EFFECTS OF EMPLOYMENT GAPS ON THE CAREERS OF MBA's

" Academy of Management Journal 1990, Vol, 33, No, 2, 391-406,

EFFECTS OF EMPLOYMENT GAPS ON THE CAREERS OF M.B.A.'s: MORE DAMAGING FOR MEN THAN FOR WOMEN? JOY A. SCHNEER Rutgers University FRIEDA REITMAN Pace University This study investigated the impact of employment gaps on two dimensions of managerial careers: income and satisfaction. As was hypothesized, the results from a survey of M.B.A. degree holders revealed that discontinuous employment histories were negatively associated with future income and satisfaction. The impact of a gap was found to he more severe for men than women. The findings suggest discrimination against men not following a traditional career path.

This study examined the impact of employment gaps on managerial careers and determined if gender moderated that impact. The effect of employment gaps on the career paths of managers is of interest from two points of view. First, involuntary managerial turnover has increased dramatically in recent years because of the high incidence of company restructuring resulting from mergers and acquisitions, strong foreign competition, rapid technological change, and shifts in economic activity. In the 1980s, more than two million managers have lost their jobs because of restructuring (Deutsch, 1988). Traditionally, managers thought of a career as uninterrupted movement up the corporate ladder. It is now apparent that ja managerial career may also include an involuntary gap in employment (Budge & Janoff, 1984; Hirsch, 1987). It is therefore important to confirm that a large percentage of managers are experiencing employment gaps and to examine the effects of such gaps on careers. In addition, employment gaps are of interest from the viewpoint of their impact on women's careers. AJpopular perception is that women interrupt their careers more frequently than men as a result of childbearing (Taylor, 1986). Such interruption is often given as one of the reasons why women have not been able to move into senior management positions in corporations. Given this perception, it is important

We would like to thank the two anonymous reviewers for helpful comments that significantly strengthened this article. We appreciate the suggestions Phil Bobko made during the revision process. The study was supported in part by a Douglass College Fellows Opportunity Grant, a Rutgers University Research Council Grant and Summer Fellowship, and the Scholarly Research Fund and the Center for Applied Research of Pace University, ] 391

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to confirm that women do interrupt their careers more frequently than men and to ascertain if such gaps in employment affect women in the same ways they affect men. This study's unique contribution is its focus on two aspects of careers—income and satisfaction—and the moderating role of gender. Employment Gaps In this article, an employment gap specifically refers to a period without employment that occurred in the career history of a currently employed person. It does not include a paid or unpaid leave from work. For a period to be considered a gap, it must have involved total severance from any company. An employment gap can be the result of either voluntary or involuntary turnover. When turnover is voluntary, employees are responsible for initiating the separation from an organization. Leaving the work force for a time to go to school or raise children would produce voluntary gaps. Involuntary turnover, in which employers initiate the separation, can be either personal or nonpersonal (Schneer, 1988). Personal reasons for involuntary turnover include performance, ability, effort, honesty, and personality problems. Nonpersonal reasons include technological change, downsizing, plant relocation, and company takeovers. PAST RESEARCH Employment Gaps and Income One of the primary focuses of this research was the impact of employment gaps on income. Theoretically, we would expect income to be positively related to work experience because of the accumulation of human capital that experience allows. Human capital, which is defined as the skills and knowledge that make an employee productive and valuable, can be acquired through work experience, during which people make contacts, learn new skills, and gather information that promote future earnings potential (Bergmann, 1986). A career interruption diminishes total work experience. Therefore, people with gaps will have accumulated less human capital and may be paid less when reemployed than comparable continuously employed people. A number of studies have empirically demonstrated a negative relationship between employment gaps and income. In her study of 1974 Stanford M.B.A.'s, Strober (1982) compared the 1978 incomes of those working fulltime who had continuous employment histories and those with employment gaps. Among her respondents, 26 percent of the women (N = 7) and 7 percent of the men (N = 10) had had employment gaps since receiving their M.B.A.'s. Holding two other income determinants constant (employer's industry classification and a travel requirement on the job), Strober found that individuals with gaps earned about $9,000 (28%) less than continuously employed individuals. Devanna (1984) also compared the incomes of M.B.A.'s with and without career interruptions. In her matched pairs of 45

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men and 45 women who graduated between 1969 and 1972, only 8 people reported gaps, all of them women. The income of those with gaps was about $1,700 (4%) less than the income of the other women, and $6,000 (1^%) less than the income of the entire cohort. I It appears that employment gaps are negatively associated with income. What is unclear is whether employment gaps have a negative effect on income beyond that which can be attributed directly to diminished work experience. In theory, human capital depreciates during a period of unemployment as skills and knowledge deteriorate with disuse (Bergmann, 1986; Blau & Ferber, 1986). Therefore, an employment gap should have a negative effect on income beyond that directly attributable to diminished work experience. Additional theoretical support derives from the sociological literature on work and career paths (Anderson, 1964). Our culture places great importance on work for pay. "When we meet a person who does not work . . . [we think] something must be 'wrong' " (Anderson & Carter, 1984: 19:^). Thus, the stereotype of a good manager encompasses uninterrupted movement up the corporate ladder (Hall, 1987). Widespread acceptance of this traditional managerial career path leads to suspicion of people with discontinuous work histories. Even if a gap was due to major organizational restructuring, other employers, and even the affected employee, often feel that the restructured company would have found a way to keep good managers (Deutsch, 1988). Therefore, people doing corporate hiring may be prejudiced against managers with histories of career interruptions. A few studies have investigated whether employment gaps affect managerial income beyond their impact on total work experience. Two of the studies surveyed M.B.A.'s and made income comparisons using regression analysis contrasting full-time workers with continuous employment histories and those with gaps in employment. Reitman (1985) analyzed the incomes received in 1984 by Pace University M.B.A.'s who graduated]between 1976 and 1980. Of those employed full time, 32 percent (N = 31) of the women and 11 percent (N = 12) of the men had experienced gaps since receiving their degrees. She found that with three factors held constant— pre- and post-M.B.A. work experience, hours worked, and holding a job in finance—each six-month interruption reduced income about $3,000. After differences in total years of work experience had been accounted for, respondents with career interruptions earned 12 percent less than those continuously employed. Similarly, Olson and Frieze (1987b) analyzed! incomes received in 1983 by University of Pittsburgh M.B.A.'s who graduated between 1973 and 1982. Of those employed full-time, 26 percent of the women (N = 86) and 19 percent of the men (N = 151) had had gaps in their careers since receiving their degrees. With pre- and post-M.B.A. work experience and gender held constant, having a one-year gap reduced income by about $6,000. This amount corresponded to 15 percent less income than the continuously employed respondents received, with differences in total years of work experience controlled.

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These studies suggest that career interruptions do have a negative effect on the income of managers beyond that attributable to the reduction in work experience. Thus, Hypothesis 1: Managers with a gap in their employment history wiJJ earn Jess income than continuously employed managers, even with experience controlled. Very little information is available on whether the negative impact of employment gaps on income is the same for men and women. Human capital theory suggests that the impact of employment gaps on income might not be the same for the two because of gender differences in investment in specific human capital—knowledge and skills that are particular to a job and not transferable. Workers who have invested more in specific human capital suffer greater wage loss from displacement than workers who have invested less, because a build-up of specific human capital is associated with salary increases in the job in which it occurs but will not contribute to salary on a new job. "Women workers are expected to invest less in job-specific human capital than otherwise comparable men workers because women expect to spend less time [in the labor force]" (Madden, 1987: 246). Thus, women managers would incur less wage loss as a result of employment gaps than men. Additional theoretical support for the notion that gender moderates the relationship between gaps and income comes from application of the literature on gender role socialization to the present topic. According to that literature, career path stereotypes differ for men and women (Russo, 1985). The stereotype of the traditional manager with a continuous work history appears to apply more to men: "Beliefs about differences between the sexes . . . take as axiomatic that women's primary sphere is the home—and that of men is the workplace" (Reskin & Hartmann, 1986: 125). Traditionally, women are expected to leave the work force to have and raise families. Women thus possess a socially acceptable reason for being out of the work force that does not relate to competence, but men do not. This difference could lead to less prejudice against women with discontinuous employment histories. The impact of an employment gap on future income would thus be less severe for women than for men. An alternate view of gender differences, based on the concept of discrimination in the workplace, suggests the reverse scenario—that the effect of employment gaps on managerial income will be worse for women than for men. Research has generally found that women earn less than comparable men (e.g., Bergmann, 1986). If this income difference is due to discrimination, women may also experience such discrimination when seeking new jobs and will have fewer and less favorable opportunities for reemployment than men with equivalent work histories. Thus, the impact of employment gaps on income would be more severe for women than for men. Very little empirical research has been conducted to examine gender differences in the income effect of career interruptions. What has been done

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has suggested that differences exist but has not established a direction or offered an explanation. Olson and Frieze's (1987b) examination of the reasons for career interruptions lent support to the socialization perspective: interruptions for family reasons (reported almost entirely by women) were not associated with lower income, but gaps experienced for reasons tbat reflected difficulty in finding a job (reported primarily by men) were significantly associated with lower income. However, Olson and Frieze's results were only suggestive, as tbose researchers did not directly test for gender differences in the impact of gaps on income. Two studies in the economic literature have also examined this question, analyzing data from national labor surveys to determine the effects on income of nonpersonal involuntary turnover in the general work force. After controlling for age, education, industry, occupation, and location. Madden found that "displaced women lose about 11 percent more salary growth than men (1987: 250). Regression analyses revealed that the salaries of men with employment gaps grew 16 percent less than those of continuously ernployed men, even with tenure controlled. For women, this loss in salary growth as a result of employment gaps was 27 percent. Maxwell and D'Amico (1986) found that men had higher rates of job loss but were reemployed more quickly than women. If women did work again, their wage loss was somewhat greater than that of men, "controlling for human capital (tenure, education, age, and race) and institutional (changing industry, occupation, and residence) differences" (Maxwell & D'Amico, 1986: 376). These economic studies support the concept of gender discrimination as they have shown that the impact of employment gaps was worse for women than rnen. Theory and past research suggest that gender will moderate the impact of gaps on income, although the direction of the gender differences is unclear. Thus, Hypothesis 2: Gender will moderate the ejifect of employment gaps on income. Employment Gaps and Career Satisfaction The second focus of this study was the impact of employment; gaps on career satisfaction. Theoretically, we would expect career satisfaction to be negatively related to employment gaps. If employment gaps have aj negative effect on income, managers with employment gaps may well be less satisfied with their careers than continuously employed managers. Strober (1982) and Reitman (1985) demonstrated a positive relationship between satisfaction and income in their studies of M.B.A.'s. Research on career path stereotypes suggests that employment gaps should have a negative effect on sa:isfaction beyond that due to diminished income because of disconfirmed expectations about traditional career paths (Anderson, 1964). Employers expect good managers to have uninterrupted career paths, and managers have been socialized to expect the same. When their careers include gaps, they will experience diminished satisfaction with their careers. It would be important

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to verify tbat employment gaps negatively affect satisfaction and to learn wbetber diminisbed income is solely responsible. No researcb bas investigated tbe impact of employment gaps on career satisfaction, altbougb some researcb bas examined related variables. Leana and Ivancevicb (1987) and Scbneer (1988) recently reviewed tbe literature on tbe psycbological effects of involuntary turnover. Altbougb it would seem that the impact on career satisfaction would be part of tbose effects, none of tbe studies bas examined it. Tbe psycbological responses studied bave included self-esteem, well-being, and outlook on life, and examination of tbe results of tbis researcb suggests tbat career interruptions migbt bave a negative impact on career satisfaction. For example, Hepwortb (1980) found tbat unemployed respondents exbibited less satisfaction witb life tban an employed comparison group. And a longitudinal study (Hyman, 1979) using data from a national survey lent credence to tbe idea of a lasting impact on satisfaction even after reemployment. Tbere is no direct empirical evidence on tbe effect of employment gaps on career satisfaction, altbougb tbeory on career patb stereotypes suggests a negative impact. Tbus, Hypothesis 3: Managers with a gap in their employment history iviJJ have lower JeveJs of career satisfaction than continuously employed managers, even with income controlled. Tbere is very little information available on wbetber tbis impact of gaps on satisfaction is tbe same for men and women. Tbeoretically, tbe impact of a gap on satisfaction sbould be more severe for men tban women. Since men bave been socialized to expect continuous careers, wben careers do not follow tbe traditional pattern, tbey will have diminisbed satisfaction (Anderson, 1964). Women, on tbe otber band, expect to bave gaps in employment, and tberefore sucb gaps might not affect tbeir career satisfaction (Russo, 1985). As no empirical study bas addressed tbis question, tbe direction of tbe gender difference is unclear. Tbus, Hypothesis 4; Gender wiJJ moderate the effect of employment gaps on career satis/action. To summarize, tbe purpose of tbis study was to examine tbe effect of employment gaps on two dimensions of managerial careers, income and satisfaction, and to determine if gender moderated tbose effects. Tbis study expanded on prior work investigating tbe impact of employment gaps on tbe income of managers by examining tbe issues of gender differences. In addition, tbis study focused on an important career factor tbat prior studies of employment gaps bave not addressed—career satisfaction. METHODS Respondents To test tbe four hypotheses, in 1987 we sent surveys to 1,361 individuals bolding M.B.A. degrees wbo appeared in tbe alumni lists of two large nortb-

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eastern universities (49 undeliverable surveys are not included in [this figure). The people surveyed had received their degrees between 1975 and 1980, dates chosen to maximize the numher of years of post-M.B.A. work experience and to ensure representation of both men and women. In[ order to generate a large enough sample of women with career interruptions, we solicited responses from all women in each graduating year and from a random sample of the same number of men from each year. We mailed a six-page survey to each person and sent three follow-up letters, after a week, three weeks, and seven weeks. A total of 925 questionnaires were returned, yielding a 68 percent response rate. Alumni office records on yearl of graduation were not always accurate, so we had to exclude 41 respondents from the study because they reported graduating after 1980. The returns were equivalent for the two universities. The respondents were about evenly divided between men (N = 462) and women (N = 422). Their average age was 38 years, with two-thirds hetween the ages of 31 and 40. Almost threequarters were married, and 64 percent had children. In terms of employment status, 88 percent of the respondents were currently employed full-time, 5 percent were employed part-time, and 7 percent were not currently employed. Employment status statistics were significantly different for men and women (x^ = 97, p < .001). For the men, 98 percent were einployed full-time and 2 percent were not employed. For the women, 77 percent were employed full-time, 9 percent were employed part-time, and 14 percent were not employed. As expected, many respondents (30%) had experienced periods when they were not employed. Measures The survey included questions on present income (yearly salary plus bonus), field of responsibility, hours worked per week, present employment status, career satisfaction, pre- and post-M.B.A. work experience, and postM.B.A. employment gaps. We gathered information about career interruptions by asking respondents if there had been periods during which they were not employed since receiving their M.B.A. degree. If they reported an employment gap, respondents were then asked to indicate the number of gaps, tiieir length, whether they were voluntary, and the reason or reasons for the gaps. Career satisfaction was computed as average satisfaction with eight career criteria—salary, title, autonomy, responsibility, job security, skill enhancement, skill use, and opportunity for advancement. The scale demonstrated strong internal consistency reliability (a = .87). Data Analyses

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The group analyzed (N = 713) was composed of the respondents who reported in the survey that they were working full-time and had had either no or one post-M.B.A. career interruption. We excluded respondents who reported no current work or reported part-time work since the focus of this study was on the effects of an employment gap on current income and satisfaction. As research on career development (Chorba & York, 1986) and

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preliminary data analyses suggested that the career implications of multiple gaps may be qualitatively different than those of single gaps, the small percentage that had more than one gap (6 percent of both the men and the women) were also not included in the analyses. This procedure provided for a strong, unambiguous test of the effect of a single employment gap on income and career satisfaction. Multiple regression analysis was conducted to examine the effect of a gap on income. The presence of an employment gap was entered as a dummy variable. We controlled work experience by including a measure of years of post-M.B.A. work experience in the equation. Pre-M.B.A. work experience was included in initial models but was dropped because it did not contribute significantly. We controlled three other variables that we found to influence income by including them in the model: the reported number of hours worked per week, gender (entered as a dummy variable), and field of responsibility (six fields, coded as five dummy variables representing accounting, management, computer science-engineering, finance, and marketing). Prior studies have found these independent variables to be important contributors (Olson & Frieze, 1987a; Madden, 1987; Reitman, 1985). The gap-by-gender interaction term was added to the model to determine if gender moderated the impact of a gap on income. Where the interaction was significant, we estimated separate equations for men and women. This procedure provided for the appropriate estimate of the effect of a gap on income hecause the magnitude of the effect varies across gender. The statistical analyses for the career satisfaction hypotheses paralleled the income analyses. To determine if managers with a gap had lower satisfaction than those continuously employed, we used multiple regression, again entering the presence of an employment gap as a dummy variable. Income was controlled by inclusion in the regression model. Two other variables found to determine career satisfaction were also controlled via inclusion in the model: gender and field of responsibility. To determine if gender moderated the impact of a gap on career satisfaction, we added the gap-by-gender interaction term to the model and estimated separate equations for men and women where the interaction was significant. RESULTS

Table 1 shows the correlation matrix and descriptive statistics for the independent and dependent variables. Significantly more of the women than the men had experienced an employment gap (24% vs. 12%, x^ = 19, p < .001). Characteristics of the employment gaps studied appear in Table 2. The gaps were fairly short for both the men and the women, with 87 percent of the career interruptions lasting one year or less. The women's gaps were significantly more likely to be voluntary, and the reverse held for men (x^ = 10, p < .01). The reasons reported for the gaps also differed by gender (x^ = 35, p < .001). As we expected on the basis of present trends, a large percentage of both men and women specified company restructuring as the

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TABLE 1 Pearson Correlations and Descriptive Statistics" Variables 1. Work experience 2. Hours 3. Gap*" 4. Gender'^ 5. Income'' 6. Satisfaction"

Means

s.d.

1

8.39 49.14 0.17 0.42 64.63 3.66

1.76 8.94 0.37 0.49 26.50 0.73

-.12 -.16

-.09 -.09

.16

.16 .03

.44 .22

-.21 -.12

2

3

4

5

.11

-.21 .03

.35

'N = 713. Correlation coefficients greater than .09 are significant at p < .01. | *" This variahle was dummy-coded, with 1 = gap, 0 = no gap. •^ This variahle was dummy-coded, with 1 = woman, 0 = man. ** Income was measured as yearly salary plus honus in thousands of dollars. " Satisfaction was measured on a 5-point scale, with high scores indicating greater satisfaction, j

TABLE 2 Characteristics of Employment Gaps Studied" Characteristics Length of gap*" Mean Median Type of gap Voluntary Involuntary

Reasons for gap"^ Firm restructuring Ghild-rearing Personality mismatch Relocation Career change or school Joh dissatisfaction Health prohlems Performance Other

I

Total

Men

Women

8.5 6.0

7.4 5.0

9.2 6.5

49 51

31 69

61**

35 20 15 9 9 6 4 1 6

45 0 30 2 6 9 2 0 9

29***

39

33 4 14 10 4 6 1 4

' There were 119 respondents, 48 men and 71 women. All statistics except thos^ for length of gap are percentages. < •" Length is reported in months. •^ Respondents could indicate more than one reason. | **p