It is well documented that there is an earnings gap between male and female workers by occupations, positions within occupations, by industry groups, age groups, educational levels from high school to college, and by racial groups. For example, Bureau of Labor Statistics (BLS) reports that in 2012, in 22 major occupational groups, median weekly earnings of full time women wage and salary workers range from 55% in Legal Occupations to 94% in Community and Social Service Occupations of male workers’ earnings.
Using Bureau of Labor Statistics data for 2011, the Institute For Women’s Policy Research finds that women’s weekly earnings, among the 20 most common female occupations, vary from a low of 65.9% for Financial Managers to 100% for Bookkeeping, accounting and auditing (an exception) of males’ weekly earnings. Same pattern holds for 20 most common occupations for men.
This earnings gap for women foreshadows a dismal income picture in retirement years, especially for single female households. The earnings gap is the most significant source of wealth gap between male households, as well as single female households. According to the US Census data for 2011, the net worth (a measure of wealth equal to assets minus liabilities) of female households is 80% of male households in 65 years and older age group. This gap has risen since 2010, not a very encouraging sign for gender wealth gap. If equity in own home is excluded, wealth of 65 plus years old female households is only 43% of male households in that age group. In the same age group, excluding equity values of assets and only counting relatively liquid and income producing assets, female households’ assets are only 54% of male households’ assets.
Thus, the gender wealth and asset gaps reflect earnings gap of male and females in the workplace. Jessica Arons, Center for American Progress Action Fund, December 8, 2008, calculates that career wage gap over 40 years may cost on average $434, 000 in income. Women with college degrees could lose $713,000 vs. loss of $270,000 for those with high school diplomas. In 2011, single mother bread earners constituted slightly higher than 25% of all primary income-earning mothers. Hence the earnings gap poses a looming threat to economic well being of these mothers in their retirement years. Assuming that female-male earnings gap is 53%, the simulation results in the study by Urvi Neelakantan, Economic Inquiry, January 2010, show that earnings gap results in 51% gender wealth gap. The study also finds that women, as opposed to men, are more risk-averse. Hence, the combined effect of earnings gap and higher risk aversion of women can explain almost two-thirds of the wealth gap.
It is hoped that the business community and governments at all levels would realize that discriminatory earnings gap is contributing to the loss of productivity and business profits, loss of income tax revenue, payroll tax revenue, Medicare tax revenue, and wealth induced consumption demand. Increasing share of older people in the population and longer life expectancy of women than men has consequences. Gender wealth gap would place a larger economic burden on rest of the taxpayers because it will require a larger safety net for older retired women. It is time to seriously pay attention to this labor market inefficiency because remedying this imperfection would be beneficial to all.