Nel's New Day

February 5, 2014

Don’t Shortchange Women

Although I live in a rural community, we have an active NOW (National Organization for Women) chapter, thanks to a group of very intelligent and dedicated women. The plan for the February meeting is a book discussion of Shortchanged:  Why Women Have Less Wealth and What Can Be Done About It by Mariko Lin Chang. As the title points out, the focus of the book is on the disparity of wealth—how much net worth a person has—and not income.

The media occasionally discusses the wage gap between men and women: this past year, women made only $.77 for every $1.00 a man makes for the same time on the job. Lack of wealth, however, is even harder on women. It is the reason that many women, especially single mothers and the elderly, live in abject poverty, a tragedy that has only worsened with the recent recession.

One of the NOW members wrote the following summary of the book. Although four years old, the book’s message is even stronger as women fall farther and farther behind. Recently, some conservative legislators have decided that women would improve their economic situation if they married. Reading this book should disabuse them of that notion.

Every man who cares about his daughters or wife or sister or mother should read this book and take note of the ideas.

Chapter 1:  The Women’s Wealth Gap:  What it is and why do we care?

Wealth, a person’s net worth, is a much better indicator of economic status and economic well-being than income.  It provides a better picture of who is economically vulnerable, who is financially secure, and variations in between.

Existing social structures such as Social Security, tax codes, and the motherhood wealth penalties help men ride the wealth escalator while women who work just as hard are left clinking the stairs or even taking the down escalator.  The difference in net work results in women’s dependency on men without being financially rewarded. Women’s lack of wealth is not simply a matter of individual failures to save or manage money effectively; women are at a disadvantage in acquiring wealth because of the way society has valued certain activities over others…..” (p.17)

Chapter 2:  Who has what? [Facts about the women’s wealth gap]

For every dollar of wealth owned by single men, single women own only 36 cents…. Since 1998, the gender wealth ratio has been on the rise, suggesting that this problem will continue to plague women and the people–children, older parents, disabled spouses, and others–who depend on them.

Until women can accrue enough wealth to keep them out of debt and to provide them with the ability to endure periodic unemployment or ill health, they will be living on a financial fault line…. While nearly all women, regardless of their incomes, suffer from this lack of wealth, clearly some are more vulnerable than others. (p.35)

Success in reducing the women’s wealth gap lies not in making sure that more women can exercise their role as consumers in the economy, but in improving women’s financial stability and their ability to control their own futures.  The persistence of the women’s wealth gap is a problem at the heart of women’s struggle for economic, political, and social equality.  Given that women are much more likely to have custody of children, the wealth gap affects the development of the nation’s next generation as well. (p.36)

Chapter 3:  The wealth escalator and the debt anchor [Men’s advantage in translating income into wealth]

Women are less likely to have access to wealth-building mechanisms in society because men traditionally get more perks in employment such as pensions, paid sick leave, unemployment benefits, and health benefits. Meanwhile, women pay higher interest rates for credit while using credit to compensate for lower incomes and a greater vulnerability to financial crisis.

The fringe benefits, tax code, and government benefits that comprise the wealth escalator help men build wealth more easily and at a faster rate because men are more likely to (1) work full time throughout their adult lives, (2) work in jobs and industries whose benefits are compatible with the escalator, (3) have higher incomes that allow them to save more and also help them ride the escalator more quickly because many benefits increase with income, and (4) have the types of assets that receive preferential tax treatment. (p.57)

Chapter 4:  How the deck is stacked against mothers [Effect of parenthood on wealth]

Whether married or single, women who become mothers are in a “no-win” situation, bearing the economic price of motherhood.  The price paid by married women comes primarily in the form of lower earnings and lower wealth linked with labor force participation, such as 401 (k) or pension benefits.  Single mothers experience heavy financial burdens because they are more likely to bear a disproportionate share of the financial costs of raising children.  “Motherhood is now the single best indicator that an unmarried middle-class woman will end up bankrupt.”  (Warren and Tyagi)  Mothers are also more likely to have gaps in employment and have part-time jobs. The women’s wealth gap cannot be closed until the costs of parenthood are shared by fathers and mothers equally. (p 74)

Chapter 5:  Saving and investing – Do men and women do it differently?

The root of the gender wealth gap is less likely gender differences in financial risk tolerance or the desire to own businesses but rather the financial Catch-22: their lower disposable income put them at a disadvantage for building savings, and the lack of a safety net puts them more at risk in crisis situations. These two situations keep them from the higher risk which can result in higher rates of return on investments. Even as entrepreneurs, women tend to start businesses in the least profitable industries. “It takes money to make money.”

Chapter 6:  Marriage –What’s mine is yours? [Or men control the wealth.]

In marriage, potentially the biggest financial safety net for women, they are far less likely to have equal access to the couple’s financial resources.  It also masks their vulnerability because half of all marriages end in divorce. If women’s primary access to wealth is through marriage, they are less likely to be able to support themselves outside of marriage. Also, marriage isn’t the answer to eliminating the wealth gap because many, especially less educated women and black women, are less likely to marry. (p. 114) “Gender differences in wealth do not disappear in men’s and women’s wealth to more subtle differences in control of marital wealth.”

Chapter 7: Public solutions – Why equal pay and family-friendly policies aren’t enough and what should be done instead

The solutions to eliminating the women’s wealth gap are multi-dimensional and interrelated, but future, more effective policies must have several critical components, including providing paid family leave, incorporating caregiving into the wealth escalator, encouraging more caregiving form men, giving women greater access to low-interest loans, changing the definition of assets in divorce laws, helping single parents tap into the wealth escalator, disconnecting benefits like health care and Social Security from full-time employment, and supporting women’s entrepreneurship.  (p.124-125)

Policies to Reduce the Caregiving Wealth Penalty:

  • Paid family leave
  • No Social Security penalty for caregivers
  • Encouragement of men to be caregivers

Policies to Increase Women’s Ability to Tap into the Wealth Escalator

  • Greater access to low-interest loans
  • Increase in women’s entrepreneurship
  • Expansion of the definition for assets in divorce law
  • Separation of health care from full-time employment

Closing gender gaps in the labor market would raise GDP in the United States by 5 percent. With more income and financial independence, women can also increase household spending on children’s nutrition, health, and education. A recent report, ”Investing in Women’s Employment,” shows that better employment opportunities for women contributes to increased profitability and productivity in the private sector through improved staff retention, innovation, and access to talent and new markets.

The 2013 World Economic Forum (WEF) Global Gender Gap Report, which measures women’s economic, political, educational, and health equality, ranks the United States at 23rd out of 136 countries around the world. This ranking falls every year, down from 17 in 2011.

The U.S. ranks sixth for “economic participation and opportunity” and falls to 33 for “health and survival” and 60 for political empowerment.  In countries with higher ranking, women rise through the ranks more easily. Other nations also have generous, mandatory paternity leave as well as maternity leave, reentry programs for women returning to work after giving birth, and gender quotas for women on boards. Only four countries out of 178 in the world don’t guarantee paid maternity leave: Lesotho, Papua New Guinea, Swaziland—and the United States.

Don’t let women be shortchanged.


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