In this edition of Author Talks, McKinsey Global Publishing’s Lucia Rahilly chats with June Carbone, Robina chair in law, science, and technology at the University of Minnesota, about her book Fair Shake: Women and the Fight to Build a Just Economy (Simon & Schuster, Spring/Summer 2024), coauthored with Naomi Cahn and Nancy Levit. Carbone explains the forces that have converged to reverse progress on college-educated women’s wages, even as the gender wage gap has contracted overall. And she outlines what can be done about it—namely, the systemic change necessary to eliminate the “triple bind” and repair the broken rung on the corporate ladder. An edited version of the conversation follows, and you can also watch the full video at the end of this page.
Why this book, and why now?
I wrote a book with Naomi Cahn, one of my coauthors, called Marriage Markets: How Inequality is Remaking the American Family, which published in 2014. In conducting the research, we were shocked by a couple of things. The first was that the only group of people in American society whose marriage rates have increased are the top 10 percent of women by income.
We were quite surprised by that, and we started examining why. We were even more stunned to see that while the gender wage gap had generally declined, it was increasing and had steadily increased since the early ‘90s for college graduates as a group. The conventional answer is that the big increases in income have been in tech, finance, and the C-suite, where there aren’t many women. But when we looked further, we found the number of women in tech and finance had declined in the same time period. It’s not just that these are male-dominated fields. It’s that women made real gains, then the numbers fell.
We were even more stunned to see that while the gender wage gap had generally declined, it was increasing and had steadily increased since the early ‘90s for college graduates as a group.
In my field, law, our classes are often 50 percent women. Yet if you study the lawyers who make the most money—the top ranks of partners—it’s not just that the number of women hasn’t increased, it’s that the men in that rank are more likely to be making $1 million per year, when the women in the same jobs make $600,000 a year. Something very different is occurring, and we wanted to get to the bottom of that story.
What’s driving this growing wage gap?
We see it as a shift in the way top-income positions work. In the critiques of the ‘50s, such as in the film The Man in the Gray Flannel Suit, we were stunned by our discovery. John Kenneth Galbraith, who wrote The New Industrial State, a book lauding the ‘50s corporation man, and William H. Whyte, author of the book The Organization Man, discussed the tendency toward complacency—avoiding risks and spending an entire career at one company.
We read both books and said, “They’re describing the same world, and ‘the organization man’ of that world could have been a woman.” There are no women in The Organization Man of the ‘50s. Yet all the traits that are described—cooperation, listening to the views of others, integrating diverse viewpoints, this idea of technocratic management as an ideal versus as too complacent and not sufficiently risk-taking—are characteristics that today would be identified with women.
What changed? We call it the “winner-take-all economy,” which doesn’t mean that one person takes all—that’s largely not true, but the people at the top are getting a much higher share of institutional resources than the corporation man of the ‘50s.
In the ‘90s, a wholesale change in executive compensation began. There was a high-stakes bonus system in which everyone was competing against everyone else. That kept everyone insecure and nervous all the time and perpetuated over-optimism bias, narcissism, amorality. What our book does that others don’t do is describe, at a granular level, how these kinds of practices—high-stakes bonus systems that make everyone insecure, tied to reduction in short-term metrics—are bad for women. They’re bad for women in systemic ways because they change the culture of the company.
Why should leaders still care about these so-called ‘feminine’ traits?
The single best discussion of these traits in terms of masculine versus feminine is by [Northwestern University professor emerita of psychology] Alice Eagly, who talked about transformational leadership styles versus transactional leadership styles. Transformational leadership styles tend to do better everywhere, including in all-male units in the military.
This is leadership that is attentive to morale and group cohesion. This is the idea that the team is more than the sum of its parts; she compares it to transactional leadership. I was describing transactional leadership, which is bonus-based: “What did you do for me today? And I don’t care what you did for me yesterday.” It asks, “How can I achieve this quarter’s goals? How can I advance my career? Who is going to enhance my opportunities for promotion?” Eagly is very careful to say, “Men engage in transformational leadership, too, and when they do, they are more effective leaders.” But women are more likely to be transformational leaders than men.
What our book does that others don’t do is describe, at a granular level, how these kinds of practices—high-stakes bonus systems that make everyone insecure, tied to reduction in short-term metrics—are bad for women.
You write that aspiring women leaders find themselves in a ‘triple bind.’ What’s that?
There are three elements. First, if you’re not competing on the same terms, you lose. The women who do try to play by the rules are disproportionately penalized for doing so. The best study on this is by Mark Egan at Harvard Business School. We talked to him, and it turned out that women are less likely to commit misconduct. In his regression analyses, he said to predict misconduct, one can look to those who have done it previously. He added that women are less likely to do it than men. From mandatory FINRA [Financial Industry Regulatory Authority] data required by all financial firms, women who commit misconduct that is less serious—meaning, causes smaller dollar losses for their employers—are more likely to be fired and less likely to be rehired.
If you have a company that is engaged in plausible deniability, that is, “We want you to break the rules, we incentivize it, but you have to get away with it without our name being on what you’re doing,” then the managers need employees who will break the rules. They need employees who will break the rules and get away with it without being instructed to do so, and without pointing to the managers who are encouraging it. In these cases, very few male managers want women. They perceive women as more ethical than men, and that’s a disadvantage in this context. They suspect, probably correctly, that women are less likely to get away with unethical behavior if they do engage in it.
The second element is that if the women get in trouble, they will incriminate the boss, which is risky. Yet even if managers simply can’t predict a woman’s behavior, because they don’t understand women, they are less likely to have women as closely valued subordinates. This second leg is the double bind.
And what about the third leg—women taking themselves out of the game?
There are two components to this. Let me share the negative one first: look before you leap. If you have a highly unethical company, women are among the first to be betrayed. What happens in such companies is that the men who become bosses and the occasional woman who becomes a boss are more likely to engage in sexual harassment. They are more likely to engage in bullying behavior, including behavior aimed at men. They’re more likely to engage in dominance. That’s because the men who are attracted to, and thrive in, cutthroat environments tend to engage in—and feel entitled to engage in—more of those behaviors.
The literature on topics like narcissism reveals that men who are successful become less sensitive to the emotions of the people around them. When men who are very successful engage in sexual harassment, they often think women are flattered by the attention they are paying. They are insensitive to what they’re doing. These environments are much more likely to drive out women specifically and result in high turnover and low morale overall.
On the other hand, one of the studies that received a lot of attention is about ads. If you advertise a “high-pressure sales environment, competitive bonuses, opportunities for advancement,” the number of men and women who apply decline. Yet men become 50 percent more likely to apply for those jobs. If you advertise, “competitive teams competing against each other to discover a cure for cancer,” women are just as likely as men to apply.
Yet if it is cutthroat competition, where you’re competing against your coworkers but there is great opportunity for advancement, the number of applications from women plummets. Again, applications from men will decrease, too, but not as dramatically as applications from women. Both scenarios would lead to women being driven out. Women who see this don’t want to play.
What happens to organizational performance when women opt out?
Thinking optimistically, I see a shift in corporate America—mainstream corporate America—though not universal and not elsewhere.
Diversity of all kinds, including racial and gender diversity, decreases as well. Decision making becomes more politicized, morale plummets, turnover increases. There are tons of management studies that say, “If you create this kind of environment, that will happen.”
Interestingly, NASDAQ released a report in 2020 that demonstrated that diversity, especially gender diversity, is good for the world. For example, diversity on boards is associated with less securities fraud, fewer accounting irregularities that have to be corrected, less manipulation. It’s a good thing. If we mandate that NASDAQ companies disclose how many women are on boards, post-2014 we’ll observe a fairly substantial increase in the number of women in top executive positions in financial firms and mainstream financial firms, but not in private equity.
We also observe an increase in women CEOs. The number increased from 6 to 10 percent. And that 10 percent has outperformed the rest of the Fortune 500 companies. Diversity is an indication, and corporate America is recognizing that. Having a lot of women doesn’t guarantee anything, but not having women in today’s world is an indication. Where you see a company unable to provide diversity and retain it, that’s a sign that there are management issues that go beyond diversity.
How has the rise of the gig economy affected the dynamics of the wage gap?
I’ll give you an example. I took an Uber from a hotel in San Antonio, Texas, at 4:00 a.m. I had a female driver, and we had a lovely chat. She chose the hours of her shift very carefully. She wouldn’t drive at 2:00 a.m. due to drunks in the bar district.
But a 5:00 a.m. drive from a hotel or to the airport was considered safe. She could do it while her children were asleep and her husband was at home. For her, it was driving Uber or not working at all. I’ve encountered a variety of women in the gig economy with similar stories. They are considering how to earn while being a primary caretaker and designing flexible shifts. The men I meet are often doing other things on the side that are lucrative.
Where you see a company unable to provide diversity and retain it, that’s a sign that there are management issues that go beyond diversity.
I’ve met men who are starting their own companies who drive for Uber. Their reservation price—the cost to engage in the gig economy—tends to be higher. If you have a plumbing company and you have regular work but hit a low period, you might go into the gig economy and pick up some extra jobs.
But you’re getting paid pretty well the rest of the time. So the reservation price for participating in the gig economy is higher if you’re supplementing a regular income versus the alternative—being out of the labor market entirely. That exacerbates the disparities for women.
Any early thoughts about how gen AI might influence women’s professional progress and wages?
Gen AI is taking what’s out there and learning from existing patterns. So it’s going to replicate gender discrimination. For example, consider ads for management training positions and gender stereotypes. If you use some kind of AI device to screen management applicants, you would base it on successful current executives—a pool that is predominantly male.
Gen AI will exacerbate the gender stereotypes. If you get women—and likewise, racial minorities—involved in the design of AI and these algorithms, you can correct for existing patterns of discrimination. Again, it’s a design feature, and you have to figure out how to design around it. I would like to see more aggressive legislation that says, “It is sex discrimination not to design around it.”
But there’s another element that tends to skew this. The algorithms involved in mediating those kinds of online environments are likely to exacerbate gender disparities further. The background conditions create the disparities in the first place, and then any kind of AI—automatic learning, artificial intelligence, etcetera—will magnify them.
Speaking of rules, are pay transparency laws helping?
My friend became a dean. The first thing she noticed is the difference in the way men and women handle salary negotiations. The pressure is to reward the squeaky wheels. Unless you have uniform practices, you will reward men.
Men enter a position always asking for more, pushing to the outer limit. Women tend not to push, and those who do are dramatically less popular among colleagues. They have a harder time making it work. That’s the aforementioned triple bind, which is that if you introduce high-stakes bonus pay, gender disparities increase.
We observed the same results in all the studies that we observed on the impact of modern executive compensation that build in a high degree of differentials with bonus pay. This is true for teachers. It’s true for nurses. Since COVID, there has been a substantial increase in pay disparities between male and female nurses. If you look at hospitals with standard pay, there are very few gender disparities.
The big disparities come from two sources: the willingness to relocate and to change shifts. Men move more to get more pay, and men are more willing to work emergency services and odd hours more than women. That difference builds in gender disparities in nursing that are not unlike gender disparities elsewhere. Pay transparency doesn’t address those issues. It addresses the disparities that come from the secret negotiations that take place in the boss’s office.
What should leaders do differently to strengthen parity—and performance?
What I see happening is the “mommy track” as a business strategy. That’s different from the mommy track simply as marginalization. We see it in the post-COVID response. Considering statistics on women and COVID, it’s a class-based response. The group that was most likely to leave the labor market and the slowest to return were women without college degrees. The women who were most likely to stay in the labor market and the ones whose labor force participation rebounded most dramatically were women with college degrees. That’s because the patterns for women over the life course are different from those of men.
Observing women college graduates, we see that the age of first-time mothers has increased dramatically. This is true of women college graduates with good jobs, and even more true of women with graduate degrees or professional degrees. They wait until they finish their education, get a job, are settled and trusted. Then they have their kids. They don’t leave those jobs, because with a two-year-old and a four-year-old they don’t want to switch to a new job where they have to prove themselves all over again. Those women are becoming the backbone of companies. When these women are overlooked for promotion, they are less likely to quit than a man.
When they have small children, these women are less likely to move to a higher-paying job. They have reached a point where they know their coworkers will cut them slack because they’ve proven their worth. Women with kids don’t want to play certain games. What we’re seeing in corporate America is that there’s no lack of women in entry-level jobs. It’s the rungs on the promotion ladder that are broken.
But what is understudied is that women passed over for promotion, especially White women—the dynamic is different with Black women—are more likely to stay, to be loyal to a company, to “make the trains run on time,” and to be the source of institutional knowledge. They are underappreciated for those roles, but those roles are incredibly important.
Women whose children are a little older are in the most productive years of their life at a time when men are going through their midlife crisis and have interests and attention going elsewhere. That’s the business case for diversity.
The people who stayed with a well-meaning CEO a while but aren’t as flashy, that's a situation where we’ve observed a lot of built-in bias. Leaders will want to be more transparent about the qualities that are valued. They’ll want to be warier about confidence and dominance. Those are the qualities that come to the fore in high-stakes bonus systems. But they’re not necessarily the best long-term qualities. Considering all the management studies about first impressions versus later impressions in interviews, if one simply looks at performance, as opposed to dominance and confidence in an interview, one could get a very different picture of a candidate’s potential.
The studies that show that women are overlooked for promotion because they don’t show the same degree of potential tend to focus on characteristics like confidence, assertiveness, and dominance. Those attributes tend to correspond with narcissism and hubris.
Management studies since the Henry Ford era refer to the best leaders and managers as those who are transformative, who pay attention to morale, and who try to get the unit to function more cohesively as a team that is greater than the sum of its parts. Many management studies indicate this, but that concept may or may not align well with goals in a sales department. However, in technology, if you want a team that is innovative, you need good managers. Those are the things that a transformative leader ought to be paying attention to.
Watch the full interview
