STA TE X

Strategy Medium difficulty

Public Sector Interviewer-led case

This case focuses on advising a state government on developing a set of policy tools and interventions
aimed at reducing the gender pay gap across their economy. It involves a challenging structuring
question, and tests all other elements of the interview scorecard. It requires to conceptualize the
problem, quantify the scale/impact of the problem, prioritize addressable issues, and propose solutions.

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Problem definition

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Our client is the government of State X (specifically their Department of Labor). State X is a small size
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state in the United States with one main large city and a diversified economy. The State’s Department of
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Labor has multiple functions including developing legislation on labor related topics, measuring labor and
workforce statistics, and providing incentives and support to employers to maintain a productive and
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satisfied workforce. They have recently launched a special initiative aimed at improving equity at work
and specifically closing gender disparity in earnings.
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In most countries around the world there is a well-documented trend of women being paid less than men
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including for the same jobs. Broadly speaking in the United States this manifests with woman earning on
average, just 82 cents for every $1 earned by men. There are several underlying factors driving this and
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the earnings gap varies from state-to-state. However, there is an emerging consensus to address this for
a number of reasons including but certainly not limited to improving economic growth. Our client is keen
to address this issue by first understanding the magnitude of the gender earnings gap in their state and
what factors at play, and then developing a longer-term strategy and set of interventions to improve the
situation.

State X has hired you to investigate what drives the gender earnings gap and what could be done
to address it.

State X - 1/9
 Question 1 (Structuring)

What could the key drivers behind gender earnings disparity in state X be?

Additional Information

• If asked the goal of the state are to a) ensure more equity for women as this is an important moral
and political imperative of the current government b) improve the overall economy and c) make the
state more attractive to out-of-state talent and employers. They do not have a specific quantitative
target in mind

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• The government has a lot of levers to address the issue but if there are limitations (e.g., on the types

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of policies that can legally be placed on employers) these will be addressed as they arise
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The difference in paid employment participation is part of the scope of the problem
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Possible answer
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1. Fewer women than men have paid employment

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a. They struggle to find a job more than men do

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b. More working-age women choose not to work than men

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2. Women are not in the same jobs as men

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a. Women work in lower-pay industries than men

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● They don’t apply to higher-pay industries as much as men

● Their fields of study are less suited to higher-pay industries
● Higher-pay industries discriminate against women at the hiring-stage
● They switch to lower-pay industries over time
b. Women work in lower-pay functions than men
● They don’t apply to higher-pay functions as much as men
● Their training or studies are less suited to higher-pay functions
● They are looked over or discriminated against at the hiring-stage for higher-pay functions
● They switch to lower-pay functions over time
c. Women are on average less senior in their roles than men
● They do not apply for promotions as often
● They do not perform as well due to commitments at home
● They are overlooked for promotions
● They take longer to advance to senior roles because of career breaks
● They leave the workforce early

State X - 2/9
3. Women are in the same jobs but get paid less
a. They work fewer hours than men
● They decide to work fewer hours than man
● They are not given the same opportunity for additional hours
b. They are paid less than men per hour, for the same job
c. They receive less incentive payments than men
● They take on less work leading to lower incentive pay
● They are not included in the same incentive structures as men
● They do not perform as well due to commitments at home
● For the same work and performance, women are awarded less incentive pay than men

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In a rush to ramp up your case structuring skills?

Practice on your own with our Structure Drills.

State X - 3/9
 Question 2 (Numeracy)

We have established that the difference in earnings between women and men is driven by both a pay
gap and a labor participation gap. The client would now like to look more closely at the state’s largest
city, New Metro, which represents the bulk of the population and economic activity. Focusing on this
city alone - what would the annual impact of closing both the pay and participation gap by 50%
mean for GDP of State X.

Additional information

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Provide the following information about New Metro:
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Population: 2M
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Working age population: 75% of total population
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• Workforce Participation Rate: 90% for men and 80% for women
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• Average men’ pay: 80K

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Average women’s pay: 75% of men’s

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State X’s GDP is currently $210b.

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We can assume that additional female earnings would automatically translate into additional GDP.
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Possible answer
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To estimate the economic impact of closing the gender pay and participation gap in New Metro by 50%, let’s
look at how much additional earnings will be generated and compare the result to the GDP of State X.

First, let’s calculate the current earnings of women in New Metro:

● Let’s assume that 50% of population is women. 50% x 2m = 1 million women
● 75% of them are working age. 75% x 1m = 750k women of working age
● 80% of them work. 80% x 750k = 600k women currently working
● 75% average pay compared to men. 75% x 80k = 60k
● This yields current female earnings of 60k x 600k = $36b

Now let’s look at the impact of closing the pay and participation gap by 50%. In this new scenario:
● Women will now earn 87.5% of what men earn. 87.5% x 80k = $70k
● 85% of working-age women will now work. 85% x 750k = 637.5k women working
● This translates into total female earnings of 70k x 637.5k = ~$45b

State X - 4/9
Assuming that male earnings and other factors remain constant, closing half the gender pay and
participation gaps in New Metro will translate into $45b - $36b = $9b, or 9 / 210 = 4% GDP increase

This represents a very substantial GDP increase, which could even be higher if the gap was further closed or
the improvement extended beyond New Metro.

I suggest that we now look at which initiatives could help us achieve this.

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State X - 5/9
 Question 3 (Judgement & Insights)

We were recently provided some data on labor statistics for the largest industries in the state
(see Exhibit 1). How does this inform your recommendation?

Guidance for interviewer

Candidates will likely point out that the gap varies by industry and will further comment on which
industries have the biggest gap as well as that most industries have a gap present.

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Strong candidates will also identify the correlation between high-pay sectors and gender disparity the

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need to prioritize industries based on potential impact.

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If asked, please share that small industries have been left out, and that the size of the working age
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population is 3 million (including those who do not work).

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Possible answer
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There are both a pay and a labor participation gap in the state:
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● The gender pay gap is present in all industries plotted on the chart, regardless of size and gender mix.
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The problem seems to be more pronounced in higher-paying industries

● There are more men employed than women in the industries plotted on the chart, with the notable
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exceptions of Healthcare and Public Sector

We should prioritize our efforts by focusing on the industries that show the biggest potential, specifically by:
● Increasing women participation in the IT Sector. This is the largest sector in the state, and the second one
in terms of median earning. However, it employs less than ~3 times fewer women than men.
● Closing the gender pay-gap in Financial Services. This is the sector with the highest median earning, yet
women receive on average half the pay as men.
● Closing the gender pay-gap in Healthcare and Public Sectors, which employ a majority of females but still
pay them less than males.

State X - 6/9
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State X - 7/9
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Exhibit 1: Size of Workforce and Median Earnings by Sector and Gender, State X
 Question 4 (Creativity)

To achieve their goal of closing the gender earnings gap by 50%, the Department of Labor would like to
avoid introducing specific regulations that direct employers to employ and pay females more. Instead,
they would like to support programs and/or incentives that encourage employers in high priority sectors.
They would like to start by piloting this in the IT sector, with a focus on increasing female participation.

What initiatives could be tested and implemented to encourage employers in the IT sector to
employ more women?

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Additional information

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Candidates can think of solutions all branches of government can implement, not just the Department of
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Labor.
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Possible answer
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State X has several tools at its disposal that it could test and implement to increase female participation in
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the IT sector, including to:

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● Ensure that more women receive the education and degrees required for employment in the IT sector:
˗ Promote STEM subjects at high school and make it a key metric to measure schools and teachers’
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performance
˗ Ensure IT education providers train 50% females and males (e.g., mandate gender mix in public
institutions, subject grants and student loan accreditation to gender balance, mandate reporting of
these metrics)
˗ Create or fund female-only coding schools
● Encourage female to pursue IT careers:
˗ Promote IT careers to women
˗ Create and promote a label for IT employers who provide benefits such as shared parental leave and
high-quality child-care that may improve female participation
● Encourage employers in the IT Sector employ 50% female:
˗ Mandate reporting of hiring and headcount gender mix
˗ Change state procurement rules so that only companies who hire 50% females can do business with
the government
˗ Encourage reporting and investigation of discrimination

State X - 8/9
 Question 5 (Synthesis)

You have a short run-in with several state legislators, how would you summarize the scale of the
problem and your recommended option going forward?

Possible answer

You have asked us to investigate what drives the gender earnings gap in state X and what could be done to
address it.

We’ve found that closing the gender earnings gap presents a significant economic opportunity for the state.

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We estimate that closing half the pay and participation gaps, in New Metro alone, would grow the state‘s

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GDP by 4%.

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We’ve also found that there are many factors that may drive the earning gaps: fewer females are in paid
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employment; and when they do, they are paid less on average than men - in all our state’s top sectors –
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perhaps because females don’t work in higher-pay functions or don’t reach the same seniority levels.
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Situations vary significantly from sector to sector. To make the most difference, we suggest focusing our
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efforts on increasing female participation in IT, closing the gender pay gap in Financial Services, and
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investigating why sectors with high female participation (Healthcare, Public Sector) still show considerable
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gender pay gaps.

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We’ve started to look more specifically at the IT sector. We have identified potential initiatives to increase
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female participation, such as increasing the proportion of females who study IT, and for the state to only
contract employers who hire 50% females.

We’ll be in touch with a more specific plan for the IT industry, and with a list of ideas for the other priority
sectors.

State X - 9/9