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Shortchanged: Women and the wealth gap
On the surface, the financial gender gap appears to be closing. Women now earn 78 cents for every dollar men earn, and women under 25 working full-time earn 95% of what their male peers earn. Women make up 47% of the labor force.
Despite these encouraging developments, sociologist Mariko Chang uncovered a vastly different story. In her recent talk, “Shortchanged: Why Women Have Less Wealth and What Can Be Done About It,” Chang revealed that despite the rise of women’s earnings to 78% of men’s, women own only 36% as much wealth.
Chang emphasized studying wealth rather than income because income only tells part of the story. Wealth, which embodies the total economic resources available to its holder, more accurately indicates overall financial status. Wealth can provide a financial cushion in times of distress, decrease the holder’s dependence on employment, and generate opportunities for social and political influence. In fact, the gender wealth disparity has been on the rise since 1998 despite the recent decline in the income gap. According to Chang, “The gender revolution has stalled, and the ways it has stalled are reflected in the wealth gap.”
The story is especially grim for particular groups of women. Never-married women own only 6% of the wealth of never-married men. More than half of all single Hispanic women in the US are what Chang calls “wealth poor,” possessing no assets or suffering from debts that outweigh the value of their assets. Single black and Hispanic women own a penny of wealth for every dollar owned by men of their race, and they own a fraction of a penny compared to white men. Because these racial inequalities are intertwined with gender, Chang warned, “Unless the gender wealth gap closes, the racial wealth gap cannot close.”
Also, marriage does not solve the wealth problem. Women often become economically dependent on their husbands and have less control over shared finances. According to Chang, men frequently manage the finances due to “deep rooted assumptions about which gender is better suited for these tasks,” and women’s economic self-sufficiency before marriage often impacts their relative power in the marriage. These disadvantages can be difficult to quantify, as marital wealth is often considered equally shared among spouses. Furthermore, women tend to outlive their husbands, and they experience more negative financial consequences from divorce than men. Half of all households are non-married, half of all marriages end in divorce, and women now spend more of their lives single than married.
Men enjoy greater access to the wealth escalator.
What factors contribute to this troubling gender wealth gap? According to Chang, men enjoy greater access to the “wealth escalator,” which translates income into wealth at a faster rate. This wealth escalator includes perks like fringe benefits (paid vacation days, health insurance, stock options, etc.), favorable tax codes (capital gains tax, tax credits, etc.), and government benefits (unemployment insurance, social security, welfare, etc.). Women are systematically less likely to tap into the wealth escalator because of the jobs they work in and their greater propensity to work part-time. Men are more likely to attain jobs with benefits, receive higher incomes that allow them to save more, work full-time throughout their adult lives, and possess the types of assets that receive preferential tax treatment. Even if the income gap closed today, women would not be able to turn their incomes into wealth as effectively as men.
Women also suffer from a “debt anchor” that compounds their wealth-building disadvantage. Women tend to have higher interest rates on their debts and are more likely to fall victim to predatory lending practices.
Motherhood is another primary cause of the gender wealth gap. Women are more likely to shoulder the financial burden of single parenthood, and in dual-earning couples, mothers are more likely to have primary caregiving responsibility. As Shelley Correll of Stanford University has demonstrated in her research, mothers face stereotypes that decrease their perceived credibility, capability, and worthiness of promotion 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.
So how can policy-makers address this dire situation? Chang provided a step-by-step recommendation for chipping away at this intimidating problem. Because current policies fail to give women access to the wealth escalator, Chang suggested incorporating caregiving into the wealth escalator and encouraging more caregiving from men. Employers must throw away the “ideal worker norm,” in which employees are expected to be constantly available, and restructure the workplace to match the needs of both women and men. In her book, Chang also recommends giving women greater access to low-interest loans, changing the definition of assets in divorce laws, disconnecting certain benefits from full-time employment, and helping single parents tap into the wealth escalator. Such policies can help ensure women and men have equal access to the wealth escalator and share equal responsibility for caregiving.
Chang argued that the wealth gap is not a “women’s problem.” Men should care about decreasing the gap not only because it affects the economic wellbeing of the women in their lives, but because they should no longer bear the sole burden of providing financially for their families. From a broader societal perspective, high levels of inequality and massive economic disadvantage prevent individuals from contributing productively to the economy and to their communities.
This talk was sponsored by the Clayman Institute for Gender Research, the Center for the Study of Poverty and Inequality, and the Vice Provost for Graduate Education at Stanford University. Chang, currently at Insight Center for Community Economic Development, received her PhD from Stanford University.