Why can't we close the gender gap?

Chicago Booth’s Marianne Bertrand and Waverly Deutsch discuss the wage gap and corporate diversity

Credit: Josh Stunkel

Staff | May 21, 2016

Why has the narrowing of the gender gap slowed in recent years?

Marianne Bertrand: No one has a definite answer. What’s more dramatic, though, is that the gap at the top of the earnings distribution, between the top-earning men and women, has not narrowed much at all over the past two or three decades. If you look at median earnings, the patterns of convergence have been stronger. 

Waverly Deutsch: We know some of the causes for the gender gap from the 1940s through the 1970s, when it was based on roles in the organization. As the role of women in the workplace has changed, the dynamics around why women make less have shifted. It’s much less about lack of opportunity, though there is still some of that. Women’s roles and their approach to their careers, along with socialization, might explain why the gap persists, and also make that last part of the gap harder to close. 

Bertrand: In the past, it was easy to point out gender differences in terms of education. Women were much less likely than men to go to college, business school, and law school. Now, women are more likely to enter and complete college than men. It’s harder to explain gender differences in earnings when there is no longer a gender difference in education.

Are women reaching senior positions but not being paid as much?

Deutsch: About 5 percent of Fortune 1000 CEOs are female. It’s not a question any longer of, “It’s not available to you.” Once women get there, what’s going on with compensation and why? In middle management, in the pipeline to the C-suite, women have a very different approach to business. Female middle managers are far less likely to say they want a job in the C-suite, to ask for promotions and pay raises, and to change jobs for career advancement. 

Bertrand: It’s not that women do not want to get to the top, but because of the role that they play at home, those jobs are less appealing. The research gives a pretty good explanation of why women are not advancing at the same rate as men. Women do something different at home than men, and children are a huge part of the explanation. Higher-paying jobs—in finance, business, law—require extremely long hours and have no flexibility. You have to be available seven days a week. Because women still do a disproportionate share of the childrearing, that’s a big part of it. Having an inflexible career is extremely difficult. 

Deutsch: The issue of taking on risk is something we see in the world of entrepreneurship. Women founders get less than 20 percent—perhaps as low as 4 percent—of venture-capital dollars. Only about one-fifth of venture-backed companies even have a woman on the founding team; yet women are starting businesses at a much closer rate to men, and women own 30 percent of the businesses in the United States. When they start businesses, they look for work-life balance. They are much less likely to start employer businesses than choose self-employment. They are much less likely to start companies that require a lot of capital upfront, that are in the really competitive areas. 

Bertrand: There is a set of explanations that have to do with different risk attitudes: women might not have an appetite for these very risky jobs; women may not have an appetite for the competitive nature of a job on Wall Street. These have been documented to exist. They are part of the phenomenon of raising our girls not to have an appetite for risk because they should be at home taking care of kids. But the research on this nature-versus-nurture stuff is not definitive at all.

Deutsch: We have to consider compensation across more than just money. When a woman is following the same career trajectory, are there factors that are holding her back from earning what her male counterparts are earning? Women are making less than men for comparable work. A senior female consultant told me her boss told her, “You talk too much about your family. That’s going to hold you back from climbing the ladder here.” She asked, “Was there ever a time when I wasn’t with my team when I needed to be, when I missed a critical meeting, when I didn’t take on travel or work that I needed to?” He couldn’t cite one. It was purely a perception issue. 

Bertrand: Perceptions are important, but that’s just one data point. There is a 50 percent pay gap between male and female MBAs 10 years out of graduate school. In the jobs they’re in, very long hours get very high rewards. Taking any kind of time off, for whatever reason, is going to hurt you. So you can explain 95 percent of that 50 percent pay gap by differences in labor supply: female students are more likely to have taken six months off to have kids, and then to work fewer hours than men, because woman tend to take on the greater share of the work at home. They cannot as easily work those long hours, so they earn less. So you could either change the model at the Wall Street and consulting firms, or change gender norms. We cannot outsource breastfeeding to the guys, but women should not be viewed as responsible for the greater share of what happens at home.

Is there a public-policy solution?

Bertrand: Scandinavia has been the most creative region. They incentivize fathers to take paternity leave. I was recently in Stockholm, and the pressure on men to take paternity leave is huge. The policy was introduced 15 years ago, but even in a very short amount of time, public policy can move norms in the right direction. 

Deutsch: Public policy is probably more effective in Scandinavia than in the US, where the pressure tends to come from the corporations. If corporations saw that by encouraging men to do more at home they would allow their female employees to be more productive, they would make changes. 

Bertrand: Education is going to play an important role. At some point, if current education trends continue, companies will have to get creative about how they attract and retain female talent.

How can we improve the number of female CEOs?

Deutsch: The challenge is the pipeline. During women’s childbearing years, they decrease their emphasis on their careers, and it’s hard for them to get back later. There is substantial evidence of a correlation between a higher number of women executives and success. Women start-up founders have more success. Having more women executives correlates with better relative returns on equity.

Bertrand: There may be a correlation between more diversity at the top of organizations and performance, but there are lots of reasons why that might not be a causal relationship. We should try to research this question, and maybe that will produce more credible evidence that having more women at the top is good for organizations. Maybe that will be more of an incentive for organizations to be more diversified. 

Deutsch: Once you have a woman on your executive board, her network is more likely to include highly qualified, highly experienced women. It is much easier to recruit women to that board or executive team.

Do quotas work?

Bertrand: We should be careful in throwing around the idea that diversity is good for business. In Scandinavia, they force companies to have more women on their boards. There is not sound evidence that this has been good for company performance. Between 30 percent and 40 percent of the boards of large corporations must be women. Our research on Norway, where they introduced that rule 10 years ago, suggests the impact of these policies is not very positive. There are some good aspects. Companies lobbied against the policy, saying they would not be able to find talented enough women to serve on these boards. The evidence clearly shows that they could. In fact, the women who then came on to boards were better qualified than the few women who had been on the boards before. That’s the only good news.

We looked to see if, once there were more women in the boardroom, they’d find more women to serve in the C-suite or slightly below the C-suite. We found no evidence for that. We looked at the next generation to see if young women in Norway would choose a career in business or think differently about trading off early fertility for staying on the career track. Again, we found no evidence. 

The danger with quotas is the sense that, “We’ve checked the box. We’ve done it. We have a policy in place, and now there is no more problem to solve.”

Deutsch: We don’t like to solve problems with quotas, just by checking the box. I do think that once diverse talent is in the door, it’s easier for organizations to bring in even more. 

Bertrand: Again, one has to be very careful. Some of the best research has a hard time finding that this stuff really works. There is some fantastic work looking at the entry evaluation committees for law careers in Spain, where a candidate is being interviewed by a panel. They found that once you put a woman on the panel, the female candidates do more poorly compared to the male candidates