Gender Wealth Gap is the Greater Problem

I read Mariko Chang's Shortchanged: Why Women Have Less Wealth and What Can Be Done About It for a personal finance book club.

Chang begins the book by informing us the gender wage gap appears to be closing. Women now earn 77.8 cents for every dollar men earn (an all time high) and women under 25 working full-time earn 95% of what their male peers earn. Women also make up 47% of the work force.

While I still can’t get excited about a 78% pay gap, compare that to this - women own 36% as much wealth; for every dollar a man owns a woman own 36 cents. Chang calls this the wealth gap. In the long run it is wealth, the value of assets minus debts, not earnings that is more important. Wealth is what sends your children to college, allows you to start your own business, and helps you make ends meet when you lose your job or your hours are slashed. Also consider with everything else being equal, women will need to support themselves an average of six years longer than men.

What factors contribute to the wealth gap?
Chang attributes the wealth gap to women’s inability to tap into the wealth escalator:

The variety of legal, institutional, and societal mechanisms that help some convert income into wealth at a much faster pace than is possible by savings alone. (Pg. 38)

The wealth escalator includes:
Work fringe benefits such as life and health insurance, paid vacation and sick days, and retirement contributions. Women are more likely to work in part-time jobs or in industries that do not offer fringe benefits such as the service sector.

The tax code has provisions more beneficial to those with higher earnings – capital gain tax rates and mortgage interest deductions.

Government benefits such as unemployment benefits which have minimum earnings thresholds. Women generally receive less of a benefit because they have lower earnings to begin with.

Also interesting to note, some government programs discourage asset accumulation. For example with the Temporary Assistance to Needy Families (TANF) people lose benefits if they have managed to save or if they own an automobile whose value surpasses the vehicle asset limit.

The Debt Anchor:
Women tend to have more debt than men, higher interest rates on their debts and are more likely to fall victim to predatory lending practices.

Motherhood:
Women are more likely to be single parents and in divorce most likely to have custody of the children. Even those who receive child support have less money to save and invest. Also mothers face stereotypes in the workplace, whereas men experience a wage increase with fatherhood. Mothers receive a 4% wage penalty for the first child and a 12% penalty for each additional child.

Chang proposes suggestions to address the unequal burdens and consequences of care-giving, so that women who work just as hard as men and can be given equal wealth building opportunities. She points out we are only one of two industrialized countries without a national paid maternity (Australia is the other country).

My thoughts:
Shortchanged: Why Women Have Less Wealth and What Can Be Done About It is a slim book packed with important information that deserves more recognition than it has received. Every woman should be aware of the facts in this book. I had a difficult time finding a copy of this book and from the comments of my fellow book club participants others did as well. Let’s get the word out and on a final note let’s make sure our daughter’s have the tools and knowledge they need to navigate the financial world.

I want to close with the quote Marika Chang included at the beginning of chapter two:

My Aunt… died by a fall from her horse when she was riding out to take the air in Bombay. The news of my legacy reached me one night about the same time that the act was passed that gave votes to women. A solicitor’s letter fell into the post-box and when I opened it I found that she had left me five hundred pounds a year for ever.

Of the two-the vote and the money, I own, seemed infinitely the more important.

- Virginia Woolf, A Room of One’s Own