Childcare, Lateral Moves, and the Gender Gap at the SEC

The gender gap in pay and promotions is an extensively documented labor market phenomenon. The financial and legal sectors are prominent examples (see here, here and here). The bottom line is that men do much better on a variety of metrics. Explaining why, however, has proven much more challenging. One of the primary explanations offered in the literature is the differential in childcare responsibilities (see here, here, here and here). 

In a recent article, “Should I Stay or Should I Go? The Gender Gap for SEC Attorneys”, we try to unpack the foregoing question in a setting that is at the intersection of the financial and legal spheres. Our focus is the lawyers at the elite federal enforcement agency—the Securities and Exchange Commission—whose job is enforcing prohibitions on financial misbehavior. There is already a literature documenting gender gaps in the elite private bar (see here, here and here), where one might expect the gaps to be the highest (wage gaps are often estimated at upwards of 15%). We come at the topic from the opposite direction. Instead of examining the elite for-profit sector, we look at a setting where one should expect the gender gaps to be relatively small. This, in contrast to the typical stories about long and relatively inflexible hours at elite law firms, is a setting with a reputation for both providing good onsite childcare and a high level of flexibility to employees. The private market lurks in the background, however, since SEC enforcement division jobs are the type of elite, public sector jobs that often allow for lateral moves into the more lucrative private sector.

Examining “childcare friendly” settings is important because it enables us to examine the extent to which employers who provide quality childcare and work flexibility can ameliorate the gender gap in pay and promotions. If we were to find, for example, that the gender gap remains large even where employers invest significantly in childcare, then that would suggest that attempts to reduce the gender gap by providing antidotes to this challenge may not be fruitful.

We study lawyers employed in the SEC’s Enforcement Division as of 2004, following their career progression through 2016. We examine whether there are gender gaps in pay, promotions, assignment quality and lateral moves. We find that gender gaps in pay and promotion at the SEC are remarkably small (near zero), as compared to the 15%+ range that one often hears of in the elite law firm context, and the around 5% range typical in the public sector.

We do, however, find gaps in assignments and lateral moves. Women, particularly in the middle stages of their careers, receive (or take on) fewer high-profile assignments. Women are also considerably less likely than their male counterparts to move laterally to lucrative private sector jobs. They not only stay on at the SEC longer, but when they do go, their destinations tend to be non-profits and other governmental positions.

Given the dominant narrative in the literature about the impact of differentials in childcare responsibilities, the natural next question is whether the differential patterns in assignments and lateral moves can be explained by differential childcare responsibilities. For assignments, we control for the presence and age of children (children under a certain age presumably demand greater amounts of care). But we find that children have no significant impact. When we look at lateral moves though, we do find an impact for a subset of women. Specifically, women with young children (under the age of 14) are much less likely to leave the SEC than men.

What are the takeaways? On the plus side, the SEC’s reputation for being more sensitive to the causes of the gender gap than the private sector does seem well deserved. Not only are the gaps in pay and promotion negligible, but women stay there longer than their male counterparts (suggesting that the opportunity costs of exit for women are higher). On the minus side, the gender gap doesn’t completely disappear. When we look at assignment quality at the SEC, we find a gap at the mid-career stage, in that the “better” assignments go to the men (higher profile, more complex). And when we look at lateral mobility, we see a gap again. Men are more likely to move laterally, and into the private sector, where jobs are usually more lucrative, if also more demanding. Women stay on longer at the SEC and, when they leave, they move to non-profits or other government agencies.

Our results do not yield a clear causal story on the assignments/lateral moves dynamic. It may be that women are less interested in the kinds of high profile assignments that can yield lucrative private sector jobs because they are happier (relative to men) staying in the public sector. Or it may be that women are simply not offered these jobs. We spoke to a number of former SEC employees in the course of this project (all three of us write and teach in the area of financial markets, so we are fortunate to have had a number of contacts at the SEC to speak with). The overwhelming sentiment we heard from the over two dozen ex-SEC lawyers who gave us comments on our piece was that the SEC is a much friendlier setting for women, particularly those with childcare responsibilities. We also heard that there was no rush, particularly among women (with or without children), to give up what was for many an interesting and often fun job and move into the private sector. Yes, sometimes adverse life events (like divorce) that caused sudden increases in expenses may have necessitated a move to the private sector, but SEC jobs were not seen only as a way to ultimately obtain a lucrative private sector job.

Obviously, more study is needed. But we think examining work settings, like the SEC, that promote opportunities for women can help shed light on the causal story for the gender gap.

Stephen Choi, Adam Pritchard and Mitu Gulati are on the faculties of New York University, the University of Michigan and Duke University, respectively.