Closing the Gender Wage Gap Isn't Enough
This post is the first in a summer series on the women's wealth gap.
As a new summer intern with the Government Affairs team here at Prosperity Now, I've been both enthralled and dismayed as I delve deeper into the causes and impacts of — and solutions for — financial insecurity among low- and moderate-income Americans. My passion area within this field lies in the ways that women build — or don't build — wealth and why.
Women's wealth is about more than wages alone. Certainly, the disparities between men's and women's wages are crucial to recognize, understand and eliminate. Still, in 2016 women make on average 79 cents for every $1 earned by a white man. The data is even more disheartening broken down along racial lines.
As grave as the income disparities are, our quest for gender equity must not stop at closing the wage gap. Even more troubling is the fact that women own, on average, a mere 32 cents for every $1 that men own. That gap is even greater broken down by race, with African-American and Latina women owning less than one cent for every $1 owned by a white man.
So, how do women build wealth differently than men, and why is the gap so big? It's important to first note that the paid workforce looks markedly different now than it did just five decades ago. Today, women comprise 47% of the paid workforce, compared to only 40% in 1970. Two-thirds of working women today are the sole, primary or co-breadwinners of their household. (Rock on, women!) While women have made tremendous gains in overall workforce participation, especially since the recession ended, 60% of those gains are in the ten largest low-wage jobs in America, including positions as childcare workers, housecleaners and bartenders, women's low-wage employment points toward a nationwide trend of a gendered division of labor.
In low-wage sectors, an employee working full-time earns only $15,000 annually and doesn't have access to what gender wealth gap expert Mariko Chang calls the "wealth escalator." Through employer-related fringe benefits, favorable tax breaks and government benefits, the wealth escalator enables people, mostly men, to transform income into wealth much quicker than they could simply by saving. That's why the type of employment women hold really matters, especially for African-American and Latina women who are more disproportionately represented in the low-wage service sector, which tends to offer few employer-provided benefits.
Unfortunately, even in higher-wage positions where women have greater access to the wealth escalator, traditional expectations of women's roles in the workforce and at home keep them from building as much wealth as men. In fact, never-married women fare worse in wealth accumulation than any other household type. For African-American women, who are less likely to marry and more likely to be single mothers, the wealth disparities are severe.
Regardless of race, many mothers face the "motherhood penalty" in the workplace. Low-wage working mothers see their wages decrease 7% for each child they have. That's one reason mothers tend to have low wealth, owning just 20% of the wealth that fathers do. Women are still the primary caregivers for 61% of U.S. households; even beyond childcare, women tend to take on caregiving responsibilities for elderly parents, sick relatives and others. Because of that, the average woman spends 12 years out of the paid workforce to care for family. Having an inconsistent work history because of their caretaker role not only gives women inconsistent income but also hampers their ability to save and contribute to retirement plans, leaving women 80% more likely to live in conditions of poverty by the time they're 65.
The gender wealth gap grows exponentially as education increases. Due to student loan debt, millennial women are hit particularly hard and have zero wealth, on average.
So what does all of this mean for women's wealth? It means that income is important, but closing the gender wage gap won't close the gender wealth gap. Our solutions must be more holistic and comprehensive in a way that regards cultural values of womanhood in the home and in the workplace. Stay tuned over the next month as we learn more about the women's wealth gap, dig into specific issues and discuss potential policy solutions that enable women to build greater financial security. Stay tuned for the next piece in the series, which will look at how women fare in the journey toward retirement.