I was recently invited to write a post for shebudgets.com, an eclectic site with the subtitle of “for a balanced and well-rounded life.” They run a lot of personal finance type posts along with other more newsy posts. Most of the site isn't exactly female-specific, but with a site title like that, I thought it would be a good opportunity to write about high-earning women. We'll see if you guys think I did a good job or not as you're always my most faithful critics. Here's an excerpt:
I am a high-earner and through my work at The White Coat Investor I have met many high-earning females who are not getting what they deserve. To be fair, I’ve met nearly as many men who don’t get what they deserve either, but since I’m writing this for Shebudgets.com, we’ll focus on the feminine side in this article. Here are six ways that high-earning females can get what they deserve.
# 1 Make Sure You’re Being Paid Fairly
Studies show quite clearly that women often get paid less than men for doing the same job. However, there are plenty of professional jobs out there where women get paid exactly the same as men. You might as well take one of those jobs. For instance, when I was a resident physician, my female co-residents received to a penny the same salary and benefits. It was the same when I was in the military. In my current physician partnership, where the books are open and all the doctors are equal, democratic partners, the pay is also the same no matter your gender. However, in an employee situation where you might not know what the other employees are making, that might not be the case. Prior to signing an employment contract, have it reviewed by an attorney and also by someone who has accurate salary data to ensure you’re being paid fairly. Many women (and men) get paid less simply because they don’t know what they are worth. Be sure that you know.
On the other hand, many women are paid less than men because they have less experience. Perhaps they took some time off or went part-time to go on the “mommy-track.” Maybe they passed up promotions and other opportunities because of family responsibilities. Perhaps they simply need a less brutal pace or schedule for whatever reason. If you’re in one of these categories, you might make less money, but that isn’t necessarily unfair.
# 2 Negotiate, Negotiate, Negotiate
Part of the reason women get paid less is that they are less likely to be confrontational and to actually negotiate for more. Sometimes a simple question such as “Is that the best you can do?” will result in you making $10,000 a year more. Unfortunately, in our culture, men who negotiate are perceived as “savvy” while women who negotiate are sometimes perceived negatively, such as not being “a team player.” So you have to negotiate carefully. Sometimes it can help to position yourself as the “good guy” while blaming your need to negotiate on your attorney, your financial advisor, your partner, or even your children!
# 3 Partner Up
A high-earning woman is far more likely to have a spouse that earns less than she does, putting her into the position of being the primary breadwinner. Unfortunately, many of these women are also expected to shoulder the burdens typically assigned to a stay at home spouse.
What else can high-earning women do to make sure they get what they deserve? Should they use special techniques when negotiating with employers, advisors, and other vendors? Why or why not? Comment below!
Great intro article. Given the retirement investment gap, which far outpaces the earnings gap, it’s vital to get women investing more and earlier. Anecdotally I also find fewer women to have a hobby interest in finance and thus they’re more likely to set and forget than jump on the hot new stock a friend of a friend heard about.
Whatever your starting salary offer, male or female, ask for a minumum of 5-10% more. If it is uncomfortable for you to ask, too bad. Think of the asking as a personal growth experience that compounded over a 20-30 year work life can lead to big bucks. An extra 10,000/year compounded at 5% over 20 years is 330K and over 30 years is 664K. A few minutes of possible discomfort is worth that amount! It also forces you to stand up for yourself which is a mindset that begins to apply in many other areas of your life. The answer also tells you a great deal about how you will be treated and valued in the position.
Do not let yourself feel dumb if you did not negotiate your salary. I did not realize this was something to do when I finished residency. Now I have not had a salary for 20+ years because I started my own practice. The opportunities for women are great in medicine. Many different models exist to figure out your life and retire secure.
Sort of only tangentially relevant, but maybe interesting because it’s based partly on seeing lots of tax returns over the years…
I think the professions probably often are a good way to get paid fairly if you’re a woman.
But maybe the best way to get paid fairly (whatever your gender or ethnicity or religion) might be owning your own business.
Excellent observation. I think you’re right.
Self-employed > Professional employee > Non-professional employee
Salary negotiation is huge. In my anecdotal experience, it seems like women are definitely less likely to negotiate their salary, and once it’s set, will sit in that same salary for years on end. My wife is in her last year of residency, looking to fellowship, and I know the salary negotiation is going to be incredibly important.
Where would you recommend to find good, accurate salary information? Particularly for a smaller specialty. MGMA/Merrit Hawkins directly? Or are there other better sources for this?
Some companies, like Contract Diagnostics, buy that MGMA data and share it with you as part of their contract review process. I think it’s actually cheaper to hire them than to buy the data yourself!
I’ve had some readers/firms email me and argue that you should have an attorney do all your reviews/negotiation but there’s some debate there.
WCI – great article as always. We are working writing a series of articles on these actual discrepancies (we see them all the time) in pay.
We do have different datasets but our own raw internal data is the most telling – and it does show Male/Female differences. Many reasons why – we feel the #1 reason is the lack of asking. We are constantly trying to convince our female clients into asking for more (and coach them on the ‘how’ as to now sound rude!). More to come…great article…
Also, would love to see the links to the studies regarding advisor fees. Is this something you’ve posted in the past? I pushed and pushed and finally got my employer to switch to Vanguard for our 401k but we are still paying fairly substantial advisory fees.
To get lower fees than Vanguard, you may have to fire all outside managers and do it yourself.
Should have been more specific. We switched to Vanguard from some garbage company, but we still have a 3rd party independent advisor that charges a hefty percentage fee to essentially show up once a year and explain plan benefits. So I can invest in Vanguard admiral shares at .05%, .09%, but with the 3rd party independent advisor added on it’s more like .7% or 1% (it’s pretty nebulous).
Ah OK. Well if you feel that the 3rd party advisor does not earn their fees, then you can fire them. I believe this trend is in full swing across the industry – from advisors to hedge funds.
I have a hunch that you don’t like paying Wall Street in general (I don’t either) and especially not paying them for run of the mill copy-cat over-priced service.
In runaway bull markets like we’ve had in recent years, average investors question why they pay any fees to anyone when they can just invest themselves and get similar results. Copy-cat hedge funds are the biggest losers since they charge the highest fees; add in that they correlate highly and have underperformed low-fee index funds and you get a ton of resentment.
I worry that bull markets make investors think they’re better investors than they really are. Sometimes, I think paying a professional manager fees to execute a system that outperforms over the long haul and protects capital in bear markets is worth it. I know that many managers aren’t worth paying bc they don’t do anything you couldn’t do yourself, but before we all start firing everyone, i think we need to ask more questions to find out how they can help us in bear markets.
“Sometimes, I think paying a professional manager fees to execute a system that outperforms over the long haul and protects capital in bear markets is worth it.”
That would be an incredible discovery. How do you go about finding these managers and their systems?
First, you have to determine how you measure performance – what makes one manager better than another?
I look at a couple of risk-adjusted performance ratios when backtesting systems or comparing managers – 1) Sortino (CAGR / Downside Std Deviation); 2) MAR (CAGR / Max Loss).
If you have a simple buy-and-hold U.S. Stocks strategy at your disposal for very low fees, you can either go with that or try to come up with something better.
Historically, buy-and-hold strategies investing in stocks produce MARs ranging from 0.10 – 0.30; CAGRs of 5-7% and Max Losses of 20-50% depending on how far back in time you look back.
Your look-back time plays a major role in your test results. For example, if you start your test on Jan 2009, you see great results (very high CAGR, small losses; high MAR and Sortino) for a simple buy and hold stocks strategy. But if you extend that look-back to, say, 1900 you get very different results (much lower MAR and Sortino).
When looking for managers, you may consider asking them to produce their MAR and Sortino for a few of their accounts; for both large and small accounts; varying start-dates and risk profiles. If they don’t know their ratios or care to produce them, you may consider walking away.
It sounds so smart doesn’t it? But the key term in there is “backtesting.” I am also quite adept at choosing both systems and managers that would have worked well in the past. The trick is choosing the ones that will do well in the future without resorting to luck. Considering that everyone always compares themselves to buy and hold, I think I’ll just do that. Everything else seems to come and go. I have a very low level of confidence that I can choose a manager who will beat that strategy, especially after fees and taxes.
I wonder what makes you choose buy and hold over other investment options. I wonder if it has anything to do with past results.
If not then I wonder what makes you think buy and hold will do better in the future than the other options.
I agree that many managers do come and go, but their failures do not deter me from trying to improve and perform better.
I’m confident I can stick with a buy and a hold plan and I’m confident that 30 years from now those who think they can time the market and/or pick winning stocks and/or choose managers who can will still be comparing themselves to a buy and hold strategy. Is there a strategy that will beat buy and hold over the next 30 years? Absolutely. Can I identify it in advance and stick with it over that time period? I’m much less sure.
Fair enough, sir.
JFOX, you are funny. Very good. 🙂
A couple thoughts. First, I’ve witnessed first hand that my physician girlfriend gets sick to her stomach by the very thought of seeming greedy by asking for more once she decides she likes the team members, the working environment, the office staff, etc. She was always under the false impression that she’d lose the job offer if she dared to negotiate. All medical students need a class on business and salary negotiation in med school. It’s unfortunate that the hospital administrators armed with business degrees manipulate risk averse doctors all too often
Coincidentally, I just wrote a guest post on basically the same topic,
http://www.callmewatson.com/gender-pay-gap-medicine/
We see this all the time – we are constantly pushing our female clients to ‘just ask’. We have ways to ask that can soften it up and make it not so binary for the hiring entity. There is high variability in specialties as well (both on the pay discrepancies and the willingness of the physician to ask) – something that has to be top of mind for all female physicians during the contracting/negotiating phase. – Jon
“She was always under the false impression that she’d lose the job offer if she dared to negotiate”
Not false all the time, as this just happened to me actually. I did just that. I asked (actually based on advice/numbers from Contract Diagnostics. I actually asked for lower than what CD recommended I ask for) and they responded by promptly rescinding their job offer.
So I would say, that yes there is always a possibility that you can lose the job offer just by asking, and just be prepared for that in case it happens. At the very least, a place that responds in such a way is probably not a place you’d want to work at.
This is a great article. All three of your first points resonate with me. My current position is gender-neutral, up and until partnership time, then negotiation really is critical because at that point, though the books are open, everything is negotiable. And while women tend to be great at representational negotiation, it is really hard for us to negotiate for ourselves. My self-talk going into negotiations now is that every extra dollar I earn is going into a 529 plan, so it’s not all about “me”. And finally, having an equal or higher earning partner who also does half of the house work is a huge score! It is such a huge benefit in so many ways, so if a woman is young and hasn’t partnered up yet, I would just so encourage her to look for someone who is going to be a help both financially and with household stuff. I can’t think of anything more relevant to one’s quality of life than a great partner.
It would be great if there was a place where doctors could see a list of accurate salary information supplied by actual physicians (ahem–like the whitecoatinvestor.com). Seriously, it’s hard to know when you walk into an interview or a meeting to accept a job what’s typical for the region. For example, is $330K as an ER Physician (2nd year out of residency) in DC normal?
Depends on how much you work and the type of job. According to the 2015 Daniel Sterns Survey of Emergency Physicians the 50th percentile of total compensation for employees is $309K. That’s for 1700 hours. It didn’t break it down by region, but traditionally the East Coast is generally the lowest. So yes, I’d say $330K is “normal.” Should you take it? Well, it depends on your next best offer.
But no, I don’t plan to start competing with MGMA.
Hi all – While MGMA has good data it is (of course) biased and sometimes can be inaccurate. The Contract Diagnostics internal database on starting compensation plans from 1000’s of deals we’ve done is powerful as it is raw data – not survey. It consists of what was offered (salary, bonuses, vacation, wRVU/collection rates, etc) and what was agreed to – not what the actual year over year production numbers are (that’s on you to produce!). So we are able to see countless trends in many different sections. $330k in DC on the surface seems fair, of course depends on how much you are working, days/nights, and overall how the compensation plan is structured. – Jon w Contract Diagnostics
Proud of you for not missing the opportunity to bash Whole Life Insurance in front of a new audience.
It’s only bashing if something I say isn’t true.
Great article introducing a lot of important personal finance pointers succintly. Apart from what other posters have pointed out re: females being less likely to want to negotiate, there is a knowledge gap, too. I was in this position a few months back and could not find reliable data on region-specific earnings. Fortunately, with a spouse in medicine, too, I was able to assess independently whether the offers were fair without needing to shell out $300 for MGMA.
Agree on the knowledge gap – one of the main roles we play at Contract Diagnostics is just helping you all understand what is in there and the HOW to ask for what you want (money or other items). There is definitely a purposeful and skillful way to do it vs just blasting an email ‘how about $X more?’ – Jon w Contract Diagnostics
Most females don’t, but significant portion of them, regardless of their station in life feel they are getting short changed. If this so called inequality is gender based, then how many of you, both men and women are willing to support an amendment to our constitution that every one in any particular profession makes exactly the same. In sake of fairness, lets expand it such that ER physician and neurosurgeon make the same. Why short change the RN’s while you at it.
To answer the above question myself, I would vote in favor of the above, but history has thought us that it does not work or end well (communism, etc)
Here is another one. Before tackling the task of making pay even between men and women, how about passing laws that women in any given speciality / profession make same salary as any other women in same position. So female surgeon in group A with more experience, better managerial skills, who works longer and generates more revenue makes same as another female surgeon who is not nearly as good or as driven.
See how things look different if we take men out of the equation.
So, this is a good blog to teach folks of all genders how to approach this issue. We all, especially younger men/women with less experience can benefit from advise.
So I guess your point is that their is pay descrepenies among same sex workers as well. Meaning some women make more then other for “same job”.
I do not know for a fact, but this is probably true
Very intresting / provocative statement sam
Thanks so much for discussing some women-specific topics here! As a female resident (with a stay at home husband and two small kids) I find myself in the minority (although that is probably slowly changing) and really feel like I don’t have the mentorship I would like to have when it comes to this kind of stuff. Reading your site has been life changing for me. I forced myself to start a blog today (thatsnotokay.wordpress.com) to try and give myself some accountability to continue to read, learn and grow in the arena of personal finance and financial literacy. I also am starting to see the fallout of some of my female friends who have had no idea regarding their finances when they unexpectedly end up divorcing. It’s disheartening to realize that there is a trend for women to be less educated about these issues, and to realize that I fall in that category! Building wealth has never been a priority for me, but this goes so much deeper than that–it’s about being intentional with my time and money in a way that helps me live according to my priorities and values.
You can console yourself that women are generally better investors than men- because they leave their investments along! Good luck with your blog!