What's your mother worth?

By Chinwe Aneke ‘15

Chinwe Aneke '15

Chinwe Aneke '15

A recent Radiolab podcast on “Worth” explored the possibility of placing a dollar value on different things, such as the value of a person’s life in society. As a 2Y student suffering from senioritis, I decided to calculate my market value over the course of my career rather than read yet another case. In true Booth style, I sought out data for this exercise.

I came across a paper by Professor Marianne Bertrand, the Chris P. Dialynas Distinguished Service Professor of Economics at Booth, on the Dynamics of the Gender Gap for Young Professionals in the Finance and Corporate Sectors. I found my answers, but wish I hadn’t looked in the first place. Surprisingly, men and women start out earning similar wages right after graduation. Unsurprisingly, the pay gap widens so much so that by year nine, men earn $400K on average, while women earn $250K on average (in 2006 dollars). Why?

Professor Bertrand cites reasons such as pre-MBA preparedness, Booth course selections (take more finance classes ladies) and number of hours worked.  Did she assume that quality of work is directly correlated with quantity of hours worked? Ever heard,“Work smart, not hard,” Professor Bertrand? I didn’t turn too many pages before she debunked my smart-ass comment. In finance and corporate roles, she says the reason is due to the non-linearity of business careers. As Professor Eric Budish, Associate Professor of Economics at Booth, explained, linear careers, such as ones in the medical field, allow you to work 50% or 80% as many hours for 50% or 80% as much pay, but in non-linear careers, such as those in the business field, you simply can’t work 50% or 80% as many hours and be effective.

Now to your mother. The reason women reduce their hours worked is linked to children. Over the course of their careers, mothers leave substantial compensation on the table because they opt for fewer hours and choose careers that don’t fast-track to the top of the corporate ladder. If your mother had an MBA and gave birth to you within nine years after graduating, you cost the lady $150K. Our belief in the market’s ability to price perfectly says your mother was less valuable in the labor market than a man because of you; so is that residual $150K what motherhood is worth?

The other two reasons for the wage-gap may cloud this calculation, so perhaps another way to evaluate your mother’s worth is to examine a country where a substantial number of women have chosen to forego childbearing to focus on their careers. How much of the country’s GDP is affected by this collective decision of women? Should we pay women to be mothers?

For me, the takeaway from Professor Bertrand’s paper is: If I have a child who ends up at Booth for his/her MBA, I’ll be demanding a $150K (future value comes to about $315K) check nine years post-graduation. Ladies, I suggest you do the same.

The author is a second year student who is curing her senioritis disease by reading research papers.