This past week, Goldman Sachs announced its latest round of annual promotions, and in doing so, it offered all of us a reminder that Wall Street is still more or less an adult chapter of the He-Man Women Hater's Club. Just 14 percent of the bank's new partners, and 23 percent of its new managing directors, were female, according to Bloomberg. That's pretty paltry, and about in line with the last couple years.
The sobering stats prompted Business Insider's Henry Blodget to ask his readers just what the heck was going on. Though he later nixed this passage after deciding it made him sound like a "sexist neanderthal," here's how he initially framed the issue.
Choice of words aside, Henry's on target about at least one thing: Babies probably explain much of the gap, and not just at Goldman. As Anne Marie Slaughter will tell you, even highly educated women tend to do a disproportionate share of child rearing in this country, and research suggests that ends up putting a huge dent in their careers.
In 2010, Harvard economists Claudia Goldin and Lawrence Katz teamed with Marianne Bertrand of the University of Chicago to publish a paper investigating why it is that, over the course of their work life, female MBAs earn so much less than their male classmates. They tackled the question by surveying graduates of Chicago's Booth School of Business from the classes of 1990 and 2006. Their findings suggested that family obligations were in fact a huge part of the reason why females have so much trouble climbing the elite corporate ladder.
The men and women of Booth started out making roughly similar salaries, as shown in the graph below. Men did slightly better for themselves, in part because they were a bit more likely to take jobs in investment banking or consulting.
Over time, however, the Booth men far outpaced the Booth women. After 10 years or more in the job market, the median male graduate earned about $242,000; the median female earned just $146,000.* The main reason for that chasm was that women were much more likely to take a break from their careers, or work reduced hours, which had a massive influence on pay. Here's how the researchers summed it up:
Women have more career interruptions, and work shorter hours, including more work in part-time positions and self-employment. Although these differences are modest, the remuneration disparity they entail is exceptionally large. [...] Any career interruption--a period of 6 months or more out of work--is costly in terms of future earnings, and at 10 years out, women are 22 percentage points more likely than men to have had at least one career interruption. Deviations from the male norm of high hours and continuous labor market attachment are greatly penalized in the corporate and financial sectors.
Why were so many women taking breaks from otherwise lucrative careers? Children, mostly. Mothers had eight months less job experience on average than their male peers, and typically worked about 24 percent fewer hours. Women without kids, by contrast, had just 1.5 months less experience, and worked just 3.3 percent less per week.
The women who chose to get married, have children, and take time off work didn't appear to be any less talented or ambitious than their classmates. "To the contrary," the researchers wrote, "we find that married women have slightly higher predicted earnings than unmarried women, and those with children have slightly higher predicted earnings than those without children...." Beyond that, many of the MBA moms initially tried to keep up their workloads, only to give up over time. "It is as if some MBA moms try to stay in the fast lane but ultimately find it is unworkable," Goldin and Katz wrote in a followup paper a few years later.
In the end, the mothers who interrupted their careers for kids seemed to have one major thing in common: rich husbands. MBA women without high earning spouses generally didn't leave the workforce, but they did cut their hours a bit. Families often under-estimate the work of raising a child. And, assuming the husband makes more or about the same as the wife, America still treats childcare largely as a women's obligation. Until that changes (or we find a way to make parenthood less of a career killer), places like Goldman are going to stay boys' clubs.
UPDATE - 8:21 pm, Nov. 18.
Forbes blogger Helaine Olen has, I think fairly, called me to task for failing to make something clear: I don't mean to rule out the possibility that Goldman Sachs, or any other big bank, outright discriminates against its female employees. There's currently a gender discrimination suit against Goldman making its way through federal court, which could potentially tell us more about the situation there. Now, just because there's a lawsuit out there doesn't mean its claims are true. But I'm not sure anybody would be surprised to find out that the testosterone-fueled culture of an investment bank turned out to be hostile to some women.
That said, I think it's also important to focus on systemic issues that hold back women's careers. For MBA mothers, the way we approach child rearing in this country, and the toll it can take on careers, is one of the most important hurdles they face, though by no means the only one.
*Those precise numbers are in the study's appendix.