Closing the wealth gap between men and women
— Mariko Chang is author of the forthcoming book “Shortchanged: Why Women Have Less Wealth and What Can Be Done About It.” A former Associate Professor of Sociology at Harvard, she is a member of the Insight Center for Community Economic Development’s Experts of Color Network. The views expressed are her own. —
I cheered when President Obama signed the Lilly Ledbetter Fair Pay Act into law one year ago. But on its first anniversary, I find the pessimist in me prevails. My skepticism isn’t about this new law, but rather our almost myopic focus on equal pay as the panacea for women’s economic inequality. It’s the inequality in wealth we need to address.
You may recall that Ledbetter was a supervisor at a tire factory in Alabama who, after almost 20 years of employment, received an anonymous note containing the salaries of three other male supervisors. The sole woman among 16 supervisors, Ledbetter was the lowest paid person in her position, earning $3,727 per month. Salaries for the men in the same position ranged from $4,286 to $5,236 per month, despite some having less seniority and experience. Over 19 years, cumulative salary discrepancies cost Ledbetter more than $200,000 in wages.
Sadly, Ledbetter is not an exception. The wage gap costs an average woman almost a half a million dollars in income over her working years, according to Lifetime Losses, a report by Jessica Arons of the Center for American Progress. But this lifetime earnings gap is only the tip of the iceberg because it creates further inequities as lower wages translate into lower pension and Social Security benefits.
There is no doubt we need to keep working to close the pay gap between women and men. But there is equally important, if not more important, work to be done to close the wealth gap between them.
While women ages 18-64 make 77 percent of what men make, Federal Reserve data reveals they have only 36 percent as much wealth. Wealth, which is the value of your assets minus your debts, translates into your ability to take an unpaid sick day, to buy a home, and secure a comfortable retirement. Many people have no wealth at all, and some even have what sociologists call “negative wealth” — meaning the value of their debts surpasses the value of their assets. Almost one in three single women ages 18-64 has no wealth or negative wealth. In comparison, about 12 percent of married couples and 24 percent of single men fall into this category.
The current economic crisis reveals how critical it is to have some wealth to fall back on. Wealth is our personal safety net, providing funds if you lose your job, can’t work because of illness, or face a hefty unexpected expense. Only a few of us haven’t faced at least one of these situations in the last couple of years.
When we look at wealth, we see inequalities hidden by our focus on equal pay. Take never-married women ages 18-64 for instance. They make 95 percent of what never-married men make, but own only 16 percent as much wealth. Why? Because pay is only one factor that affects a woman’s financial bottom line. Other major factors include single parenthood and fringe benefits, such as 401(k) plans and pensions. Even if the pay gap between women and men were to close, women would continue to have less wealth because they shoulder a disproportionate financial burden of raising children as single parents and because they are less likely to work in jobs that have “wealth-building” fringe benefits.
In today’s economy, one may be considered fortunate to have a job, let alone one that provides equal pay for equal work. But this is merely a starting point. If we expect a better future where one’s chances for achieving economic stability are independent of gender, race, age, national origin, religion, or disability then we must also address the root causes of the wealth gap.
The “wealth escalator” of fringe benefits, favorable tax codes, and government benefits convert income into wealth at a much faster rate. For instance, people with 401(k) plans can build wealth more easily because they often receive company matches. These benefits are also worth even more since contributions are tax-deferred. Yet women are less likely to work in jobs that offer these benefits and often lose access to benefits if they take time off or reduce their hours to care for children, parents, or disabled spouses. Encouraging employers to offer retirement plans and other fringe benefits to part-time workers would have a tremendous impact on women’s ability to build wealth.
In addition, time spent care-giving often results in years with zero or greatly reduced earnings, which are averaged in to determine Social Security benefits. Social Security “credits” are needed to ensure these low-earning years do not have such a strong negative impact on women’s benefits.
Programs like Individual Development Accounts should also be expanded. Authorized under the Assets for Independence Act, IDAs are matched savings programs for low-income families that help them save money to purchase a first home, start a business, or obtain post-secondary education or training.
All of these things and more are necessary to make sure that the fight for equal pay is not the end point but rather just the beginning of the fight for a woman’s economic equality.