High tax rates discourage women from pursuing promotions?

Sheryl Sandberg is getting people excited about her new book, Lean In. It seems as though this would be a good time to add to the “Aid to Evaluating Your Accomplishments” page (hit reload a few times to see the names change). Most of us would be happy either to (1) care for an infant child, (2) run one of the world’s most valuable companies, or (3) be the author of a bestselling book. Sandberg is doing all three simultaneously.

Sandberg’s life sounds pretty good but not every female executive can rise to such levels; there simply aren’t very many jobs as good as being Facebook COO. The typical female (or male) executive can expect to end up somewhere in the middle of a pyramid.

The men that I know seem to seek promotions uncritically. They don’t need a much larger salary in order to take on a larger responsibility. They’re happy to go from “Director” to “Managing Director” or “VP” to “Senior VP”. As Napoleon said, in reference to medals, “It is with baubles that men are led”.

Some women friends though, tell a different story. One who lives in San Francisco is typical. She earns a very comfortable salary, more than $200,000 per year, managing a small team. She was offered a promotion recently that would have paid her about $9000 per year additional. She cited federal income taxes, California state income taxes (among the highest in the nation at up to 13.3 percent), and an additional San Francisco city payroll tax in calculating that at most she would be able to spend about half of the additional money, netting perhaps $4500 per year. She decided that it wouldn’t be worth it because the bigger job would involve more hours of work and more travel time. Her hourly after-tax wage would actually have fallen. Other women talk about being bored to death watching PowerPoints in endless meetings. The higher up in the pyramid, the more time spent looking at PowerPoints and the less time doing anything productive and therefore satisfying. Asked about the value of titles, a female MBA said “I care about the hours that I have to work and the salary that I get paid. They could call me ‘secretary’ and I would be just as happy.”

It is far from obvious that it is rational to want to climb a corporate hierarchy. There are a lot of good jobs near the bottom of the pyramid for talented people. One can get paid $250,000 per year without having to manage anyone. If you don’t manage anyone you can work flexible hours and not lose sleep at night over whether or not a subordinate will complete an assigned task. The first step into management brings a radical reduction in quality of life and, typically, only a small raise. Being a COO or CEO is great (and being fired from a CEO job is even better; Robert Nardelli got paid $210 million to stop working at Home Depot) but being a middle manager is not necessarily a great job. As there are thousands of middle management jobs for every CEO or COO job the probability that a career in management will lead to one of those great jobs is tiny.

Sandberg and others posit complex reasons for women failing to claw their way slightly higher in management pyramids. Perhaps part of the answer that women, on average, do a more rational cost/benefit analysis.

Related: http://philip.greenspun.com/careers/women-in-science

[Note that the same can be said about programming jobs, albeit typically at lower wages than the ones above. To be a programmer can be heaven. To manage programmers is often hell. Why go from heaven to hell for a 15 percent raise that, after taxes, will have only a tiny effect on one’s lifestyle? If money is that important, why not do a little consulting on the side instead?]

15 thoughts on “High tax rates discourage women from pursuing promotions?

  1. You seem to misunderstand what engineering management is. It is not a promotion from engineering. It is a totally different job. Arguably being a VP at a large company is a totally different job than a first line manager.

    The usual reason for becoming a manager (at least in the companies I have worked for) is because you are seeking a new challenge, and want to work more with people and spend less time staring at code. Engineers who become (good) managers do so because they have much stronger people skills than their peers, and they feel an urge to develop those skills. Strong tech companies make sure that managing people is not required for advancement — this is partially to help them keep their strongest engineers. (The top ranks are “principal” or “fellow”.)

    Personally, when I became a manager many years ago, you could argue it was a demotion. More work, harder, and no raise. It was just a lateral transfer to a new job. Have I been promoted since then? Sure. Do I manage engineers who make way more than me? Sure. Do I regret the change? No. I believe I’m a better manager than I was a pure engineer.

  2. I am curious what job you have in mind where you can earn $250000 a year without any direct reports? The obvious ones are doctor, lawyer, and investment banker I guess. But those have very high barriers to entry, much higher than the person aspiring to middle management (the bottom of the pyramid people you refer to) can reasonably overcome. And they are certainly not careers that you wake up one morning, decide your are sick of corporate politics, and switch into.

    I don’t dispute that those jobs exist. I just want to know what they are so I can go get one.

    On a side note, one big problem is that you don’t know when you are choosing a college major and starting your career what the “best” careers are. You can read the statistics but at 18 years old you do not understand work-life balance, not wanting to travel, being tired from the monotony of work, etc. You don’t understand that what you are interested in may or may not make for the best career long term. You don’t understand at 18 that a government pension plan is worth a lot more than an extra chunk in your paycheck. The wisdom you need doesn’t hit you for another 15-20 years. Your perspective and what you value can change so much over time.

  3. M: A friend is a hardware engineer at Apple. He earns about $250,000 coding away in Verilog. The biotech industry (which is dominant in my neck of the woods) has a lot of high-paying jobs that are in the leaf nodes of large bureaucracies. A worker could be a PhD biologist or an MBA working on marketing strategy.

    I absolutely agree with you on the tragedy that the only time at which a person can choose a career for his or her middle age is when the person is young and inexperienced. Part of the problem is that people are parked in school until age 22 or 30 and therefore end up with much more limited exposure to actual workers than young people had in the old days.

  4. I tend to agree with Phil here in that in many ways it is irrational to want to climb a corporate hierarchy if the probability of reaching senior senior management is low. In my most recent experience at a blue-chip Boston tech company, the middle managers considered as a population did not seem to have many attractive qualities– they tended to have less balanced personalities and lives, were more stressed and generally less pleasant to be around, etc. My instinct (or perhaps bias) was that the people who chose to try to climb had less worthwhile going on in the rest of their lives and used work to compensate or fill the gap. Or maybe they are just prefer working to other activities, but either way the effect is the same.

    Based on how cushy the individual contributor positions were, I definitely agree that if one were to want to spend an extra 10 hrs/week working, consulting on the side would be the rational way to go.

  5. Don’t most individual contributor engineering jobs top out around $150k, maybe $175k for the extremely talented and/or narrow specialist hired gun types? And that’s after working for 25-30 years in a blue chip company in a tech center like Boston?

    Or am I just grossly underpaid (in engineering) and don’t even know it?

    I see lots of jobs posted for engineers that barely break $100k and that’s the extreme end of the range listed. I’ve been pursuing a change to Project Management to climb a bit higher up the pay scale. Maybe I am barking up the wrong tree altogether? Maybe the next level of Project Management-leading-to Engineering Management just isn’t worth the hassle for the $10-15k pre-tax bump that probably won’t really change your lifestyle one iota? Except that you will be more miserable working more hours chasing other people’s problems. Maybe I just answered my own question.

  6. What M said. (All posts). Beyond joining a guild of some sort (MD, clearance, etc), upper middle class salaries for line work seem hard to come by. Perhaps this is the pressure of globalization?

    Anyone else have any career ideas for $250k at the line level? Beyond the obvious ones M already mentioned, Verilog monkey seems to be the only new one. Other ideas? I’ve gone into technical sales which can reasonably top out around $250k, although the travel can be brutal and expense accounts are only really cool if you like getting fat.

  7. M, P: I do think that there are a lot of sales jobs that pay $250k. It wouldn’t make sense for top individual contributors at big companies to make a lot less than that. Otherwise the companies would lose people to government and quasi-governmental employers, who often pay well over $200,000 per year when you include the value of pension and other benefits and who don’t require people to work very hard.

    There is still a fair amount of competition among American employers for motivated bright people.

  8. Okay I gotta bite, call me naive. I’m in Boston so I know 250K isn’t a lot of money to some people. But let’s step back for a second, isn’t 150-175K still pretty darn good money?

    I have a small business and my wife works. We do well but we’re not 1%ers or anything like that. We have three children. I’d say we have a great lifestyle, I consider our family tremendously fortunate and I thank my non-denominational higher power every night. And to me a stable salaried 150-175K is pretty darn good money. No private jets, but I mean if you have a family how realistic is stuff like that anyway? I’d much rather take a ride in the minivan even if I had the Gulfstream.

    I love my life and I have no axe to grind. We live in a great place, take great vacations, save. I’m just really curious, every time I hear someone complaining about “only” making 175K or whatever, I’m just like huh? Where’s it all going? Is this just because my wife works that I’m confused? Because I drive a Honda? If you live moderately, save and invest prudently, won’t that meager 175K still snowball into something pretty decent over the years? This is not a troll. And please, no breakdowns of, private school is this and my mortgage is that, we’ve all seen that on the WSJ and those are always a good laugh.

  9. stu: It doesn’t matter whether 175k is “pretty darn good money” (I agree with you that it is, by the way) but whether some other enterprise is willing to pay $200k or $250k. That’s how a market works. Since you have “a small business” you don’t have a billion dollar brand to protect. How much is it worth to Apple to avoid having the iPhone 6 fall so far behind Samsung that sales nose-dive? How much is it worth to a big pharma company to get the marketing strategy right on a drug that has taken 12 years to get FDA approval?

  10. pg, I hear you on the market aspect of labor and no argument there. It’s just that sometimes I get the sense that people are upset not just because they feel like somehow the market is inefficient in their case, but because they feel like they _deserve_ or _need_ that salaried 200K job. Look, go for it more power to you. But I wish people would be a little more thankful too, and put it in perspective when there are so many others with way (way, way, way) less.

  11. And maybe more to my original thought, at these salary levels why is money the main thing being optimized? We are talking about changing jobs, careers, etc, to try to bump up from good pay to slightly-better-than-before-good-pay. Like your original post, 20K or something pretax when you’re already making 175K, it’s not really that much functionally, and moreover it’s probably not much relative to investment growth etc. Right?

  12. Stu, speaking for myself, it’s all about the anticipation of unstable employment in an increasingly, uh, “dynamic” economy. The only thing better than living off of 150k is continuing to live off 150k WHILE making 250k. That way, when the hammer (seemingly) inevitably drops, you are better positioned to recover. It also speeds you toward the day when you aren’t trading time for money (in theory), which is also a boon in the face of “dynamism.” This is hardly bulletproof, there are other things that could go wrong systemically that higher earnings wont protect against (e.g. Hyperinflation). But it does help with the unstable employment problem, which I obviously think is significant.

  13. Stu: Why is money the thing being optimized? The economy would grind to a halt if it were not! There has been a lot of research done on number of hours worked in Europe where marginal tax rates have varied from 30 to 70+ percent in different years. When tax rates are high and it is very difficult to achieve a lifestyle change through working harder, people reduce working hours (most of the difference between hours worked in France versus the U.S. can be accounted for by tax rates, not cultural differences; the French worked similar hours when they had tax rates similar to the U.S.)

    This is not to say that I think a growing economy with all private sector workers working 60+ hours is ideal. There is a lot to be said for a society where nobody works more than 35 hours per week. However, economic growth is an imperative for most modern democracies because the future’s money has already been spent for present consumption. Without strong growth the tax burden on future workers would be staggering.

  14. P, yes I do see this point. Like I said I consider myself incredibly fortunate and I certainly wouldn’t expect times always to be good. At the same time, I enjoy my work and would like to do it for a long time. Ideally I never stop working, I just scale it back when I slow down. I have been lucky and would like to continue giving back until I kick the bucket. This is another aspect of the calculation that strikes me as odd, which is that people seem to heavily optimize in terms of early retirement, at the cost of being unhappy in their current job/career. Isn’t the stress and effort much better spent finding a job/career that one intrinsically enjoys, or on interesting hobbies etc? I don’t feel like humans are built to be satisfied retiring to the golf course, so after the big push for early retirement then what? I mean look at PhilG look at all the work he gives himself! (I know, I know, pilots aren’t paid well.)

  15. Stu, I agree with your analysis personally (though I know plenty of people who really would be happy to play golf all day), but disagree with the assumption that a lifetime of enjoyable, stable, and adequately remunerative employment is a realistic option. (“Adequate” meaning that you earn enough to raise a few kids in a safe neighborhood with good educational prospects; ideally you’ll also be able to decay and die with dignity, and not as a burden on your offspring.) Providing for my family will take precedence over enjoying my job 100 times out of 100. I suppose it’s just a matter of personal priorities, but suspect I’m not alone in this. The most important thing to me is that the work is ethical, followed closely by its remunerative potential for the aforementioned reason. Everything else is varying degrees of frivolity for my particular value system.

    There are various guilds you can join to reasonably achieve the above ends, but I’m not and MD or a government employee, hence the emphasis on “stacking mad chips” (in the parlance of our times). While its better to experience income disruption at $250k than $150k, it’s better still to experience it with $2.5MM in the bank.

    Phil, I can’t agree more with you. I don’t see the moral imperative of economic growth, but contemporary society has turned it into an operational imperative. Yay.

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