The Truth About the Wage Gap

Sallie Krawcheck: I was talking to a CEO not long ago about this who said, “We absolutely do not have a gender pay gap. It just doesn't exist in my company.” And I said, “Yeah, it does. It actually literally does.” “Oh no, it does not. I'm so unbiased. I have daughters.” I said, “Well, let me ask you this. If you have a man and a woman who have the same job, or you're offering them the same job and he negotiates, which is what happens. And she does not. You give him, you know, additional money, because he negotiated. Do you top her up?” He answers, “No, of course not.” And so you sort of get it coming and going.

Katie: Welcome back to The Money with Katie Show, Rich People, the podcast where women only earn 83 cents for every dollar a man earns. Just kidding. Today we're discussing an interesting economic phenomenon, one that we can't even get people to agree exists. That's right: It's the gender wage gap. And because I live in perpetual fear of one-star reviews that call me biased, I decided I would venture into some pretty icky waters of the worldwide web to find out what the staunchest wage gap deniers have to say. I wanted to understand why there's always so much pushback about this topic to the tune of, “That's a myth” or “It's not real,” when the data from the Department of Labor itself seems relatively straightforward. All that to say, in preparation for today's episode, I dove into the bowels of Matt Walsh's internet and consumed some anti-women-style content to understand where the facts start to diverge…so you don't have to. 

My guest today is the esteemed Sallie Krawcheck, founder and CEO of Ellevest, former CEO of Merrill Lynch and Smith Barney, and former CFO of Citigroup. I'm gonna give you my two cents first and then we'll get to the conversation with Sallie.

We're also gonna be relying pretty heavily on the research of Claudia Goldin, an American economic historian and Harvard professor who's made studying gender economics her life's work. She's a pioneering researcher in this field, and it was impossible to wade into wage gap territory without encountering her work. We are going on a winding journey today, everything from Bureau of Labor Statistics data to evolutionary biology. So buckle up. 

To start, let's unpack the most popular claim: that the median American woman working full-time earns 83 cents for every dollar a man earns. This number comes from the Bureau of Labor Statistics. The most recent report is for 2021, where we can get the blandest version of the data. And after doing a little poking around, I started to understand why people take exception to this oft-cited statistic, because while it's technically a true claim, it's merely a snapshot, and not a very informative one at that. 

But the BLS breaks down the gender wage gap by race, which makes the story even more interesting. Paradoxically, you tend to see less of a gender wage variation in low-wage work where the floor, so to speak, is fixed. The gender wage gap is smallest among Black people, as the median Black woman working full-time earns 94% of what her Black male counterpart earns. Though it's worth noting the racial disparity still persists here. The median Black male worker earns 74% as much as the median white male worker. The gap is largest among Asian Americans: The median Asian woman working full-time earns 78.5% of what her Asian male counterpart earns. Overall, among all women and all men who work full-time, the gender wage gap is 83.1%, and this is where the 83 cents on the dollar concept comes from. But I would still call it a snapshot because things like age or profession can skew these numbers wildly.

This is the main point of criticism from wage gap deniers, that you can explain it away using personal preference and job choice. And to an extent, there is a kernel of truth in that line of thinking. But what's most interesting about the current state of wage gap research is that it's shifting away from the assumption that it represents individual choice or individual bias against women to telling us more about the structure of work and family life today. We'll dive into the data after a quick break.

So let's explore the landscape, shall we? One of the major arguments you'll hear is that women work fewer hours than men. So some pundits claim disparities in pay can be attributed to the decision to work less or to work in more flexible, less demanding fields. One of the pretty expressly anti-women podcasts that I listened to on 1.5x speed, which I will not be naming here, basically was like, “You can't be mad that you're paid less 'cause you're working less.” This led me to a natural next step in my curiosity. Well, okay, if we assume women are working less, what are they doing with that extra time?

We turn now, dear friends, to the Bureau of Labor Statistics’ time use studies. What a treasure trove the BLS has been. The BLS conducts American time use studies to understand how people use their time. And as a reminder, we are addressing the argument that gender wage gaps exist because men just work more. They choose to work more, which would seem to suggest that they are simply more devoted to their jobs. 

Now for some interesting data around paid labor. On the days when they work, men spend 8.3 hours per day, on average, doing work or work-related activities. Women said they spend 7.8 hours per day on paid labor, meaning men do paid labor for an average of 32 minutes more per day. So are women filling the other 32 minutes with pedicures and bon-bons? When it comes to leisure time, women spend 4.8 hours per day on leisure activities, while men spend 5.6 hours per day on leisure activities, or about 48 more minutes per day. So how is it that men are working more and lazing more on average than women? Gee, I wonder. 

Looking at the breakdown between men and women, we see that women spend two hours and 42 minutes per day on average doing “household activities,” compared to men's two hours and 12 minutes per day. So women are spending about 30 minutes more per day on household activities. Houston, we have discovered some of our missing time. And in the “caring for and helping household members” category, the average woman clocked in at 38 and a half minutes per day, though that group is inclusive of women who do not have children, and the average man clocked in at 18 and a half minutes per day. For those with children under age six, women spent one hour and six minutes per day providing physical care, such as bathing or feeding a child to household children. And by contrast, men spent about 31 minutes providing physical care, or about 35 fewer minutes per day.

To summarize, at the statistical aggregate in the United States, women perform 32 fewer minutes of paid labor per day than men. They also spend, on average, one hour and five minutes more doing presumably unpaid labor around the household each day. And remember, all data here is reflective of people who are employed. 

It's at this point that I'm sure someone is like, “Katie, you are being a manhater and I feel alienated.” But hey, I am just reading you numbers off of a chart. And the point of this exercise is to debunk the idea that women work less than men. If you wanna know statistically how a woman is spending her time, or see an explanation for why she might be spending less time doing paid labor, well, there you go. The answer is she's doing unpaid labor. 

So how do we fix this? Where do we go from here? Usually we point to a couple of things: changing policies or minimizing individual bias. Now the former is a lot easier to study than the latter. So we're gonna start there. To begin our exploration of policy, let's first try to understand when and why the wage gap happens. There's strong evidence that gender pay disparity is exacerbated as women get older. A Harvard study of the wage gap amongst people with MBAs found that the wage gap was relatively small upon graduation: a $115,000 starting salary for women and $130,000 for men, which doesn't actually sound all that small to me, but just you wait. And it widened considerably over time.

So nine years later, the women were earning $250,000 while their male classmates were pulling down $400k, which indicates something is happening once people progress in the workforce and their lives. There was still the observable disparity at the outset, but as the women and men in the study aged, it grew into a chasm. And we are talking about obviously highly educated individuals with prestigious secondary degrees from an Ivy League institution, which highlights that the wage gap is larger in highly paid, highly educated work compared to low-wage work. Claudia Goldin points out that men tend to have a longer right tail, as in, men in the 90th percentile of earnings 13 years post-MBA earn $1.2 million, compared to women in the 90th percentile, who earn just shy of $440,000.

There are two primary theories for why this is. One is borne out more clearly in the data and the other is just interesting, so I'm including it. The primary theory is that as people get married or start cohabitating, the burden of unpaid domestic responsibilities falls more squarely on women's shoulders at the aggregate level, which tracks with the earlier data we reviewed. And as people start to have kids, this effect is exacerbated. This is why some people believe the wage gap is mostly a motherhood penalty. And even if you've decided you will not be having children, merely the perception that you might can be enough to negatively impact your career trajectory. 

The secondary interesting theory is about the intersection of sexism and ageism. Attractive people overall tend to have an easier time in the labor market and life in general, I would say. But a man in his fifties may be considered a distinguished silver fox, while a woman over 30 is considered past her prime and less desirable. That is to say, we value youth more in women than in men. And if you don't believe me, just stroll down the health and beauty aisle at your nearest convenience store and count the number of anti-aging products that are being marketed toward women compared to men. Anyway, I thought that that was a really interesting take on what might make things worse. 

And to address the family piece, there are a lot of advocates for paid parental leave and universal childcare who believe that these policies would fix the gender pay disparity. The idea being, hey, if you give people time off to have children and then you give them an accessible and affordable means for caring for those children, you will see less of a gender-based pay gap. To an extent, we have reason to believe this is partially true. And how do we know? Well, because the US has a slew of peer nations that do it already, and they all have smaller gender wage gaps than the US. So it's probably safe to assume some reasonable correlation there, but it doesn't explain the whole story. 

A US News report attempts to rank countries on a variety of factors like gender equality, so how equal life is for a man and a woman in this country. We’ll link the methodology for their survey data in the show notes. And the top five countries for gender equality, in order, are the Netherlands, Sweden, Norway, Denmark, and Finland. When I say Scandi, you say navia! Scandi! [crickets] Okay, moving on. 

This has interesting implications for wage parity data. Germany, for example, is ranked 14th. The US is ranked 17th, though US News ranked the US number four in best countries overall behind Switzerland, Germany, and Canada. And I feel like there's probably some home country bias at play here, but US News also names The Money with Katie Show a top 10 personal finance podcast, so there will be no US News slander here. 

But here's where things get really juicy, because we can compare cultural attitudes toward gender equality, wage parity data, and policy. According to the Organization for Economic Cooperation and Development, the OECD, Germany and Denmark have similar paid family leave policies. Total paid leave available to mothers in Denmark is 50 weeks, while German mothers receive 58. The pay rates are slightly different. Germany will pay 100% of your wages for 14 weeks, and Denmark will pay 50% for 18. Moreover, childcare in Germany is ranked as being four times more affordable than Denmark, though Germany ranks lower on access. So you would assume that the wage gap in Germany and Denmark should be relatively similar, right? They've got very similar support for parents. 

Far from it. Denmark's gap is only 5.6%, compared to Germany's 13.7%. The US, remember, is 17%. Now the conclusion that Goldin draws from these curious numbers is that wage gaps hinge more on cultural expectations for women than policy alone, though policy obviously makes a difference. The EU, where paid family leave policy and universal childcare is more common, has a rate of 10.4% overall. All that to say, though, it's reasonable to assume that policy alone cannot close the gap. Unless you think even the policy measures are straightforwardly effective, hit the brakes. Claudia Goldin has some counterintuitive takes on the unintended consequences of paid maternity leave policy. Because the person who biologically births the child needs the paid leave more, women are more likely to use it, which pulls them out of the workforce for longer, and entrenches the “mothers are out of work for a long time, more often than men” narrative framework. 

I recently had a conversation about this with a Swedish podcast producer who is covering this topic for a deep dive series. And many of the Swedish mothers that she's interviewed have told her that while the paid maternity leave is fantastic, they still felt behind when they came back to work. One woman said, “Being out of the workforce for a year negatively impacted my career, but I didn't really feel like I had a choice if I wanted to become a mom.” 

So now we're down to the brass tacks of household management. I've touched on this a bit already, but are there just innate biological limitations? This tends to be where many explorations of wage gap conversations hit a bit of a dead end. If you wanna become a parent and you happen to be the human with the womb, taking a break from your career is effectively required. Too bad, so sad. But when it comes to household labor and running a family, why does that also seem to fall more on women, based on the time use data that we looked at earlier? 

The more I read about this, the more I started to wonder if there is some inertia at play here at the micro and macro levels. Now this is a relatively unscientific explanation, but if you'll humor me, look at the recent history of industrialized work. For much of the 20th century, middle- and high-income households had an invisible partner at home, another adult who kept things on track and took care of kids and cooked and cleaned. And now, as of 2022, according to the Bureau of Labor Statistics, in 48.9% of married couples, both spouses are employed, without another adult in the home all day doing the work of running a household. But which spouse was more likely to be at home before? In 1970, 40% of married mothers with working husbands stayed home…mostly the rich white ones. And in 2012 that number was just 20%, according to Pew Research. How much of today's dynamics can be attributed to a vestige of what's considered “women's work” going unquestioned despite the actual structure of work changing around it?

I think about this in my own life. My mother was born in the 1960s and she raised me in the 1990s and 2000s, which means the maternal figure that she was emulating, who was surprisingly both college-educated and a participant in the labor force, was probably emulating her mother who raised her in the 1940s. Like my mom, I grew up in a household where both parents worked, but my mom still did the majority of the housework. She cooked and vacuumed and did our laundry and ironed and made all of our appointments. She was the CEO of the house. I witnessed her bearing not just the physical load of managing our household, but the mental load as well. She ran the family calendar; she delegated duties to other members of our family. She managed our money. Even if she wasn't the one actually executing a task, she was the one determining that it needed to be done and deciding who was gonna do it. 

This mental load is arguably more challenging than the physical load, because it requires high-value executive functioning, the same type of exhausting executive functioning that we use at work all day long. And now as a 28-year-old woman married to a man, I find myself filling those same shoes almost by default, despite working full-time, though with a few measurable differences. 'Cause there is more of an attempt to split labor, though I think we would probably both agree that I'm the de facto household manager.

What's interesting is that this decision was never made consciously. We didn't sit down and appoint me household chief executive officer. It just kind of happened. We drifted into these roles, and while I didn't poll a representative sample of friends, I can say that anecdotally, the vast majority of heterosexual women I talked to about this experienced the same phenomenon of kind of sleepwalking into that role almost unquestioningly. Again, this is unscientific, but how much of the present day inexplicable attitudes about a woman's role in the home is just the unnecessary evolutionary appendix that hitched a ride inside the metaphoric body?

It seems plausible that today's generation of young women might be less interested in having children because they grew up being told that they could be anything they wanted to be, that women and men were equal. And yet many of them watched their moms work full-time and still play the homemaker role. They watched their moms constantly stressed and pressed for time and said: [lyrics] “Fuck this shit, I’m out.” 

Inertia, as I learned in the AP physics class that I barely passed, is a very powerful force. It takes deliberate, intentional intervention and awareness to change it. So that is my theory about the macro.

But is there inertia at the micro level too, within each individual family? Think about it in work terms. Someone who starts a project as the project manager has to make a conscious effort and decision to hand the reins off to someone else. Now I'm not trying to compare having a baby to leading a project, but the person pushing the child out of the birth canal is probably going to be the default primary caretaker in the beginning, because the baby's body is dependent on its mother’s if she's breastfeeding. And without an intentional deliberate effort to split future caretaking duties 50/50, I can see how the inertia to remain the de facto primary caretaker is powerful. We'll be right back after a quick break. 

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Katie: So this brings us, as promised, to evolutionary biology. Yikes. We really are in the rabbit hole. Now, some of what I encountered on my journey through the annals of feminist theory revealed that there is a strong contingent of people, both men and women, who believe that a woman's role in the home as a caretaker and nurturer is biologically predetermined. That it's unnatural for a woman to want to do anything else, or at the very least, that expecting a man to be an involved and nurturing caretaker flies in the face of their biological desires to, I don't know, hunt stuff. Things get really cave painting-y really quick in those circles, which we know now is a bit of an ahistorical fantasy anyway.

But things become quite fuzzy, because there's no annual study from the BLS that aims to understand how the effects of innate biological preference versus socialization are changing over time. Some research on nature versus nurture concludes that both are at play, while other bodies of research conclude that gender roles are almost entirely dependent on socialization, so it's not cut and dried. Some claim that women choose more flexible work because they innately want to be around their child more than the child's father does. That this is a natural, “nothing to see here” personal preference explained by the presence of a uterus. And if that's true, then great, 'cause that means there's no problem to solve. 'Cause the Wage gap is all about choice. But is there actually an innate biological difference in a man's versus a woman's preference for being with their children, or having flexible part-time work, or taking care of a family? 

And that's not rhetorical. I actually wanted to know, at the aggregate level, when you control for outliers and you look at a bell curve, is it even possible to answer that question scientifically, given the fact that almost nobody escapes socialization? One thing we can do is look at the full extent of recorded human history—no big deal—and across cultures where people were socialized differently. Times in history when, say, infanticide was common, or cultures like the !Kung tribe in Africa, where entire tribes raise children equally rather than relying on the efforts of individual mothers. 

Widening our historical aperture makes it less clear that either gender has a biological preference for childrearing. There are fields of study and evolutionary biology and anthropology that aim to understand if physically birthing a child changes one's connection with it. And the research on this is, to put it lightly, mixed. But one essay that I came across made an interesting point. Laura Kipnis wrote, quote, “I don't believe in maternal instinct, because as anyone who's perused the literature on the subject knows, it's an invented concept that arises at a particular point in history. I'm speaking of Western history here, circa the industrial revolution, just as the new industrial era sexual division of labor was being negotiated, the one where men go to work and women stay home raising kids. Before that, pretty much everyone worked at home. What we're calling biological instinct is a historical artifact, a culturally specific development, not a fact of nature.” End quote. And she acknowledges later in the essay, which we will link in the show notes, that this instinct to care for one's young feels and might be very real, but that it's not specific to female biology. 

All of that to say, it's hard to empirically debunk the claim that women are more interested in their kids than their male counterparts, and that the preference explains the wage gap at an aggregate level. But I think there's reason to be suspicious of anything that suggests culturally prevalent norms about gender or tradition are your choice. So by now, we've spent a lot of time talking about this at the household level, especially addressing some of the common pieces of pushback about why the gender pay gap is a non-issue, particularly the fact that women are choosing lower-paid or less important or more flexible work because of their desire to be around their family. 

But even star athletes contend with these issues. In March 2019, 28 members of the US Women's National Team filed a lawsuit citing years of ongoing institutionalized gender discrimination against the players in their compensation and working conditions. Per NBC news, quote, “The disparity in pay between men and women is stark. FIFA awarded $400 million in prize money for the 32 teams at the 2018 Men's World Cup, and $38 million to the champion, France. By comparison, FIFA awarded $30 million for the 24 teams at the 2019 Women's World Cup, including $4 million to the US after winning their second straight title.” End quote. Now, the women won their landmark settlement and US Soccer agreed to pay men and women at an equal rate in the future. But as the joke goes, men studied to become doctors and lawyers. Women just choose lower paying jobs than men, like female doctor or female lawyer. 

All right, before we chat with Sallie, I wanted to cover one last piece of common debate that I saw. A favorite talking point of the “women don't actually earn less” crowd is this: If employers could get away with paying women less than men for the same jobs, they'd fire all of the men and only hire women because, what a bargain! Free markets, baby. Turn up. The fact that this doesn't happen is treated as evidence that the wage gap must be a myth. But this is a gross oversimplification of the way unconscious bias or deeply entrenched social norms work.

It's not that employers feel they're getting some bargain on women for equal work. It's that work has long been structured to favor employees who are constantly available and willing to work 24/7, which inherently preferences whichever gender is more available all the time, because the other is statistically more likely to be taking the lead on raising kids or laundering clothes or cooking dinner or any number of other things. As we know, men on average tend to fit that bill, which means women are perceived as being less valuable in the workplace, and are therefore paid less through various measures, less likely to be promoted into higher, more demanding positions, or less likely to get exposure to higher value projects.

And finally, an example that is just, hmm, too illustrative not to share. I once made the mistake of venturing into an argument in a Wall Street Journal comment section about the wage gap, where this guy Steven inadvertently hit the nail on the head. His comment said “The wage gap isn't real. My experience as an engineering manager is that men work longer hours. I managed a group of nine men and eight women. The women had kids to deal with. Their husbands and boyfriends didn't do the kid stuff.” Yeah, exactly, Steven. 

All right, onto our conversation with Sallie Krawcheck. Sallie, welcome to The Money with Katie Show. I really appreciate you taking the time to be here.

Sallie Krawcheck: Happy to be here, Katie. Thanks for having me. 

Katie: Absolutely. So to start today, I would love if you could tell us your thoughts on the idea that women need to be empowered, because you're one of the first people in this space that I've heard talk about this in a way that's maybe a bit counterintuitive and not what people would expect. But you changed my perspective on this, so I'd love to hear you expand. 

Sallie Krawcheck: I'm glad to hear that, Katie. The term “empowerment” has always sort of struck me the wrong way. And I thought it was just because I'm just being contrary and disagreeable. But we were sitting around one day talking about it at Ellevest, how it sort of struck us the wrong way. And somebody looked up the dictionary definition of “empower” and Katie, it means to be given power. The reason it bothered me is because that indicates, implies, frankly flat-out states a certain passivity,  that we do not have power, that we as women must be given power. Of course, we have so much power. We're 51% of the workforce, we direct 80% to 85% of consumer spending. We have trillions of dollars of investable assets, not as much money as the men, but that's a lot of power, if money is power. And I think with Money with Katie, I don't have to tell you, money is power. We have the power. It's simply activating that power. 

Katie: I'm getting the “sleeping giant” analogy here, because there's a narrative, right, in personal finance that women earn less and invest less because they are innately less confident. And you mentioned passivity. I kind of wanna know, I think I know how you feel about this, but do we suffer from a biological passivity that needs to be corrected, or what's actually happening here? 

Sallie Krawcheck: Well, I don't know the answer as to what is biological and what is learned, what we have internalized from the messages we receive from society. But there's no doubt that women are less confident around money. They're less confident in investing. By the way, they're sort of closer to the truth than men are. Men tend to be overconfident when it comes to investing, women less confident. The one that bothers me more is the idea that women, that this lack of confidence leads to a risk aversion, and that somehow, inherently and innately, women are risk-averse. And you've heard it so many times, you just, it's just stated as it's just a fact. It's just a fact. “Women are risk-averse,” and you say, well, why do you think that? And what I used to hear in the industry back when I was running Merrill, “Well, we know that because women don't invest as much as men do.” To which I sort of say, “Okay, well, if women don't invest as much as men do, if women therefore aren't buying what we're selling, one possible explanation is that they're risk-averse. That is a possible explanation. Another, just stay with me here, is they ain't buying what we're selling.” That, you know, the industry as we've built it perhaps is not meeting their needs or perhaps is not attracting them. Or perhaps they don't see themselves reflected in an industry where, you know, close to 90% of traders, financial advisors, et cetera, are men. And 98% of mutual fund dollars are managed by men. Maybe there's something else going on here, which is really, of course, the genesis of our founding Ellevest, which is the only invest-tech and wealth management company that really centers women. 

Katie: You mentioned risk aversion and how it's possible that women's perception of risk in investing, or that their approach is actually maybe more realistic than a man's. I think I've seen some data that women tend to trade less or that they generally do get higher returns and on the margins. How does that influence how you guys think about what you're doing at Ellevest?

Sallie Krawcheck: In so many ways. I mean, first of all, it's influencing our results. Women set an investing plan and tend to stick to it. We don't tend to, when markets are tough, repeatedly look at our accounts and therefore give ourselves the opportunity to freak out, therefore, you know, have that itch to trade. You know, “Things look bad, I need to do something.” What we saw instead is that in every week, really since the pandemic, we've had positive inflows. And it's a result of women setting a plan and really sticking to it. So I always say the biggest mistake men make in investing is they overtrade and therefore give themselves the opportunity to make some bad decisions. 

For women, that's not the issue. The mistake women make is we don't invest enough. We don't invest early enough and we tend to, again, because of how we've been socialized. My friend Reshma Saujani has something she says, that “Boys are taught to be brave. Girls are taught to be perfect.” So because we have been taught to strive for perfection, and Katie, I'm betting you got As at school, I believe you did. Katie is giving me the “I sure as heck did.” But we wait until we feel like we can get an A in investing. And again, because the societal messages to us tend to be, you're not good with money and you're risk-averse, you're not good with math, that date never really shows up on our doorstep. And so we tend to wait way too long to begin investing. 

Katie: So we're kind of wading into the waters of socialization and the differences between men and women. And I was listening to your book, Own It, the other week, and I was struck by one of your beliefs just about how men and women are fundamentally different, that women bring something different to the table as it pertains to work. And I think this is one of those points where if you dive deep into the feminist theory, there's a lot of disagreement about this. Like, are our differences innate or are they culturally learned? Are they the results of socialization? At this point in time, you've now led multiple big banks and you've shared that in many cases you were one of only a handful of women in those rooms of top leadership where these decisions were happening. So I am curious to know how that shaped your perspective. 

Sallie Krawcheck: Well, first of all, I'm not a sociologist, and I haven't dug deeply into what is nature, what is nurture, what are these messages received? I just know that they are there and I just know that the research tells us that diversity is, in leadership teams, on boards of directors and companies and any kind of team, almost without question, a positive. And that diversity leads to higher returns, greater innovation, greater client engagement, greater employee engagement. That the research says that diversity is so powerful that diverse teams outperform smarter teams overall. 

So however that came about, that friction from difference, that friction that men tend to make quicker decisions, women tend to make decisions more slowly, but tend to take more information into them. You know, women tend to be a bit more relationship-oriented than men. Women tend to be a little bit more longer-term in their outlook. These things are not negatives or positives. They are differences, and it's when the differences come together and the diversity and the friction in the office that we come out to better results. By the way, this is also true, Katie, of course, with investing, and I mean nothing's free in investing. If anything were free, diversification would be the freebie, right? That it, you know, over time increases returns and reduces volatility. And it has for some period of time. 

So what I saw when I was in the top sort of C-suite on Wall Street is there was a lack of diversity. And going into the subprime crisis, I saw really, really, really intelligent individuals who had similar backgrounds looking at the same information and coming up with the same answers. And so rather than thinking through 20 different scenarios, we were thinking through five, and there was the false comfort of agreement of individuals who'd been on the same trading desk together of, well, we've seen this before, X, Y, and yeah, we've seen that before. You're like, actually, you know, as it turned out you never saw that before. And frankly, it threatened the global economy. That's not an exaggeration. It threatened the global economy, this lack of diversity of experience that we had. 

Katie: I found that point so fascinating in the book, that because there was this innate trust between these, I would assume predominantly white men, that they're not really thinking to question or push back because at a surface level they just have this sort of buy-in and trust between one another. So I think there's an element of this, too, that we're covering today that is really about the gender pay gap as well. And the extent to which is this something that is purely policy failure, or is this cultural bias at play? Is it just being exacerbated by policy failure? Because I think when you think about domestic labor, things like child-rearing, we think about these things as a private family matter and that work that traditionally codes as “feminine” is considered less valuable and sometimes even free—that it should be free. But by your estimation, how much of this do you think is driven by cultural bias? 

Sallie Krawcheck: Thank you for those thoughtful comments. What we know is the gender pay gap starts at the child-rearing age. There's a little bit of it I've seen in different studies coming outta college or business school, et cetera. But where it really begins to widen is when families have children, and pretty immediately he gets the daddy bonus and she gets the mommy tax. So we know that the, the second thing we know, courtesy of the pandemic, sociologist Jessica Calarco said something that just will always stick with me, is what we learned during the, one of the things we learned during the pandemic is that other countries have social safety nets and the US has women. And that so much of the progress that we had made was really built on sand dunes. And the sand dunes got wiped away. And at that point in time, women were getting knocked outta the workforce to a greater degree. Women were not getting promotions to as great a degree, et cetera. 

Now the good news is women are coming flooding back into the workforce currently, but we were one old white man's vote away from mandated paid parental leave. It's fascinating because in the past year we were one vote away. And then of course had the striking down on the other side of that, of Roe v. Wade, which is an issue in many ways, but is also a financial and economic issue which primarily affects women, and when they have families that they were not planning to have affects her negatively financially overall. So we sort of got close, and then, you know, we've had these other impacts and effects. 

I think one thing you said that's important is, how much of this would go away if we had mandated paid leave for parents? So I mean, the good first step would be for women, for moms; the better step would be for everybody. And who wouldn't benefit from having some time home with a newborn, as someone who is a parent, who wouldn't benefit from that? And if you are thinking the companies wouldn't benefit, you're absolutely wrong, because mandated, paid parental leave pays for itself within a year, because when women have that leave, they are more likely to return to work. And when they don't, and you know, for the parents out there, you know, those early days and some of those medium days, you're on a razor's edge. If the babysitter gets sick or the daycare is closed or the kid gets sick, you have a kid who's sick for a couple of weeks, you're out of a job. You have an issue that they don't seem to be thriving, you're gonna, oftentimes, if you're financially able to pick staying home with that kid to going into the workforce. And so if you have humane policies, then people are more likely to come back to work. Therefore, you don't have to spend the money to replace them. You don't have to spend the money to train the replacement and you don't have to take the hit to economics of that person not being as productive as the person who can actually do the job. So it's something…we say we love families, we say we love moms, we say we love parents. We don't really treat 'em like we love them. When we really, and you know, Katie, I know you'll appreciate this. We're treating an investment as though it's an expense. It's an investment that pays for itself, right? When I was CFO of a big bank, we would've taken that in, like you came to me and said, I have an investment that's gonna pay for itself in a year? Done, right? But instead we think about it as an expense, the wrong way. 

Katie: As much as I've dug into the childcare infrastructure or lack thereof and all of the economic research about how even if at a federal government level we invested in childcare and what that would unlock for the economy, primarily through women being able to work more, there's something going on here though that I feel like I can't quite place my finger on, which is that obviously it is illegal to discriminate based on a protected class. You cannot discriminate based on gender. And so the assumption then is that, okay, well then, people must be paid equally for equal work. And there's a pretty common counterpoint that we're exploring in this episode about if you ever listen to the equal pay for equal work pushback? It's typically that, well, if companies could get away with paying women less for the same work, they would just fire all the men and only hire women because what a bargain that would be, right? 

Sallie Krawcheck: Yeah, please. 

Katie: But I don't think that that's really an accurate reflection of what's happening. 

Sallie Krawcheck: Well, the research is clear, that white men are promoted based on potential, and women and people of color are promoted based on achievement. So the bar is higher for women and other underrepresented groups there, there's no doubt. There's no research that shows women are not as good at business. And again, I mentioned we started with the investing industry. The research shows you women are better investment managers than men, but yet men manage 98% of mutual funds. If the facts were going to bear fruit, that's the industry it should be in, right? Because it's very measurable. I think, again, it's the socialization. What do you and I, if someone were to catch us unawares, “Picture a mutual fund manager.” You and I would immediately picture a white man; that just feels right. And so we just slide with these cognitive biases, but they hit us in every way. It's the person, we call 'em a Todd at Ellevest, that middle manager. I always love to say middle management is where diversity goes to die, but Todd really means well, and he really goes to all the diversity meetings, and his mom is his hero, but he just never seems to promote anyone who isn't like him. And because we run merit autocracies, that is allowed to continue. And so the CEOs truly believe in diversity, but it just doesn't quite make its way down. 

The other issue is…I was talking to a CEO not long ago about this who said, “We absolutely do not have a gender pay gap. It just doesn't exist in my company.” And I said, “Yeah, it does. It actually literally does.” “Oh no, it does not. I'm so unbiased. I have daughters.” I said, “Well, let me ask you this. If you have a man and a woman who have the same job, or you're offering them the same job and he negotiates, which is what happens. And she does not. You give him, you know, additional money, because he negotiated. Do you top her up?” He answers, “No, of course not.” And so you sort of get it coming and going, because it's the expectations of the managers and the leaders that sort of seep in. And again, as the research shows, means that the bar is higher for her. And then it's the way women have been socialized: Don't rock the boat. Whereas men, you know: Be bold, be brave, go after it. 

Katie: I struggle with that negotiation research too, because I remember looking into that and finding that, I think it was a Harvard Business Review case study that they did where it's not just that if the job description says, you know, salary negotiable, or if it doesn't make any mention of negotiation, that women tend to negotiate less, that is true. If it says the compensation is negotiable, there's no appreciable difference in whether or not a man or woman will negotiate. But what crushes me about that is that they found that man or woman, it didn't matter who the hiring manager was, that women were viewed less favorably for having tried to negotiate. 

Sallie Krawcheck: Who likes a mouthy woman? Nobody. Nobody likes a mouthy woman. I speak from experience. Nobody. Come on. 

Katie: It's socialization kind of all the way around. It's not just, and that's where I think I struggle with those types of individual solutions, which at the individual level, you know, you gotta walk that line, you gotta be aggressive enough to get what you want, but not so aggressive so as to appear off-putting because you should be demure enough to fit that feminine standard or ideal. And even to your point, even people that don't consider themselves biased, it's like some of the stuff is just so ingrained. 

Sallie Krawcheck: It's the double bind. You have to be aggressive, but not too aggressive. You have to act smart, but not too smart. You have to be soft, but not too soft. The problem is, as I've seen in my career, it can be different for every boss. You know, I've had bosses who just loved my energy, and I've had bosses…I had one boss who, he didn't choose me, but when he came in, he couldn't look at me, he just couldn't look me in the eye. And again, it's how they've been socialized and what they've been brought up. It's, yeah, it's hell out there sometimes. 

Katie: Did you find in your career, once you were so advanced such that you were the CEO of, I assume had a lot of male reports, that you had to lean into what I'd call tendencies that may scan as more traditionally masculine? Did you feel that pressure or find that behaving in a more masculine way helped you in some way? That's kind of a weird question, but did you ever find you had to walk that personality line in a way that maybe your male peers did not?

Sallie Krawcheck: Well, I don't know. I don't know about the men 'cause I've never been a man. I think it's different in every company. I worked at Sanford Bernstein where what was really valued were contrarian perspectives backed by analytics, and nothing else mattered. And then I was at Citigroup under Sandy Weill back in the day, and it was an entrepreneurial, take no prisoners culture. And I thrived in both of those. And then at Bank of America, I struggled to be comfortable. It was much more of a corporate environment. There was more process. And I was told repeatedly that I stuck out like a sore thumb. And that it was important for me to get my profile down because the business was getting some attention as we were turning it around. And I remember, I don't know, as one of the few senior women on Wall Street, I don't know how to get my…if I'm not giving any interviews, I'm not talking to the press except when asked, and I'm getting attention 'cause I'm one of the very few, I don't know how to put that in back in the bottle. And I remember feeling so…I'm looking for the right word, ashamed is not quite the right word. Embarrassed, sheepish, somewhere in those words, Katie, is the word I'm looking for. But I thought I was doing my job and this stuff comes with it and I can't help it and I'm being shamed for it. It was an adventure every day. 

Katie: Sallie, thank you so much for joining us today. Is there anything I didn't ask you about that you feel is important to say? 

Sallie Krawcheck: Well, what I would say is, being for women is not being against men, and women having more money, and at Ellevest, we're working to help women build their wealth through investing in financial planning, that doesn't hurt anybody. It can feel like it does, because we as human beings are so driven to compare ourselves to others. But if women have more money just because their family is better off and their community is stronger and they put money back into the community and back in the family, the economy grows. This is not a fixed pie. Nonprofits are better off, women give away more of their wealth, climate change, women are more likely to believe in the adverse effects of climate change and donate in order to fight it. So it's really, we love to say again and again, at Ellevest, nothing bad happens when women have more money. It can feel threatening, but I don't know of a more direct way to try to improve the world we're living in. Certainly not with the skill set that I've got. So we think the work we're doing is really important. 

Katie: I agree. Thank you for joining us today.

Sallie Krawcheck: Thanks, Katie. 

Katie: That is all for this week. I will see you next week, same time, same place on The Money with Katie Show. Our show is a production of Morning Brew and is produced by Henah Velez and me, Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is our chief content officer, and additional fact checking comes from Kate Brandt.