Is There a Price to Womanhood? The Studies Weigh In.
June 30, 2020 Author: Tess Downing, MBA, CFP®, Complete View Financial
As women, we think we’ve broken through so many of the stereotypes and made progress in how we – and others – think about gender and money. We have, but unfortunately, there’s still a price to womanhood. And we have a long way to go until we are on an even playing field with men.
While it’s important to keep trying to correct the inequities, the most valuable thing we can do for ourselves is to become aware of where the extra costs are coming from so we can minimize their impact.
We also need to become as knowledgeable as possible about our finances. If that means asking for help, that’s fine. What’s not okay is ignoring the problem, because of that uneven playing field.
And, ultimately, we want to be sure we don’t let these uneven costs derail our retirement. Here’s why:
To save as much for retirement as a man, a woman has to save nearly twice as much of what she earns throughout her working career. (We’re looking at averages, of course.) She spends fewer years working because she stops to raise a family. That’s the parenting penalty. Then, she makes less than a man with the same job when she’s working – the gender pay gap.
She is more cautious when she invests, which may lower her returns on investment. And her lack of confidence when it comes to all things finance means she misses out on opportunities (the financial literacy penalty). And, she lives longer than a man, so her savings have to last much longer (the life expectancy penalty).
All of that is compounded by the fact that almost everything costs more for women than for men (the pink tax), and there are expenses she has that men don’t.
Let’s look at each area.
The Parenting Penalty
The ‘cost of motherhood’ is not because women become less productive employees. The pay discrepancy comes from old-fashioned ideas that women will work less and be more distractible on the job. One estimate says that mothers face a 4% decrease in earnings for each child. But men get a bonus: as fathers, they are perceived as being more stable, and fatherhood is estimated to raise men’s earnings by more than 6%.
In some cases, women are passed up for job opportunities, raises and additional benefits. In others, because of the high costs of childcare, women may be forced to save money by staying home from work so they can afford other expenses related to newborns. One estimate says women spend an average of nine fewer years in the workforce than men.
On the other hand, a Danish study reports that childless women experience very little difference in pay compared to their male counterparts. https://www.henrikkleven.com/uploads/3/7/3/1/37310663/kleven-landais-sogaard_nber-w24219_jan2018.pdf
CNBC reports that the ‘motherhood penalty’ is real, and it costs women, on average, $16,000 a year in lost wages. https://www.cnbc.com/2019/03/25/the-motherhood-penalty-costs-women-16000-a-year-in-lost-wages.html In 2019
The Gender Pay Gap
According to the U.S. Bureau of Labor Statistics & Department of Commerce, for every dollar earned by a man, white women earn 77 cents, black women 65 cents and Hispanic women 57 cents. https://equalmeansequal.com/the-gender-pay-gap/
The Pew Research Center analysis says that in 2018, women earned 85% of what men earned, based on the median hourly wages of both full- and part-time workers in the U.S. Using this estimate, it would take an extra 39 days of work for women to match what men earned in 2018. https://www.pewresearch.org/fact-tank/2019/03/22/gender-pay-gap-facts/
Whatever the number is, the gap has narrowed since the 1980s, but the narrowing has slowed in the past 15 years.
Some say the gap is because women choose professions that pay less traditionally. But even in nursing, a female-dominated profession where nearly 90% of nurses are women, they earn 10% less than male nurses.
The Financial Literacy Penalty
Traditionally, parents have spent less time sharing financial know-how with daughters than with sons. The result is a gap between men and women around the basics of finance and the basics of managing their own financial lives.
One recent study shows that the financial literacy gap is closing. Among boomers, the difference in knowledge levels between men and women is 19%; with Gen X, it’s 18%. But with millennials, it’s 10%. Still, 10% is substantial when you consider the consequences of not knowing the basics of finance over a lifetime. It is reflected not just in the quality of financial decisions, but also the opportunities not seized for lack of awareness or confidence.
When women do invest, they tend to be more conservative and risk-averse, keeping more of their savings in cash or money-market funds. They may miss out on the higher earnings from stocks, mutual funds and ETFs. But they do compensate by earning slightly better returns because they trade less frequently and they stay the course.
The Life Expectancy Penalty
Women live longer than men. According to OECD (the Organization for Economic Co-operation and Development) 2017 data, a man over 65 has a life expectancy of 18.1 more years. A woman’s expectancy is 20.6 years. https://www.simplyinsurance.com/average-us-life-expectancy-statistics/
As a result, the lifetime expenditure on healthcare is higher for women: $361,200 for women and $268,700 for men. Two-fifths of the difference is due to longer life expectancy, as nearly half is spent in the senior years. And for those who reach age 85, more than one-third of lifetime expenditures happen in those last years. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1361028/
One positive on the life expectancy front is that more men have life insurance than women, and since women live longer, they are more likely to be widows. And, according to CNBC, 79% of the men in a survey had life insurance, compared with 67% of women. Men averaged $423,000 in individual policies, and women $231,000. https://www.cnbc.com/2019/09/19/women-make-this-big-mistake-when-it-comes-to-life-insurance.html
The Pink Tax
The pink tax – or gender tax — covers a vast array of costs, from consumer products to insurances, and from makeup to financial costs that add to the price of womanhood.
Consumer Products
Products marketed to little girls and women are priced higher even if similar in ingredients, substance or construction. That surcharge is called a ‘pink tax’ since pink is the prevailing ‘girly’ color.
The New York City Department of Consumer Affairs published an extensive study in 2015 that covered over 800 products, looking for price differences. On average, those for girls and women cost 7% more than those for boys and men. The same holds for everything from dry cleaning to haircuts.
The gender tax is pervasive. (Imagine the cost over a lifetime.) One explanation for the upcharge is that women influence 83% of the $7 trillion of consumer spending done in the U.S. each year. Since marketers put so many resources into marketing to women decision-makers, they load the women’s products with the extra cost.
Another hidden price to womanhood comes from the expectation that women should be well-groomed. That implies spending money on makeup, haircare and fashion. The pressure comes from the fact that women who are less made up are viewed as less professional and are often likely to earn a lower salary.
A survey by SkinStore of 3,000 women aged 16-75 discovered a typical 16-step beauty regimen from early morning to bedtime, at the cost of $8 a day. That’s nearly $3,000 a year. Women in New York spend $11 a day. At an extreme, from age 16 to age 75, that could represent over $200,000. https://www.skinstore.com/blog/skincare/womens-face-worth-survey-2017/
Health Care Costs
Before the Affordable Care Act, insurance companies charged women up to 50% more than men for health coverage. Part of the explanation was the cost of reproductive health. While the practice was ended, the non-insurance price to womanhood continue to be high. That includes products such as birth control pills and menstrual products. But it also includes copayment requirements for all the different female health visits to doctors for gynecology visits, birth control and pregnancy care. A reliable (but dated) study indicates that, on average, women have lifetime health care costs a third higher than men. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1361028/
Life Insurance
Women are not penalized when buying life insurance. For a 20-year term life insurance policy for $250,000 of coverage, a 30-year-old woman pays $140 per year and a man $155. By age 40, those amounts jump to $182 for women and $208 for men. For $500,000 at age 50, women pay $685 and men pay $930. The reason it costs more for men is that they have a shorter life expectancy than women. https://www.goodfinancialcents.com/term-life-insurance-rates-men-vs-women/
Long-term Care Insurance
The cost and premium for long-term care insurance did not account for gender until 2014. As all the policies sold in the 1970s, 1980s and 1990s to Baby Boomers started seeing claims, they discovered that women file more claims, so companies started charging women higher premiums than they charge men. https://www.comparelongtermcare.org/insurance-cost/
Disability Insurance
Men pay less for disability insurance than women do. Women file more claims for pregnancy and mental health conditions and are disabled for more extended periods. With the years, rates increase faster for men than women, but they never quite catch up. https://www.policygenius.com/disability-insurance/disability-insurance-rates-by-age/
Credit Scores
Women tend to have lower credit scores than men, most likely because their lower incomes make it harder to pay bills on time and in full. A 2016 study of 7 million Americans showed the gap was the largest among those age 65 and older: 15 points. While it may not seem critical, just a few points can make a difference in the interest rates available to borrowers.
Mortgages
Women aren’t riskier borrowers than men and are less likely to default. Regardless, they might pay higher interest rates when they take out a mortgage to buy a home, partly because they’re less likely to shop around.
Student Loans
Women hold $900 billion in student loan debt, almost two-thirds of the $1.5 trillion outstanding Since they earn less than their male counterparts and tend to take breaks from the workforce in their mid- to late-30s, they have less money to devote to debt repayment. As a result, they pay more interest overall, further increasing the price to womanhood. https://fortune.com/2018/06/05/women-student-loan-debt/
Car Purchases, Repairs and Insurance
Women are often quoted higher prices when buying cars or having them repaired because of the gender-based expectation that they don’t know much about cars. On auto insurance, they may pay a little more than men in many states, but the difference is minimal. However, because men are riskier drivers and are more likely to be involved in fatal crashes, women’s rates should be lower. https://www.thezebra.com/resources/research/men-women-auto-insurance-differences-by-state/
So, What’s the Total Cost?
The list of extra costs of being a woman is endless. And once we’re aware of where to look for extra costs, there are steps we can take to avoid some of them. But many of them, such as the Life Expectancy Penalty and the Gender Pay Gap, either can’t be changed or will take a long time to bridge.
The answer is to adapt our budgets and financial plans to account for the price of womanhood. And to find resources to make the most of what we earn, what we spend and what we save. Working with the right financial planner can make a marked difference in how prepared we can be for retirement.
If you believe we could help you navigate the waters more effectively to retirement, feel free to call Complete View Financial for an initial consultation.