Women in Finance: Underpaid?

A new survey of professionals in banking, accounting and finance shows a startling gap between what men and women are paid for doing the same jobs.

By Anne Fisher  (Fortune.com  10-14-2002)

No doubt about it: Over the past three decades, the "gender gap" in U.S. employees' salaries overall has narrowed significantly, so that women in nearly every line of work are on a par, or very nearly so, with their male peers. That's the good news.

The not-so-hot news is that pockets of inequality remain. Oddly, one of these is a field where you might expect people would be especially inclined to scrutinize the numbers: banking, accounting, and finance. In fact, gaps of 20%, 30%, and even 40% are not uncommon between men and women with the same education and job title, according to a new survey of 2,575 finance folks nationwide by job site CareerBank.com.

Female lending officers at banks, for instance, reported average pay of $38,666, while their male peers average $61,021. And look at assistant treasurers: Women with that title make, on average, $50,000 a year. Men make $88,550.

"We were surprised by these numbers," Robert Epstein, CareerBank.com's CEO, told me recently. "In fact, just to make sure we were really comparing apples to apples, we analyzed the survey results several different ways, including taking marital status into consideration. We found that, at the lower-to-middle levels, the gap between men and women is not too bad. For example, single female staff accountants earn $36,802, to single men's $38,464. But single women overall earn $42,315 to men's $54,292, while married women earn $48,302 to men's $68,294. And the higher you move up through the ranks, the more the pay disparity increases."

Indeed. Consider the average salary of a female chief financial officer with a master's degree: $70,908. What does her male counterpart make? $112,109, a whopping $41,201 gap. "Even with the same education as men, women CFOs earn only 63% of male CFOs' pay," notes Epstein.

What accounts for the differences? Epstein observes that explanations abound--but that none of them are particularly persuasive. "Often you hear people say, 'Well, women are more likely to be working part-time or flextime, so that explains it.' But everyone in our survey is full time," says Epstein. "You also hear, 'Women are more likely to take time off to have kids, so they fall behind.' But if someone takes a few years off to raise a family, are they going to come back with the same title as a man who had not taken that break? Probably not."

So how to explain the gap between men and women at the exact same level of responsibility? CareerBank's researchers asked only about salary, not about other benefits such as child care, dental insurance, or ability to telecommute, all of which appeal to women with young children, Epstein says. "Organizations that offer those things may tend to attract more women, and the family-friendly benefits may act as an offset to lower salaries," he explains. "That might realistically explain a 10% or 15% disparity in pay--but 20, 30, 40%? We don't think so."

Still, before we jump all over banks and other financial companies for undervaluing their female employees, let's think about something I've heard from at least a couple of dozen executive coaches and recruiters over the years: Women, on the whole tend not to be as comfortable as men when it comes to discussing money. (Of course there are exceptions.) They tend not to keep track of their current value on the open market with the same assiduity that men do. And they often are not as assertive in negotiating for raises as men are. For the pay gap to disappear, all that has to change.

In the short term, says Epstein, it is in financial companies' own best interests to take a close look at who is making what. "More than half of all new college graduates in accounting and finance are female, so numbers like this are actually dangerous for the industry," he says. "Underpaying half your workforce is not great for recruiting or retaining the best people. If employers aren't careful, it will ultimately hurt their business. And it's a problem with a ready solution: Review everyone's current pay and start rewarding the top performers, regardless of sex." Hear, hear.

Now, while we're on the ever-popular topic of pay, here's an e-mail from a reader about the column on job interview howlers: "I think they're all funny except for this one: 'When the interviewer asked the candidate what she was earning, she answered, "I really don't see how that is any of your business." I've never understood how that is a legitimate interview question. I'd like to hear the side of the people who ask it."  This was also the subject of my June 3 column "Do I Have to Reveal My Past Salary?"--but, hiring managers who ask about past or current pay, what say you? How do you respond to job seekers who resist answering? I'll print your comments in a future column.