Women's Wealth Gap: Pieces Of The Puzzle

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This is the third in a series of articles that describe the extent of women’s wealth gap, why it matters, and what companies can do about it. Click the following links to read part 1 and part 2.

Women’s wealth gap accrues over time, and multiple factors contribute to its development over the course of a lifetime. These include occupational choices, the unpaid work of caring, and the role of asking for salary history during the job application process.

Occupational Choices

Some argue that the frequently cited statistic of women earning only 80 cents for every dollar earned by a man in the same job does not take into account other factors such as the occupational choices women make, and that the gap can be explained by women simply choosing to take jobs or work in fields that traditionally pay less. While choice of occupation does matter, industry and specific occupation only account for half of the earnings gap. Research has shown that when more women enter an occupation, the relative pay for that occupation declines within 10 years. Schieder and Gould cite computer programming as an example of a field that has become increasingly male dominated with a corresponding increase in pay, while when more women became park rangers, pay for that job decreased. College administrators provide another example: in a frequently cited study, Pfeffer and Davis-Blake found that increasing the percentage of women resulted in decreased salaries for both sexes.

Pervasive gender discrimination can influence the educational choices women make before they are ever hired for their first job. According to researchers at the Economic Policy Institute, women’s occupational choices are influenced by their families, their culture, and societal norms, all of which can contribute to gender discrimination. Even though a woman may choose to enter a lower-paid, female-dominated occupation such as teaching or nursing, that choice is framed by forces beyond her control and perpetuate existing discrimination. In one study, parents were more likely to expect their sons, rather than their daughters, to work in science, technology, engineering, or mathematics (STEM) fields, even when their daughters were equally proficient in math. Gender bias in educational systems is also a factor when role models and resources such as textbooks reinforce gender stereotypes, limiting girls’ educational ambitions and achievements.

When women do enter traditionally male fields, they are paid less than men, particularly in highly compensated fields such as medicine. In a 2016 JAMA Internal Medicine study surveying a national sample of 10,241 physicians at public institutions with published salary data, female physicians had a lower mean salary of $206,641 compared to male physicians’ $257,957, a difference of $51,315. An even larger study of 36,000 physicians who reported salary data anonymously and controlled for doctors' ages, hours worked, and region found a 27 percent wage gap nationally across all specialties and geographies. In that study, U.S. women physicians earned an average of $91,284 less than male physicians.

Another popular misconception is that women earn less because they quit work to have children. Only 10 percent of employed women who leave work cite having a child as the reason, according to a Gartner survey. In another study, 60 percent of higher-level professionals continued to work an average of 11 years after the birth of their first child. Those women reported leaving their jobs despite existing flexible work policies because of the associated stigma, reduced responsibilities, and fewer opportunities for advancement associated with actually using the company-approved policy.

In fact, being on the ‘mommy track’ typically diminishes a woman’s career prospects, while becoming a father often results in an earnings bonus for men. According to University of Massachusetts sociology professor Michelle Budig, mothers are less likely to be hired for jobs, be perceived as competent, or be paid as much as male colleagues with the same qualifications. For men, having a child improves their job prospects. They are more likely to be hired than mothers or childless men, and tend to be paid more after they have children. Fathers receive a 6 percent increase on average after the birth of a child, while mothers lose 4 percent for each child they bear, on average. The ‘daddy bonus’ and ‘mommy penalty’ are the largest for high income men and low-wage women.

Caregiving: Time Out

Women’s unpaid work of cleaning, cooking, childcare, and elder care is essential for individual households and for society in general to function. Unpaid care work powers the paid economy by freeing up other resources. But the work of caring is not valued, and it is explicitly omitted from economic measures such as Gross Domestic Product (GDP). When women spend their time performing these tasks, they have less time for other activities, including paid work.

Women are also disproportionately represented among unpaid caregivers of elder family members—66 percent—and they spend 50 percent more time providing care while continuing to work, compared to male caregivers. On average, women are likely to spend 12 years out of the workforce providing child care and elder care. Estimates of the value that women’s unpaid elder caregiving provides ranges from $148 billion to $188 billion annually. But creating this value takes an economic toll on women, particularly on their ability to retire. In terms of lost wages and Social Security benefits, the cost to an individual female caregiver is approximately $324,044 over her lifetime. This figure does not include the out-of-pocket costs of caregiving such as paying for medications and equipment. With the graying of the American population, these numbers can only increase.

In The Workplace: Salary History Bias

The common practice of asking for a job applicant’s salary history also helps to perpetuate the income gap. Since a woman is already likely to be underpaid in her current job, basing compensation in a new position on her prior salary just maintains the gender-based pay inequality.

An obvious solution would seem to be for women to simply negotiate higher wages or salaries, either at job entry or later on. But it’s more complicated for women to negotiate pay, compared to men. Women are often reluctant to negotiate a higher starting offer or ask for a raise, and their reluctance is justified—multiple studies have documented that when women attempt to negotiate for more compensation, they are perceived more negatively for not conforming to gender stereotypes and being ‘too demanding’, not ‘nice’ or ‘too aggressive’ while men are perceived positively as confident and competent. Ironically, women incur this social cost only when negotiating on their own behalf; they are not perceived negatively when advocating on behalf of others.   

The consequences of the income gap accumulate over time, and combine with other discriminatory factors to systematically disadvantage women. In the next article, we examine just how the process happens.

Click here to continue on to part four. And To hear from traders, financial experts or authors like Martha Menard, be sure to grab a ticket to the Benzinga Women's Wealth Forum March 21.