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Equal Pay Day and your personal finances

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Credit Sesame discusses Equal Pay Day and why there is still a gender pay gap.

What is Equal Pay Day?

Equal Pay Day is on March 14th this year, 2023. The date symbolizes how far into the year women must work to catch up to men’s income from the previous year. This day supporting equal pay is always on a Tuesday to show that women must work an extra two days into the following week to catch up to what men earned the previous week.

The National Committee on Pay Equity created this day in 1996 and called it National Pay Inequity Awareness Day. Its purpose is to educate the public about the gap between men’s and women’s wages. Today, the organization asks everyone to wear red on Equal Pay Day to symbolize how far women and minorities are “in the red” on payday.  

How unequal pay affects everyone

Earning less for the same work puts people at a disadvantage, and women in the US are 35% more likely than men to live in poverty. It’s harder to fund an emergency savings account when you earn less. Without savings, you’re more likely to take on debt when your expenses increase or your income suffers. Debt can easily cause a financial spiral when your income barely covers necessities.

It doesn’t get any easier for women in retirement. According to the Brookings Institution, average women’s Social Security benefits are just 80% of men’s. And data from Vanguard show that the average women’s retirement account balance is just two-thirds of the average man’s.

Why the gender pay gap still exists

There are many reasons for the gender pay gap, and not all relate to discrimination.

  • Women tend to leave the workforce for extended periods of time to care for their children or elderly parents. This reduces their lifetime earnings significantly and also impairs career advancement and the additional compensation that goes with it.
  • Similarly, women tend to cluster into jobs and occupations that offer more flexibility but lower pay. Those jobs enable them to meet their household responsibilities more easily but may cost hundreds of thousands in lost lifetime earnings.
  • Workplace discrimination is an issue and the perpetrators may not even be aware of it. Unconscious bias means decision-makers may believe that men make better leaders or are more proficient with technical jobs than women. This leads to unconscious discrimination in hiring, pay and promotion.
  • The lack of transparency in compensation helps keep women’s pay down. The National Womens Law Center claims that studies show that increasing wage transparency closes wage gaps between men and women.

While some of the wage gap stems from the preferences of many women in the workforce, not all of it does. The US Department of Labor claims that even in female-dominated fields, men are paid more. And that when women enter any field at a higher rate, wages in that career drop. And according to the University of Minnesota’s Gender Policy Report, 85% of the wage gap results from differences in pay within the same occupation and not because women choose certain careers.

Gender pay inequality by race, identity and age

While women earn 83% of what men earn, the gender pay gap is not equal across the board. For every dollar earned by white men, for instance:

  • White women earn 79 cents
  • Hispanic women earn 58 cents
  • Black women earn 63 cents

There may also be unequal pay for LGBTQ+ workers. The Human Rights Campaign says that their research showed LGBTQ+ workers earned 90% of every dollar earned by the “average worker.” However, they acknowledged that both genders were present in each group and that we don’t yet understand the impact of being an LGBTQ+ woman on wages.

The disparity between male and female wages also varies by age. Women earn less than men of the same age.

  • 16 to 24 years women earn 82.91%
  • 25 to 34 years women earn 87.53%
  • 35 to 44 years women earn 84.21%
  • 45 to 54 years women earn 76.90%
  • 65 years and up women earn 76.52%

The impact of childbearing and years out of the workforce can be seen in the years in which women return to the workforce. The penalty for leaving work for an extended time during prime working years can be severe. However, the numbers might also illustrate a less-equal environment for women in the past and a better one for younger women today.

Overcoming the gender pay gap

There are some aspects of the gender pay gap that come down to choices women make:

  • The average pay in a given career
  • The number of hours or years women choose to work
  • How successfully women negotiate pay and promotions

If women want to earn more, they may have to commit to a less fulfilling or flexible career. They may have to work longer hours. And they may have to be more educated and assertive when negotiating pay or promotions.

However, American culture, government policy, unconscious bias, and overt discrimination from employers are clearly culprits as well. That’s demonstrated when pay in a profession declines as more women choose it. And when men earn more than women even in female-dominated careers.

So how can you get the pay you deserve in the workplace?

  • Research your career choices carefully. The Bureau of Labor Economics (BLS) maintains a website and database of career information. You can look up earnings by people at different stages in that career and in various regions of the country. You can see the education level required, typical working conditions and if the industry is growing, shrinking or stable. Choose an occupation that meets your requirements for pay and lifestyle.
  • Do your homework before salary negotiations. It’s not hard to discover online what people with your qualifications in your position earn. Arm yourself with facts and figures and documentation. Many women tend to underestimate their worth, says The New York Times, so steel yourself for negotiation and don’t settle for less.
  • Understand that you may have to switch employers or industries to get your desired salary.
  • If you want to earn top dollar, understand that sacrifice may be necessary. BLS data indicate that men work on average 8.4 hours daily while women average 7.8 hours.

Women should also prepare carefully for their financial future. Put retirement savings on autopilot by taking advantage of workplace plans and directing money from each paycheck to a 401(k), IRA or another plan. Avoid unnecessary debt and protect your credit rating to minimize borrowing costs. If your earnings are lower, you must be more mindful of where they are going.

Supporting equal pay for equal work

Much of systemic inequality stems from the fact that women still shoulder most of the child-rearing responsibilities and a disproportionate amount of household tasks; about two hours a day more than men, according to a report by Oxfam and the Institute for Women’s Policy Research. Women perform the bulk of unpaid but necessary work in their households. If you want more time and energy for work, there must be a better division of labor in the home. Or a family can buy time by hiring others to complete household tasks.

Another driver of workplace fairness is government. Electing leaders who make supporting women and families a priority is key, like these policies:

  • Raise the minimum wage and the tipped minimum wage. Women make up a large proportion of the lowest-paid workers. Raising the minimum wage would provide an immediate earnings increase to 15 million women.
  • Increase pay transparency. New state laws requiring employers to disclose the salary range for positions and national proposals like the Paycheck Fairness Act (which failed in Congress due to Republican opposition) could help reduce the gender wage gap by prohibiting retaliation against employees who disclose their wages and increasing penalties for wage discrimination. Voting for leaders who support equal pay is voting for your own bank account.
  • Improve access to child care. When childcare costs absorb much of a mother’s income, it can make more sense for her to drop out of the workforce, doing long-term damage to her career prospects and her future social security income.
  • Push employers to fix pay disparities. Because bias can be unconscious, unequal pay can result by accident. Employers need to conduct pay audits and make corrections when men and women are not being compensated fairly.

Unequal pay in the workplace hurts everyone, especially families. The wage gap can be narrowed by supporting employers that pay fairly and politicians that prioritize fairness for all regardless of gender, age or identity.

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Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

Gina Freeman
Gina has been writing consumer-centric content in the personal finance, business and investing for nearly 20 years. She loves making challenging or even “boring” topics accessible and helping readers feel educated and confident in their decisions.

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