Women earn around 83 cents for every dollar their male counterparts earn.
Just let that sink in for a minute.
Meanwhile, this startling fact only scrapes the surface of the full impact gender wage inequality has on women in the workplace. It doesn’t account for women of different races, different ages, or who work in different industries. For example, in 2022 Black women earn 70 cents to a man’s dollar and Hispanic women earn 65 cents, highlighting an even more alarming discrepancy for women of color.
Gender wage inequality is certainly not new; it’s had a direct impact on women’s financial security for decades. Unequal pay has limited women’s abilities to save for retirement, and affected their ability to start and raise families. Less income also means less money to put toward their investments or other savings goals, which will often dictate their long term financial plans and options for the future.
We’re diving deep into where this issue stands today, and what strategies we can use to address the ongoing gender wage inequality.
Understanding Gender Wage Inequality
The gender wage gap refers to the difference between what a man versus a woman in equal positions earns from their employer. As we mentioned earlier, there is a clear discrepancy in how much women earn for every dollar their male counterpart does — and that divide grows even more significant for women of color, and older women.
The gender wage gap has been documented for decades. In 1982, women were earning around 65 cents for every man’s dollar. By 2002, the female wage average had increased to roughly 80 cents to the dollar, but it has stayed relatively the same in the 21 years since.
Notably, the pay gap doesn’t change based on the level of education a woman has. College-educated women and non-college-educated women both experience the same wage discrepancy. This indicates that less obvious factors are fueling this inequity, such as the perceived responsibility of raising a family, and other forms of gender discrimination.
The Motherhood Penalty vs. The Fatherhood Premium
While women leaving the workforce to start families tends to result in only a short-lived pay cut — typically in the form of maternity leave — they often face challenges upon their return. Women who are mothers of young children may be passed up for promotions, or otherwise seen as unable to fully manage their professional responsibilities. This is sometimes referred to as the “motherhood wage penalty.”
Conversely, fathers are seen in an opposite light. A phenomenon known as the “fatherhood wage premium” was first studied in the 1980s but is still observed in the workforce today. When working men become fathers, they’re statistically likely to earn more money than those who aren’t. This is especially apparent amongst white-collar, high-earning men.
The Consequences of the Gender Pay Gap
Just how much do women miss out on earning over their lifetime as a result of this inequality? Using the assumed median earnings for a White, Black, and Hispanic woman, let’s look at how far the gap spreads over a 40-year career:
With the current discrepancies in place, these women are projected to receive notably less income over the course of their careers than their male counterparts in similar roles might otherwise be benefiting from:
- White woman: a reduction of $527,440
- Black woman: a reduction of $941,600
- Hispanic woman: a reduction of $1,121,440
That’s a significant lifetime of lost earnings, which creates additional hurdles for women trying to save for retirement or other financial goals.
Additionally, women account for around 60% of all caregivers for older relatives, typically parents or in-laws. Caregiving inherently creates financial strain, and can often take women out of the workforce — further lowering their lifetime earning potential and limiting opportunities for professional growth. Caregivers spend an average of $7,242 annually, or around 26% of their income, on needs and considerations for older loved ones.
In terms of retirement savings, these challenges are evident in the distinct gap between how much men have saved versus women. A 2023 report found that, on average, men had 50% more saved in their 401(k)s than women.
Considering women are statistically likely to live longer, this lack of savings poses a serious threat to their future financial security.
How to Address the Gender Wage Gap
Beyond simply acknowledging that the gender wage inequality exists, it is important to identify strategies for addressing and overcoming it. Here are a few ways to protect yourself and advocate for greater equality in the workplace:
Stay Up-to-Date on Legislation and Policy Initiatives
The Equal Pay Act of 1963 dictated that men and women need to be paid the same for jobs that are “substantially equal.” This includes base pay or salary, bonuses, stock options, overtime pay, insurance benefits, vacation pay, etc. In the 1964 Civil Rights Act, sex-based and race-based discrimination became illegal in the workplace, again furthering protections for women.
While these laws were theoretically passed to close the gender pay gap, it’s estimated that since 1967 women have failed to receive a cumulative $61 trillion in wages. This staggering number doesn’t discredit the vast improvements women have seen in the workplace, but it does clearly indicate the need for more work to be done in balancing these inequities.
In recent years, some states have enacted salary range transparency laws, which require jobs to include salary ranges on job postings. This is done to reduce pay gaps and give women more leverage to negotiate fair wages.
As of 2023, states with mandated pay transparency include:
- Washington
- Nevada
- California
- Colorado
- New York
- Connecticut
- Maryland
- Rhode Island
Keep a close eye on your state’s proposed legislation regarding pay transparency, changes to the minimum wage, maternity leave requirements, and other similar bills. It’s possible that in the coming years, you’ll see more changes being made to support women as the call for workplace reform grows stronger.
Promote Pay Transparency
Despite what some companies say overtly or “strongly suggest,” you have the right to share your wage information with other employees. This right is protected under the National Labor Relations Act (NLRA).
Discussing your compensation with others is one of the most effective ways to keep your employer accountable for pay equality. It gives you leverage in negotiations, and can help others identify discrepancies or even possible discrimination issues.
Talking about money can, of course, be a taboo topic for some people — employers often count on the fact that their employees are too uncomfortable to share their pay information with each other. But you may find that opening up to coworkers is both empowering and mutually-beneficial, especially for women.
Equal Pay for Equal Work
Promoting pay transparency within your workplace is the first step to ensuring all employees receive equal pay for equal work. Again, this concept is protected under the Equal Pay Act, though employers can often find ways around it.
You can advocate for your human resources (HR) department to conduct a pay equity audit or analysis. A pay equity audit will show your company leaders where possible inequities exist on the payroll, and what factors may be influencing those inequities (such as gender, race, or family status).
You may have more success in making this happen if you’re in a leadership position. But hiring managers or trainers can also make the case that pay equity is a big draw for future candidates, meaning it might increase your company’s success in attracting and retaining talented, high-performing employees.
Polish Your Compensation Negotiation Skills
If you’re looking for a substantial salary increase, it may be more beneficial to switch companies entirely. Most businesses have a larger budget for attracting new talent than they do for rewarding current employees, so promotions within an existing company role tend to result in more minor pay bumps than starting somewhere new might.
With that in mind, salary negotiations as you join a new company are significant — this is when you’ll likely have the most leverage to influence your income. Yet, unlike men, few women tend to negotiate for higher pay during these discussions, and, even more frustratingly, fewer women are likely to receive what they asked for.
When you’re approaching salary negotiations, here are a few tips for earning what you deserve:
- Know and demonstrate your worth. Research comparable positions in your industry and their respective salaries, and look at the different responsibilities you’ll have in your role. Listing out the value you bring to the table, and knowing what that value is worth on the market, goes a long way in salary negotiations.
- Give notice. Don’t spring a salary negotiation on your employer. Instead, let them know in advance you’d like to discuss your compensation and role at the company, and send them any necessary materials so they can prepare.
- Compromise, don’t compete. You don’t “win” a salary negotiation, you compromise to find a balance that works for both parties. Come in expecting to negotiate, and know what you’re willing to compromise on.
- Set healthy boundaries. Know your non-negotiables, and don’t be afraid to walk away. Whether you have a minimum salary you’re willing to accept, or you’re looking for a shift in role or responsibilities, identify your boundaries ahead of salary negotiations to stay true to yourself.
- Negotiate for alternative compensation. Even if your base salary can’t be increased, you can always negotiate a better bonus plan, employee stock options, more time off, etc.
Creating Equality for Women in the Workplace
Our team members at Abacus are fierce and passionate advocates for diversity, inclusion, and equal pay. If you’d like professional guidance around addressing any gaps in your own savings and retirement plans, or advice for negotiating fairer pay at work, we encourage you to book a meeting with one of our advisors today. We are stronger, together.
