Women tend to be paid less than men. Recent data shows that in the United States, women earn approximately $0.83 for every dollar earned by men. Another way to look at it is that women are paid about 17% less than men.
This gender pay gap also poses major problems for investing, retirement savings, and wealth building. Women earn only about 70% of the retirement income that men earn and only have about 32% of the total wealth levels that men have.
Unless women, men as well as businesses, organizations and governments take action to address the gender investment gap, it will make everyone poorer.
Let's take a look at some of the big downsides to not closing the gender investment gap.
1. Women become poorer after retirement
Women tend to live longer than men, making it even more important for them to save and invest for their retirement. But if she continues to work for many years at 17% less than a man, she will save less for retirement, pay less for Social Security, and face other disadvantages.
The average woman receives only about 80% of the Social Security benefits of a man, according to data from the American Association of University Women (AAUW). AAUW data also shows that the average annual income for white men age 65 and older is $44,200. A comparison of the incomes of women of retirement age is as follows:
- White women (65 and older): $23,100 (52.3% of white male retirement income)
- Black women (65+): $21,900 (49.5% of white male retirement income)
- Latina women (65+): $14,800 (33.5% of white male retirement income)
The gender pay gap means that women's work is not adequately rewarded, and they earn less in retirement. By closing the gender investment gap, we can help women build wealth for a more secure golden age.
2. More families will live in poverty
Women are more likely to live in poverty than men. As of 2022, more than one in nine women (15.5 million people) in the United States will live in poverty. The issue of financial insecurity is also reflected in the number of low-income women in banking roles. According to FDIC data, 15.9% of single mothers are unbanked, leaving them vulnerable to high fees and predatory loans. If people don't have enough money to feel like it's worth having a bank account, it's even harder to invest for the future.
Many women who earn enough money to save for retirement or invest in stocks are not at significant risk of falling into poverty. But low-income women and their families can also benefit from a focus on closing the gender gap in investing. Low-income women (and their children) also benefit when companies pay women more, offer family-friendly benefits like flexible work and paid family leave, and provide opportunities for career advancement. become.
One public policy that would improve the lives of low-income families is to expand the child tax credit. We already know it works. The child tax credit expanded in 2021 helped nearly eliminate child poverty by increasing cash payments to families.
With stronger social safety nets for families, more women can begin to have more room in their monthly budgets and enough money to meaningfully save and invest for the future. You will be able to do it.
3. The financial industry has become too much of a “boys’ club”
Have you ever felt that all the richest people in the world are men? You're not wrong. The top 15 richest people on the Bloomberg Billionaires Index are all men. Sometimes it seems like capitalism is a man's game.
The truth is more complicated. Looking beyond billionaires, 60% of American women invest in stocks, according to a study by Fidelity. The financial industry needs women as investors, and women are good at investing. In fact, women are better investors than men on average. Women tend to have 0.4% to 1.0% higher average annual investment returns than men.
There is no clear answer as to why women get a higher return on investment than men. But that's because women are more proactive in managing risk, understanding the potential downsides and avoiding jumping on speculative investment trends that can go up in the short term but plummet even faster. It might be for a reason.
There are many ways to be successful as an investor, and most of them don't involve being an aggressive, obnoxious guy on social media who deceives other guys into making risky and self-destructive decisions. Some of the best money moves happen quietly behind the scenes, by patient investors making informed long-term choices. Does it look like a woman you know? The financial world needs more investors like this.
4. The world will miss out on great ideas, investment, and innovation.
This reason for closing the gender investment gap is impossible to calculate, but may be the most important of all. When women don't have wealth, when women can't invest, when women can't contribute to society's allocation of capital. The global economy is making us all poorer.
The gender investment gap is causing all of us, men and women, to miss out on great ideas and untapped human potential. We are losing every small business that was never launched, every great invention and life-changing product that was never built, every wealth that was created and never shared.
conclusion
Buying stocks isn't just about saving for retirement; it's about investing in human cooperation, creativity, and ingenuity. When investment decisions are primarily controlled by less than half of the population, we end up missing out on some of humanity's best ideas. If more women invest, we can all be wealthier.
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