Tuesday, April 7, 2015

Women are twice as likely to retire in poverty

Women receive more college degrees than men, and comprise nearly half of the United States workforce. More than two-thirds of families in the U.S. depend all or in part on a mother’s income. But the wage gap remains, and its effects are far reaching. Women in the U.S. make only 78 cents for every dollar that their male counterparts make. Over a lifetime of working and trying to plan for retirement, this loss in potential wages adds up.

The long-term effect of this wage gap is staggering. U.S. women are almost twice as likely as U.S. men to retire in poverty. While retired men live, on average, on $27,000 per year, retired women live on about $16,000 per year, about $11,000 dollars less than their male counterparts.

So, why the retirement discrepancy? First and foremost, the gender wage gap. When women aren’t making as much money as their male counterparts, they aren’t able to save as much. This affects both savings and social security benefits for women, since these benefits are based on overall earnings.  Less income also means less ability to contribute to a 401(k) or Individual Retirement Account (IRA).

Closing the gender pay gap would increase the wages of 59% of women. In attempts to remedy this problem, Senator Barbara Mikulski proposed The Paycheck Fairness Act which would make it illegal for an employer to pay a man and a woman performing the same job different wages. This practical bill aimed at fighting sexism passed the House of Representatives in 2009, but was blocked by Republican filibuster in the Senate in 2014.

A second major reason that women have less for retirement is that on average women work 12 fewer years than men. This disparity arises primarily because of caregiving. Women are more likely than men to take time off work to take care of their children, sick spouse, or aging parent. In fact, two-thirds of caregivers are women.

When Social Security benefits are based on the top 35 years of earnings, if a woman worked less then 35 years, the years of no earnings (for example, while caregiving) count as part of the basis for social security benefits. These years recognize no earnings for women who performed caregiving functions, thus bringing down a woman’s lifetime average (and her overall social security benefits). In fact, estimates from a Society of Actuaries study suggest that the wealth of a woman can fall by $303,800 when she takes on caretaking responsibilities during her lifetime.

One proposed solution is the issuance of a “Caregiver Credit.” The Caregiver Credit could be given to workers who have reduced work for caregiving reasons. This would go toward the individual's Social Security benefits, so they wouldn't be punished in the years that they are caregiving. Although a bill was introduced in the House of Representatives, it hasn't moved forward.

While women have made strides in the workplace toward gender equality, there is still much to be done. The above statics expose the enormity of the problem that still remains. Improving wages for women seems to be the best starting point, and is especially important since women who reach age 65 are projected to live 2.5 years longer than men of the same age. With a 14% longer retirement for women, savings and benefits are vital. For a discussion on the economic benefits of closing the gender wage gap, read this post.

1 comment:

Heather said...

The gender pay gap is a sobering reminder of the need for continued vigilance by feminists. Setting aside that women tend to fall into lower paying jobs, I find it disheartening that in 2015 women are still not automatically paid equally for doing the SAME job as a man. I find this wage disparity even more upsetting because in my experience, women tend to do more for their offices than men. Women are more likely to volunteer to help on committees and arrange functions. These efforts should be rewarded.

I recently saw this amusing BuzzFeed video where a female worker discovers she makes 78% of what her male colleague does, and then sets about her day doing just 78% of her assigned work. She leaves meetings 78% of the way through, only completes 78% of documents, etc. The video is available here if you want a laugh: https://youtu.be/bm3YfMtgEdI.

The spoof is poignant: why are expectations of women in the workforce so high if employers are only willing to pay us 78% of our value?