Applied Economics and the Glass Ceiling: Prof. Marianne Bertrand Discusses the Gender Pay Gap

On Friday May 4, Marianne Bertrand, the Chris P. Dialynas Distinguished Service Professor of Economics at Chicago Booth, presented her review of recent research on why women continue to earn less than men. Bertrand’s lecture unpacked the reality that, despite substantial gains for women in many countries over the last century in education, labor force participation, and labor market earnings, women are under-represented in the upper part of the earnings distribution. Additionally, when they are represented, data shows that they earn less than men. This presentation was part of the Becker Friedman Institute’s lecture series, 2017-18 Friedman Forum, which was created for undergraduates, offering them an opportunity for informal discussion with prominent economists. 

The room in Saieh Hall was quickly standing room only, filled with undergraduate, MBA, and PhD students alike. Bertrand later commented, “I’ve given versions of this talk several times, subsets of it, and it’s always a very heavily female audience so I actually appreciated that this one was much more gender-balanced in terms of who was in the audience. I think it’s very valuable”. Bertrand’s introduction included trended analyses across several papers revealing the consistency of under-representation of women and gender pay gaps throughout high status occupations in business, health, technology, science, and other industries. 

The crux of the lecture focused in on why women are struggling to break the glass ceiling. In fact, why is the economy operating inside its efficiency frontier in terms of its pool of leaders? First, Bertrand explored the research on gender differences in psychological attributes. Both within lab environments and among MBA graduates in the corporate world, data indicates that women have higher rates of risk aversion and less willingness to compete. Across more than seven studies from 2006 to 2015, these effects of gender differences in psychological traits account for anywhere between 5-15% of the gender pay gap. Bertrand stressed that the research isn’t clear on how much of that difference is attributable to upbring and society (nurture) versus genetics (nature), but her subsequent slides pointed towards a strong societal impact. Additionally, the magnitudes suggest that these trait differences are not a first order factor -- not the key explanation for what is going in the labor market. 

Next, Bertrand reviewed data exploring women’s demand for flexibility and work-life balance, given that higher-paying jobs tend to have long, inflexible hours and that, due to societal constructs, women remain the dominant providers of childcare. A paper published by Bertrand, Goldin and Katz in 2010 surveyed multiple cohorts of Booth MBAs for thirteen years after graduation, and found that parenthood impacted two components of labor force participation and labor supply which accounted for significant portions of the gender gap. Thirteen years after graduating from a top MBA program, women demonstrated over a 56% gap in salary compared to their male classmates -- on average, men earned $450K in total compensation while women earned less than $150K.  The authors then parsed out several factors potentially causing this gap. Certain factors, such as pre-MBA characteristics and MBA performance, did not have large impacts. However, controlling for labor market experience, which reveals time taken away from work after graduation, reduced the gap to 31%. Controlling for weekly hours worked reduced the gap to 10%. The study revealed that taking time away from work and working on average 7 hours per week less than men greatly impacted women’s earnings. Regarding that remaining 10% gap, Bertrand noted, “it’s still there, it’s still big, and you can call this whatever you want -- you can call this discrimination...the main point I want to stress is that you can explain a lot simply by looking at labor supply”. Furthermore, Bertrand presented research that revealed a so-called “child penalty,” in which childbirth and childcare mapped directly to explaining the large gender gaps in both the U.S. and Scandinavia. Time constraints allowed for a quick nod to the roles corporate and public policy play. To conclude, Bertrand noted that she did not cover discrimination not because it’s irrelevant but because there seem to be many factors in the labor market which indicate that discrimination is not the sole reason for the gap. Additionally, firms can adjust, and technology can evolve, to lessen the gap especially as it relates to flexibility as the economy progresses towards the future. The review of Bertrand’s work can be found in her paper, The Glass Ceiling (2017 Coase Lecture, London School of Economics).

Attending the lecture has afforded several students the opportunity to discuss Bertrand’s findings throughout Harper Center’s hallways. First year student Leigh Terhaar said, “It's easy to find opinion pieces and anecdotal evidence of pay differences between men and women, but these usually fall short of getting to the heart of what's going on. I wanted to hear about the research so that I could look at it from a more objective point of view and understand how work-family life balance plays a part...It made me think about my own goals both personally and professionally and what the short and long term trade offs are. Everyone talks about trade offs, but seeing the salary differences over the course of a career put the issues into a new perspective”.