employment Outlook” ). Similarly, a big gender wage gap is reported for South Korea, Japan, Canada and Austria with variations as high as 40-50%. The United States is reported to have a gender wage gap of 78% and France a disparity of 10%. Additionally, it has been determined that the gap has been reducing for some countries such as the U.S. and France whereas in others such as Switzerland it has remained more or less constant (Polachek & Xiang 4).

In cross-country analyses of the gender wage gap, Blau and Kahn (105-43; 791-837; S29-S62) determined that higher wage gaps exist in nations where the general wage disparity is big as female workers are usually placed at the lower ends of wage distributions. As previously mentioned, the U.S. has a very big gender wage gap that stands at 78%, with men earning significantly higher wages than females. However, when analyzed for different groups, the disparity shows significant variations. Single women earn 10% less than men whereas married women earn 60-70% less than men. Furthermore, married women with children earn less than married women without children but earn more than married women who space their births widely (Polachek a. 8; Harkness & Waldfogel 369-414; Polachek b. 205-29).

Consequently, lower wage earnings among females have been attributed to the so-called “Motherhood penalty”, where children are shown to negatively affect wage earnings by women. Other researchers corroborate these findings. Waldfogel (137-156) illustrates that a woman’s salary gets lowered by 10% once she gives birth while Budig & England (204-225) assert that each child imposes a 7% reduction in her mother’s salary. Similar findings have been reported by Berger et al (309), Joshi, Paci & Waldfogel (543-564), and Davies and Pierre (469-486)

It has also been observed that men and women generally get similar salaries after graduating. Men’s salaries rise steeply compared to women’s which decline after marriage and child bearing. However, the salary gap between the genders lessens when women return to employment (Polachek 205-29b; Ofer & Vinokur “Earnings Differentials by Sex in the Soviet Union” A First Look”).

Employment across the genders also reflects a similar trend. It is estimated that more women are now in the labour force than before, with a rise from 4.6% in 1890 to 61% in 2003 (Goldin 60-61 cited in Polachek 9a). Women spend more time out of employment than men. According to Polachek & Kim (23-42c) women spend a mean of 9.62 years out of employment compared to men’s 2.22. Simpson (1777-86) finds that married Canadian mothers are more likely to spend 36.4% of their working life outside employment compared to 12.9% for single women and 8.1 for men. This finding is replicated for MBAs (Catalyst “Workplace Flexibility Is Still a Women’s Advancement Issue”).

Salaries Earned by MBAs

Projections put the average income earned by new MBA s in 2006 in the U.S. at $80, 292, a reflection of an 11% increase over a 4 year period. Mean incomes for MBAs were $72,459 in 2002, $75, 418 in 2003, $80,266 in 2003 and $ 78, 385 in 2005. Reductions in salaries witnessed in 2002 were attributed to reduced economic growth. The 25th percentile over the same period was $65, 000 and the median $75, 000, $80, 000, $80, 000, $80, 000, $82, 000 respectively. The 75th percentile was computed to be

$84, 500 for year 2002 and $85, 000 for 2003 and 2004. Values for 2005 and 2006 were $90, 000 (table 1,) (Murray 2).

Table 1: Average incomes earned by MBAs in U.S.

2002
2003
2004
2005
2006
Mean
$72, 459
$75, 418
$80, 266
$78, 385
$80, 292
25th percentile
$65, 000
$65, 000
$65, 000
$65, 000
$65, 000
Median
$75, 000
$80, 000
$80, 000
$80, 000
$82, 000
75th percentile
$84, 500
$85, 000
$85, 000
$90, 000
$90, 000

On average, salaries earned by MBAs were $11,000 more than those of other graduates. This has been attributed to the strong communication and technical skills possessed by these graduates together with their ability to meet employers’ expectations (table 2) (p.4). Other graduates earned an average of 53,553, 59,621, 65,578, 63,920 and 66,430 US dollars respectively from 2002-2006. Mean differences between MBA graduates and other graduates salaries for the period 2002-2006 stood at 12,828, 12,061, 10,942, 11,714 and 10,736 dollars respectively (table 2,). However, there is a scarcity of data on the average incomes earned by MBA graduates by gender (Murray 4-5).

Table 2:comparison of salaries earned by MBAs and other graduates in the U.S. (Murray)

2002
2003
2004
2005
2006
MBA Graduates ($)
66, 381
71, 682
76, 520
75, 634
77, 166
Other Graduates ($)
53,553
59,621
65,578
63,920
66,430
Mean difference ($)
12,828
12,061
10,942
11,714
10,736

Regional disparities also manifested with regard to the mean starting salaries for MBA graduates. MBA graduates getting employment in the South earned markedly lower salaries than their counterparts in the Northeast or in the West.  Salaries in the West were the highest with an average of $83,700 in 2006 (table 3, Appendix). In the Middle Atlantic region and the South, salaries increased steadily by an average factor of 3.5% and 5% respectively (Murray 5-6).The buying power of the salaries paid to the MBA graduates was strong in all the regions with the exception of the Northeast (Murray 7).

Employment of MBA graduates by gender

                Estimates indicate that only 29% of women with MBA qualifications are engaged in full time employment in a consistent manner since their graduation. In contrast, 61% of men with MBA qualifications are employed (Catalyst “Workplace Flexibility Is Still a Women’s Advancement Issue”).

Discussion

                From the foregoing review of literature, it was observed that more men with MBA qualifications are currently employed than are women. This can be attributed to a number of factors.  Most of these factors relate to the so-called “motherhood penalty”. Primary among these is the division of labour in the home. This arises when the mother is forced to drop out of work and remain at home in order to take care of domestic duties such as raising children (Polachek 10a).

                This division of labour is said to occur due to a number of reasons. Firstly, it may be caused by the woman’s weaker bargaining power in a marriage. In this case, the husband’s decision carries more weight. Since the traditional role of women has revolved around household chores with the man as the breadwinner, the man may be reluctant to quit his job in order to remain in the house to take care of kids and other domestic chores. Thus, the woman with MBA qualifications would quit her job in favour of taking care of her home thereby contributing to reduced numbers of employed women with MBA (Ott 80-99).

            Secondly, high marginal tax rates levied on the salaries of married women has also been cited as an important factor in women’s low participation in the labour market (Kumar “Lifecycle Consistent Estimation of Effect of Taxes on Female Labor Supply in the U.S: Evidence from Panel Data”). This is especially true where the women are earning lower wages and where tax cuts would greatly erode their earnings. However, MBA graduates have been shown to earn significantly higher salaries and the effect of taxes on the salaries of those who are married may not serve as important factors causing them to quit their jobs.

            Thirdly, inability to access day care centres is also mentioned as an important factor contributing to the low level of women participation in the labour force market. This commonly occurs when such facilities are not available within the family’s locality. In such instances, the wife will be constrained to remain at home to take care of the young children. This would seem to be an important factor behind the low levels of women with MBA qualifications in employment (Krayenfeld & Hank 317-37).

            Culture is also mentioned as an important contributor to the low level of women participation in the labour force (Coltrane 1208-33). Women are viewed in many cultures as homemakers whose primary duty is to stay at home and help in the upbringing of children. Working women who get married may face these cultural pressures which may cause them to quit their jobs. However, the effect of culture on women with MBAs has not been described.

            On the other hand, men are not severely constrained by the factors outlined. If anything, cultural considerations require them to be the breadwinners and upbringing of children is not considered to be their domain. In short, factors causing low participation of women in the labour force do not place such inhibitions on men and they are therefore at liberty to pursue their careers fully.

                Studies cited before indicate that men earn higher salaries than women across the board. No conclusive data on the variations existing between the earnings of men with MBA qualifications and women with similar qualifications is available. However, from the general studies conducted on the gender wage gap, it seems very likely that factors directly responsible for this gap play an important role in creating disparities between men and women with MBA qualifications.

                   Numerous factors have been listed as affecting women’s wages. For starters, employed men tend to invest much resources in ventures that would enable them advance their careers and climb the corporate ladder. Such investments would include attending training seminars, extensive reading, among others. These ventures would enable them become more knowledgeable in their fields, more efficient workers, and hence more useful employees (Polachek 10).

                This would in turn lead to promotions and higher pay. On the other hand, married women would invest more time and resources in the home. With little time to invest in capital resources, they tend to become less specialized in their areas of study so that their bargaining power is reduced when they return to the job market. As such, they will command low salaries. Specialization of men with MBAs in their places of work leading

 to their attractiveness as workers as contrasted with that of married women with MBAs in their homes leading to reduced skills would thus seem to be a likely reason behind the gender wage gap (Polachek 10a).

A number of variables have also been proposed as being contributory to the gender wage gap. Fertility rate is often mentioned as being the most important factor. Other factors cited include the age gap between husband and wife at their first marriage,

The top marginal income tax rate, and female relative educational attainment (Polachek 5a). As described in the preceding sections, single women earn significantly higher salaries than married women who in turn earn 60-70% less than men. In addition, married women who space their births widely earn less than married women without children but (Polachek a. 8; Harkness & Waldfogel 369-414; Polachek b. 205-29).

As such, lower wage earnings among females have been attributed to the so-called “Motherhood penalty”, where children are shown to negatively affect wage earnings by women (Waldfogel 137-156; Budig & England; 204-225; Berger et al (309), Joshi, Paci & Waldfogel 543-564; Davies and Pierre 469-486)

                In a secondary meta-analysis investigating gender-based pay disparities, Weichselbaumer and Winter-Ebmer (“The Effects of Competition and Equal Treatment Laws on the Gender Wage Differential,”) contend that ratification of international conventions which favor gender parity among workers negatively impacts the gender wage gap in a major way. Stated differently, several international conventions favour affirmative action while discouraging discriminative practices based on gender considerations in the workplace. This has had the effect of equalizing wages between the sexes thus lowering the gender wage gap. As such, countries that have ratified such treaties manifest remarkably low gender wage gaps across the board. However, no study has demonstrated that lower earnings among females with MBA qualifications are as a result of gender discrimination. Studies on this area need to be carried out.

                Another factor said to lower the gender wage gap is the collective bargaining agreement. Countries that have effected CBA regimes would thus have little disparities in salaries earned by members of both gender (Blau and Kahn (105-43; 791-837; S29-S62).

Similarly, it has been reported that countries exhibiting a higher rate of economic competition as measured by the Economic Freedom Index generally have markedly reduced gender wage gaps. This is an observation that is premised on the theory that competitive markets lead to a decimation of discrimination based on gender consideration as a long-term consequence of cost-cutting measures. Becker (1957)

This would suggest that highly liberal economies with advanced markets would be expected to have low wage gaps. However, this is not always the case as the U.S. demonstrates. With active affirmative actions, a highly competitive and advance market and free market policies, the gender wage gap stands at an astronomical rate of 78%. This implies that other factors play a more important role in widening the gender wage gap.

The important conclusion to be drawn from this finding with relation to MBA graduates is that the low wages earned by women with these qualifications is less of a systematic problem. Rather, it has more to do with the other mentioned variables that touch on the “motherhood penalty.”

Additionally, the age difference between husband and wife at their first marriage is also mentioned as a possible cause of the gender wage gap. This assertion is based on the observation that older persons are more likely to be well-read, to have wider work experience and therefore to have skills that would attract a higher salary. On the other hand, younger persons are less experienced, less skilled, and less schooled and therefore may not be able to command a higher salary. When an older person marries a younger person, then the differences become bare and the wage gap more obvious.

All the reasons cited have the same effect: that of reducing the affected individual’s incentive to invest time and resources in human capital investment. The affected individual, as demonstrated, is in most cases the woman. This causes them to be less marketable. As a result, they are not able to get higher salaries. This is in contrast with members of the opposite gender who may not face similar constraints. This would indubitably lead to a widening of the gender wage gap.  (Polachek 10a)

Finally, these observations are based on the lifetime participation model. First proposed by Ben-Porath (1967), this is a model which seeks to explain lifetime participation by individuals in the labour market. It is of significant importance as it also takes into account the periods when persons are out of employment. In its basic form, it asserts that the salary and wages that a person gets in the workplace are directly related to the person’s training both in school and at work.

Future earning expectations of the person in turn act as a motivating factor for him to improve his/her skills. Where there are no expectations of future earnings, then the employee is not motivated to invest t in human capital investments, leading to diminished skills which make the person less marketable.

Despite the gender wage gaps, recent reports assert that the pay gap is narrowing. Opinion is strong that favor women are favoured by the increasing rates of return to education, especially when viewed in the context of expanding college enrollments. As Polachek opines the diminishing gender wage gap obtains from women’s increased incentive to participate in the labor market during the past decades. Higher expected participation leads to steeper earnings profiles and smaller overall wage differences. The implication is that women with MBAs are more motivated now, more than ever before, to invest in human capital investments so as to obtain the increasing salaries which MBA graduates receive. As such, they will become less involved in homemaking with the result that the gender wage gap among MBA` graduates will be greatly lowered.

Conclusion

MBA graduates are more marketable than graduates from other professions. This is because of their strong communication and technical skills coupled with their ability to meet employers’ expectations.  On average, MBA graduates earn higher salaries than graduates from other professions. Studies from across the world show that a gender wage gap exists in many countries. Generally, men are shown to earn higher salaries than women. Many factors have been cited as being behind this observation. These include the fertility rates of women, the role of culture, high marginal tax rates on wives’ salaries, and unavailability of day care centers.

More men with MBA qualifications are employed than women. There is scarcity of data on gender wage gap among persons with MBA qualifications. However, factors causing disparity in salaries earned between members of both genders have been linked  with across the board and as such, conclusions drawn that men with MBA qualifications get better salaries than women with similar qualifications.

 The above factors have been associated with other factors have been mentioned as possible contributors to the reduction of the gender wage gap. These include ratification of international treaties favoring achievement of gender parity and collective bargaining agreements.

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Appendix I

Table 3: Average Expected Annual Starting Salaries for New MBA Graduates by Region

2002

2003

2004

2005

2006 Average % change
Northeast

$78,208 $80,655 $82,418 $87,837 $84,352 2.0%
Middle Atlantic 68,609 70,118 77,191 79,630 83,407

 5.0
Midwest

75,200 75,257 89,847 79,167 81,902

 2.8
South

63,635 65,293 69,024 69,029 73,043

3.5
Southwest

71,436 69,270 72,390 72,376 72,963

0.6
West

80,047 80,063 76,561 78,337 83,700

 1.2