Saturday, January 25, 2020

Gender wealth gap hurts all


An editorial in the Baltimore Sun addressed the issue of the wealth gap between men and women. The editorial addresses some but not all of the issues that lead to this problem. As the editorial board stated: The wealth gap, a consequence of realities women face throughout their lives, leaves women experiencing financial hardship and distress at a disproportionately higher rate than men. Financial hardship is often a precursor to emotional distress and physical ailment, with cascading negative implications.

What is meant by the gender wealth gap? It refers to the difference in accumulated financial resources between men and women. 

Some of life’s difficulties that apply and hurt women more so than men are, divorce, single parenthood, caring for ageing parents or ill spouses, disability, and the inevitabilities of old age, and widowhood. Women who face these issues understand that each of them can wreak havoc, practical, economic, emotional and physical on their life and plan. 

Underlying the issues is the fact that women earn less and thus accumulate less wealth than men. This leads to a wealth gap that has the potential to and often does increase the devastation for women. 

Raising awareness that women earn less may catalyzing remedial action both individual action and action by policymakers. The burden of having women who are older living in poverty is not exclusively borne by the individual; it ripples through families and communities.

A recent study cited by Barron’s concluded that the lifetime gender wealth gap could translate to a difference of greater than $1 million in accumulated wealth. While the actual dollar amount will vary by individual and circumstance, the gender wealth gap exists across the socioeconomic spectrum.

One significant reason is that women earn less than men by about 20% for the same work. A 20% income differential, compounded over a lifetime, translates to significant accumulated wealth differential. While understanding all the causes of gender income disparity is essential before drawing conclusions about pay equity, we know that the gap exists and places many women at a financial disadvantage. Also, by choice or necessity, women assume the lion’s share of family caregiving, either staying home to raise children or interrupting careers to care for children, grandchildren, ageing parents and spouses. 

Less pay and intermittent work translate to less accumulated social security and fewer retirement savings and pension plans. And while nonworking spouses may be entitled to a portion of future Social Security and pension/retirement streams earned by working spouses, the sad reality is 40-50% of marriages in the U.S. end in divorce. 

Divorce can take a heavy financial toll on the finances of both spouses, but typically more on women who stayed home to raise children. Years out of the workforce likely means reentering at a lower salary level in the same industry or accepting any job to pay the bills. According to a report by the U.S. Government Accountability Office, women’s household income decreased by 41% post-divorce — almost twice the decline that men experience.

Women’s orientation around money is more likely to be focused on earnings and a living budget, and less likely to be focused on strategic financial planning and long-term investing. 

Finally, women in the U.S. live an average of five years longer than men. This “longevity factor” means assets must last for a longer time frame for women. It also means women are more likely to need long-term care (70% of nursing home residents are women).

This confluence of events — caregiving, systemic income disparity, societal realities, longevity — contributes to the gender wealth gap, with women experiencing some form of financial inequity in their lives in disproportionate numbers. In fact, women consistently name financial hardship as a major life concern, and in women over 50, fear of financial dependence is ranked a top fear. Many worry about outliving their savings or being a burden to loved ones in retirement. That fear causes anxiety, and it can compromise physical well-being.

We need to continue to fight for equal pay for women so that the women we work with and care for do not have the fear and anxiety they currently have.

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