Do Americans have an earnings problem or a savings problem? Unfortunately, I think we’ve got both. Take a look at the median salary by age and sex compiled by Motley Fool from the Census Bureau.
The obvious points are 1) people make more the older they get and 2) men make more than women at every single age group. Making more as you age is nothing insightful. What is insightful is how the difference between men and women’s salaries really start to grow in their 30s. A 25% pay gap is huge!
So what’s going on here? The answer must be biological (life). For example, I have a female friend who was the most gung-ho worker ever. She was an Electrical Engineer in college (one of the hardest majors) and told me that she planned to work “forever” after Harvard Business School. Two years after HBS, she was pregnant, and when I asked her whether she still planned to go back to work she said, “No way! Raising my children is the most important thing in the world to me.”
It’s been five years since she’s been out of the work force. If she decides to return at age 37, it’s logical to assume that she will have to start at a lower pay and title than colleagues who kept working while she was away. Regarding finding a solution to the gender wage gap for equal pay for equal work, the fix I’ve come up with is to have equal paternity leave rights for men and women. With equal paternity leave rights, employers are more blind to discriminate.
What’s interesting is that women have more money in their 401k on average up to the $150,000 income mark, according to a 2014 report by Fidelity Investments with 13 million tracked accounts. Women earning between $20,000 and $40,000, for example, have saved an average of $17,300 in their 401(k) compared to $15,200 for men in the same income range.