January-February 2010 > Right Now

A Quant’s Quandary

Family or Fortune

by Elizabeth Gudrais

That investment banking isn’t a relaxing career is perhaps obvious. But new research by Lee professor of economics Claudia Goldin and Allison professor of economics Lawrence Katz shows just how bad the quality of life is for financial-sector workers. The field stacks up as even more inflexible than other professions with a reputation for being demanding, such as medicine and law.

And their research shows the particularly high price paid by women who go into finance. In their Harvard and Beyond survey of 6,500 Harvard and Radcliffe graduates from various classes between those of 1969 and 1992, Goldin and Katz found that women who had gone on to earn an M.B.A. after graduating from Harvard were far less likely to be employed and have children at the time of their fifteenth reunion than were female respondents holding M.D. degrees: less than half of the M.B.A.s reported both having children and working, versus two-thirds of the M.D.s. Among the M.B.A.s, only 30 percent worked full-time, year-round, and had children, whereas 45 percent of the M.D.s did.

Women have undoubtedly made gains in terms of access to business careers: the female component among entering M.B.A. classes nationwide has surpassed 40 percent, up from 10 percent in the 1970s. But in terms of being able to choose careers they want within those fields, as opposed to having to abandon professional goals for the sake of family, women still have far to go.

Goldin and Katz conclude that female M.B.A.s with children select professions with shorter hours, compared to their male peers with children and childless peers of both genders. Analysis of data from a different survey—this one of 2,500 male and female University of Chicago M.B.A.s from the graduating classes of 1990 through 2006, conducted by Goldin, Katz, and University of Chicago economist Marianne Bertrand, Ph.D. ’98—showed that only 8 percent of respondents working in venture capital were women; among those in investment banking, only 15 percent were. But among those working in human resources, 71 percent were women; in advertising, that number was 59 percent.

The researchers also asked the M.B.A.s how many hours they worked per week; the occupations with the highest numbers of men also had the highest average number of hours worked (investment banking and consulting, at 74 and 61 hours per week, respectively). Conversely, those with the highest numbers of women had the shortest hours (human resources and advertising, at 51 and 52 hours a week, respectively).

A similar sorting occurs in medicine, where specialties with shorter and more predictable hours tend to be more heavily female. Women now make up 41 percent of new M.D.s nationwide, but less than 30 percent of physicians under 35 practicing emergency medicine or general surgery. Meanwhile, 70 percent of gynecologists and nearly 60 percent of dermatologists in that same age bracket are women.

But in balancing work and family, women in finance make especially large sacrifices. In the Harvard and Beyond survey, Goldin and Katz found that female M.B.A.s took more time off after having a child than did their peers with other advanced degrees, and that even after correcting for the amount of time out of work, this group of women saw the largest pay decrease compared to peers who took no time off. Female M.B.A.s who took a year and a half off made 41 percent less than their counterparts who had worked continuously. For J.D.s who took time off, the pay gap was 29 percent. And for M.D.s, the gap (16 percent) was even less than the gap facing women with no graduate degree (25 percent).

People who opt out of investment banking for some other financial specialty (as women more commonly do) also forgo compensation. Nine years after graduating, the Chicago M.B.A.s working in investment banking (both male and female) were making, on average, $700,000 a year (the median was $470,000), compared to an average income for the entire survey pool of $370,000, and a median income of $190,000. There wasn’t much difference between the incomes of male and female respondents in their first jobs after graduation, but the genders’ incomes diverged further with each subsequent year, in part due to choosing different specialties.

Although the number of Harvard graduates pursuing financial careers has dropped, it is still substantial: last spring’s Crimson senior survey showed that, among College graduates entering the workforce, 20 percent were heading for finance and consulting—down from 47 percent in 2007 and 39 percent in 2008 (see “Flocking to Finance,” May-June 2008, page 18).

Goldin advises students considering those fields to go in with eyes open. For the most part, she says, “you choose a sector because of your passion, not because of work-life balance.” Within any sector, she adds, “people assume that they can find some choice and some accommodation.” But if the field they are considering is finance, they may want to weigh those issues more carefully.