It’s certainly not news that American women continue to earn less than men for the same work, typically 79 cents on the dollar. But what’s less understood is the devastating impact those lost wages have over time. In fact, over a working woman’s career, that pay gap could accumulate to a half million dollars in lost income and even more for women of color. A comprehensive analysis of gender pay inequality, released by the Joint Economic Committee’s Democratic staff, shows how the gender pay gap grows over time. It’s not just an issue for working women because this inequality can also have a compounding and devastating impact on retired women.
The thought of running out of money in retirement keeps 57% of women awake at night. That’s not a surprise when you consider the many combined factors which make retirement especially challenging for American women. Women earn less than men even when doing the same jobs, they more often work part-time or in jobs that do not offer retirement savings plans, and they tend to spend more time out of the workforce as a consequence of their caregiving responsibilities. Women could lose $430,480 in earnings over the course of a 40-year career due to the wage gap alone. For Latinas the career losses mount to $1,007,080, and for African American women the losses are $877,480. Lower career earnings also translate to fewer savings for many women in retirement. At the same time, their longer lifespan and higher chances of disability means that they will have higher retirement costs, both for everyday expenses and necessary medical care.
These financial obstacles facing older women explain why women are 80% more likely than men to be impoverished at age 65 and over. The median income of women age 65 and older is 44% lower than the median income of men of the same age and that poverty gap widens over time due to decreasing income for women at older ages. Women aged 75 to 79 are three times as likely and those over the age of 80 are twice as likely to live in poverty compared to men. While it’s self-evident that working women must be aware of the unique challenges they could face in retirement, simply understanding these issues won’t be enough to bridge the very real gap created by systemic and demographic forces far beyond their control. That’s why the National Committee to Preserve Social Security and Medicare launched our Eleanor’s Hope initiative. We’re not only educating but also advocating for legislation that addresses the inequities threatening millions of retired women while also working to elect lawmakers who share our vision of retirement equity for women.
There are a number of proposals which, if adopted, could significantly level the playing field for women and reduce the threat of poverty in their old age:
Gender Pay Equity. Eliminating the wage gap that limits women’s earnings is essential to helping our daughters and granddaughters save for their own retirement. Congress should strengthen and reform the “Equal Pay Act” by putting an end to pay secrecy, strengthening workers’ ability to challenge discrimination and bringing equal pay law into line with other civil rights laws.
Caregiver Credit. Compute the Social Security benefit by giving an annual caregiver credit for each year of caregiving so that total earnings for the year would equal 50 percent of that year’s average annual wage. Caregiving service years would be those in which an individual provides care to children under the age of six or to elderly or disabled family members. Up to five family service years could be granted to any worker.
Improve Survivor Benefits. Increase the benefit paid to a surviving spouse to an amount that is equal to 75 percent of the total combined benefits that were paid to the couple prior to the spouse’s death, capped at the benefit level of a lifelong average earner.
Consumer Price Index for the Elderly. Adopt the Consumer Price Index for The Elderly (CPI-E) for the purpose of determining the amount of the cost-of living adjustment (COLA) adjustment for Social Security benefits. This is especially important for women who tend to receive benefits longer because they live longer.
It’s been more than 50 years since our nation acknowledged and attempted to address, with passage of the Equal Pay Act, the gender wage gap which unfairly targets half of our population with billions in lost wages. Yet, at the current rate of change, it will take another 40 years to close that gap. That’s simply not an option for generations of American women who will continue to face the consequences of income inequality from their very first day on the job until they die.
Women’s retirement insecurity.
The Gender Wage Gap and Women’s Retirement Security Go Hand in Hand
The gender wage gap: it’s a figure most people are familiar with. On average, women earn only 79 percent of what men earn when comparing full-time year round workers. Although this particular figure doesn’t account for differences in occupations, education, caregiving responsibilities, or a number of other differences between men and women, a gender wage gap persists even when these factors are taken into account.
But the focus on what a woman earns each year compared to her male counterparts masks a related and equally important issue: the gap in women’s retirement insecurity.
To understand how the gender wage gap relates to women’s retirement security, first you have to understand the drivers of the wage gap. While a portion of the gender wage gap can be attributed to discrimination, there are also other factors at play.
For example, men and women tend to get tracked into different types of jobs, and women have fewer opportunities to negotiate their salaries and advance up the ranks. Even when working full-time, women tend to work slightly fewer hours and thus earn less money than men. This “time gap”, however, disappears when factoring in the unpaid hours spent on family caregiving. And women are more likely to work part time, have gaps in their work history, and have shorter job tenures, all of which are associated with family caregiving responsibilities.
All of these factors — the gender wage gap, unstable jobs and caregiving responsibilities, compounded by discrimination — show up as gender gap in wages and, ultimately, less retirement security for women.
Recent analysis shows that, based on the current wage gap, the average woman will earn $430,480 less than the average man over the course of a 40 year career. And the effects are even worse for women of color, with African American women losing $877,480 and Latinas experiencing losses of over $1 million. Less earnings make it more difficult for many women to save, let alone prep for what should be their golden years.
No matter which forms of savings we consider — 401(k) plans, IRAs, or emergency savings — women, on average, have less available to them than men. The fact that women are typically paid lower throughout their working lives only exacerbates women’s economic insecurity in the future.
Unfortunately, all indications suggest that things will only get worse for coming generations of women.
The share of all working-age households that are likely to have to severely cut their spending in retirement grew to 52 percent in 2013, up from 31 percent in 1983. Single women nearing retirement are much more likely than single men to fall short in their retirement savings. Women on average have less money saved for retirement, are less likely to participate in retirement plans at work and have fewer emergency savings compared to men.
Ironically, women actually need more retirement savings than men because they tend to live longer and they face greater chances of disability in their old age than men.
As women struggle with economic adversity preparing for retirement, they get little help. Women are much less likely than men to have a traditional defined-benefit pension, and women, because they get paid less, enjoy fewer tax incentives when saving for retirement. Many women do not work for employers offering retirement benefits and are less likely than men to be eligible for retirement benefits, leaving them on their own to maneuver the complexities of retirement savings.
Once women enter retirement, many struggle with poverty. In 2012, the poverty rate for all women aged 65 or older was 11 percent. But older single women experience poverty rates at much higher levels: among women aged 65 or older, 17.1 percent of divorced women, 14.5 percent of widowed women, and 23.2 percent and never married women live in poverty. By comparison, older men had a poverty rate of just 6.6 percent in 2012.
Women’s retirement insecurity in old age follows in large part from the economic insecurity and economic risks they experience throughout their working lives, because the wage gap and retirement insecurity go hand in hand. To ensure greater retirement security for most women, policymakers must address the savings needs of women in earnest.
In addition to policies to close the gender wage gap, we also must focus on creating new low-cost, low-risk retirement savings options that are simple to use, combined with new tax incentives that particularly benefit lower-income workers. Without a new policy approach to retirement savings, older women’s struggles will only get worse.
Sarah Jane Glynn is Director of Women’s Economic Policy at the Center for American Progress. Christian E. Weller is a Senior Fellow at the Center for American Progress and a professor of public policy at the McCormack Graduate School of Policy and Global Studies at the University of Massachusetts, Boston.
This proposal was included as part of the National Committee’s Eleanor’s Hope Initiative unveiled in the fall of 2014. With the cost of higher education at an all-time high, this benefit improvement could go a long way toward helping more children access college opportunities.
Benefits for disabled adult children should be improved by allowing them to reestablish entitlement to benefits after their marriages have ended in divorce, and by computing their benefits without regard to the family maximum. When a disabled adult child qualifies on a parent’s record, benefits for the child and for other family members may be adjusted due to the family maximum. If all eligible family members live in the same household, expenses and income are usually shared. However, people with disabilities are increasingly deciding to live independently from their families, creating a difficult situation for those disabled adult children whose benefit is reduced because of the cap on the family maximum. Computing the benefit for a disabled adult child without regard to the family maximum, as is already done when calculating the benefit for a divorced spouse, will address this situation. Providing caregiver credits would strengthen a parent’s earnings history which should also result in a higher benefit amount for themselves and their eligible children. Interrupting participation in the labor force to look after other family members, usually children and elderly parents or relatives, can result in a significant reduction in the amount of the caregiver’s Social Security benefit. This disproportionately impacts women. When calculating an individual’s Social Security benefit, caregivers should be granted imputed earnings equal to 50 percent of that year’s average wage for up to as many as five years spent providing care to family members. Enactment of this provision would strengthen the protection provided by the program for both workers and their children.
Maloney/Arquette: state by state pay inequality report on Tuesday.
Women and Retirement Saving Gap: EH updated Viewpoint
While there has been some progress in closing the median wage gap between men and women, in 2014 women working full-time still earned only about 78 cents annually for every one-dollar earned by men doing the same job, while Hispanic women’s median weekly earnings were 61.5 percent of white men’s earnings, and black women’s earnings were 67 percent of the median weekly earnings of white men.3 This wage gap increases for older women; the National Institute on Retirement Security reports that the typical income of women age 65 and older is 25 percent lower than men. As men and women age, men’s income advantage widens to 44 percent by age 80 and older.
Part-time workers are at an even greater disadvantage not only because of their lower earnings but because most employers do not offer retirement savings plans to their part-time workforce. This situation disproportionately affects women because a much higher percentage of women work part-time when compared with men. In 2014, 26 percent of employed women usually worked part-time compared to 13 percent of employed men.
Women are also more likely to spend time out of the workforce entirely to raise their children or provide care to elderly parents. In 2014, 43 percent of women were out of the workforce compared with 31 percent of men.6 A report by the Family Caregiver Alliance updated in February 2015 found that 66 percent of all caregivers are women, and 20 percent of women are family caregivers.
Unemployment rates went up for older women.
That fact, sadly, makes sense. See my PBS blog on older women’s problems in the labor market and warnings about raising the retirement age.
One Small Fix To Help People Who Leave Their Jobs To Care For Loved Ones. – THINK PROGRESS. When Sen. Chris Murphy (D-CT) went home for the winter holidays, he met with a number of people who sacrificed careers to care for family members. And many of them kept bringing up the same worries.
Think Divorce Is Miserable? – SLATE. Look how bad life can get when divorcees try to retire. Especially when they’re women.
Maria Women and Retirement Update:
The gender wealth gap
In the 2015 Women and Wealth study, author Mariko Chang found that since more women are going to college than men, more families will rely on women’s earnings than ever before.
“Two-thirds of mothers are either the sole breadwinners, primary breadwinners (earning the same or more than their partners) or co-breadwinners (earning 25 to 49 percent as much as their partners).”
Yet a severe gap exists across all family situations, ages and races. The report found that some of the factors obstructing women’s wealth are:
- Median wealth for single women is $3,210, compared to $10,150 for single men.
- Single women have 32 cents for every dollar of wealth men have.
- Single black women have a median wealth of $200. Single Hispanic women fare even worse at $100 – less than a penny for every $1 of wealth owned by single, white, non-Hispanic men.
- Millennial women have a median wealth of $0.
- Women 35-49 have median wealth of $1,000 (4 percent as much as men 35-49).
- Millennial women are more likely to have education debt then millennial men (49 percent versus 32 percent).
- Median wealth for men with a high-school diploma is almost $2,000 more than women, and at the graduate-school level, it is $51,000 higher than women with same level of education.
- Mothers have only 20 percent as much wealth as fathers.
- Black mothers have median wealth of $0; Hispanic mothers have $50.
- Women are more likely to have every type of debt, and the median debt for women is 177 percent higher than the median debt for men.
Another study, What Do Women Breadwinners Want?, found that as women breadwinners are becoming more common, 40 percent of women surveyed feel that family and friends pressure them to downplay their breadwinner status, with 28 percent reporting that their parents disapprove of their breadwinner status. At the same time, the survey found that 95 percent of women will be their family’s principal financial decision-maker at some point in their lives. Breadwinner women also assume more than 75 percent of all financial planning and as much as 90 percent of the responsibility for charitable giving, paying for college, retirement planning and overall saving.