The following post is from Holly of Club Thrifty.
Experts use the term “gender wage gap” to describe the ongoing disparity between men and women’s average annual earnings. According to recent government data, women earned just 80.9 percent of what men brought home in 2012. That’s certainly disappointing, but what’s more disconcerting is the fact that it may actually be getting worse. According to Bureau of Labor Statistics, women earned approximately 82 percent what men did in 2011- just one year before.
Several other studies claim that the gender wage gap rests at various percentages, although most studies tend to agree that women of color and women older than 35 often earn the least. These statistics become even more troubling when you consider the fact that women were the sole or primary earner in 40 percent of households in the U.S. in 2011. The gender wage gap also appears to be somewhat elastic, with varying levels of intensity from industry to industry:
But, are salaries really impacted that that much by gender alone? While a quick glance at the statistics might lead us to believe that the gender wage gap is caused entirely by gender discrimination and crotchety old women-hating bosses, many believe there is much more to the story than the raw data can possibly portray.
Let me give you an example, “Real Housewives” style.
The Housewives of Affluent Suburbia
My neighborhood is home to many women whose own lifestyle choices might affect their earnings today and in the future. To set the stage, the median household income in our town was $88,429 in 2012. While that might not sound like a lot, a nearly six-figure income can go a long way in the rural Midwest. (To keep things in perspective, the median family income in San Francisco- one of the most expensive places to live in the country- was $87,329 the same year).
Our neighbors include judges, doctors, lawyers, corporate executives, and scientists. There are also an unbelievable number of stay-at-home moms. And, on any given day, you can find them pushing adorable custom baby strollers down the tree-lined garden pathways, meeting friends for hot yoga class or coffee, and bouncing around in workout clothes that cost as much as I spend on groceries in a week.
But these women aren’t frumpy slackers or underachievers. Like their husbands, many of the women I’ve befriended hold an advanced degree. In fact, within a few miles radius, I can name two attorneys, one engineer, and a handful of former business executives who chose to stay home with their kids. Several of the women volunteer and I know one who works part-time. The rest of them appear to do what they want for the most part, and a few saunter over to the neighborhood pool like that is their full-time job.
One new friend recently told me that she doesn’t plan to practice law ever again, even after her youngest goes to kindergarten next year.
“I don’t want to start over at the bottom of the pack,” she said. “I lost my career momentum when I chose to stay home.”
Another friend has an MBA, yet only works at a school part-time. “I want to be available for the kids,” she said. “I also refuse to work summers.”
Several others tell me that they’ll probably go back to work once their kids leave the nest. And of course, there’s nothing wrong with that. Staying home to raise your kids is admirable and I can truly believe that parenthood is the hardest job on Earth.
But, what happens when women like my neighbors do choose to go back to work? In the words of my friend, will they truly be forced to start over at “the bottom of the pack” in terms of pay and seniority?
Of course they will.
Why Women Earn Less Than Men
On the other hand, plenty of research shows that the gender wage gap is real, even when accounting for the lifestyle and family choices of women. For example, “Graduating to a Pay Gap: The Earnings of Women and Men One Year after College Graduation,” revealed that one year after college graduation, women were paid an average of 82 percent of what their male counterparts brought in. And, even after accounting for lifestyle choices such as college major, occupation, GPA, type of undergraduate institution, marital status, and age, a 7 percent difference in wages between newly-employed men and women still went unexplained.
The American Association of University Women, who conducted the research, goes further to report a 12 percent unexplained difference in wages between male and female workers only ten years after college graduation. Other various studies seem to back up the AAUW claims that the entire gender wage gap cannot be attributed solely to the lifestyle choices of women. But, looking at the research, it appears that one factor may be playing a bigger role than once thought: Parenthood.
The Motherhood Penalty
Additional AAUW research shows that, ten years after becoming a parent, 23 percent of mothers were entirely out of the workforce and another 17 percent worked only part-time. Meanwhile, only 1 percent of men had stopped working and 2 percent worked only-part time. But why?
Apparently, women who do return to the workforce after raising children may not be greeted with open arms. The AAUW cites an unspoken “motherhood penalty” as the cause of such grief since research shows employers are less likely to hire a mother compared to a childless woman. And if they do, the salary they offer is often lower.
However, there is no such “fatherhood penalty” to speak of when it comes to hiring patterns of men with children. In fact, a growing body of research indicates that men with children actually earn more when compared to their childless male counterparts. Go figure.
Solving the Gender Wage Gap
It’s easy to see how opting out of the workforce for years or even decades could affect one’s earning potential, but it’s important to understand that it doesn’t have to be this way. All kinds of experts have weighed in on how women can fight against the powers that be and close the gender wage gap once and for all. Here’s what they’ve said:
- Advice #1: Warren Farrell, the author of “Why Men Earn More: The Startling Truth Behind the Pay Gap — and What Women Can Do About It,” believes that, overall, men earn more because of the career decisions they make. When it comes to advice for women who want to close the gender wage gap, he suggests working longer hours, earning a degree in a male-dominated field such as math, science, or engineering, not dropping out of the workforce to have children, and taking commission-based work.
- Advice #2: Amy Caiazza, director of democracy and society programs at the Institute for Women’s Policy Research., claims that women need to take matters into their own hands. “What’s needed is mentoring to make connections and training to learn new skill sets and move to higher jobs,” Caiazza says. “Women can get more education and be assertive and confident in negotiating pay.”
- Advice #3: Heidi Hartmann, Economist and the president of the Institute for Women’s Policy Research, believes that, among other moves, women should pressure the government into promoting policies that end gender discrimination and ensure equal pay. For example, we should support policies like the Lilly Ledbetter Fair Pay Act, which makes it easier for women to sue their employers if they feel they’ve been unfairly discriminated against.
The bottom line is this: Women obviously have a lot of work to do when it comes to advocating and insisting on a system that ensures equal pay for equal work. Research shows that lifestyle choices and parenthood do play a factor in women’s earnings. However, it also proves that women’s earnings, even when accounting for those things, aren’t always where they should be. Yes, men and women are different and often want different things, but that shouldn’t be used as an excuse to pay women less for the same job.
So, talk about the gender wage gap with your friends, learn how to negotiate for a better deal, and vote for political candidates that support policies that might one day close the unfair wage gap once and for all. Perhaps if we all speak loud enough, the message will be heard loud and clear by those who seek to stifle our earnings and keep us down.
START A BUSINESS ALREADY
You know what’s great about starting your own business? There’s a much tighter correlation with effort and reward. There might still be gender issues, but there’s also a much better meritocracy.
It’s been over six years since I started Financial Samurai and I’m actually earning a good passive and active income stream online now. I never thought I’d be able to quit my job in 2012 just three years after starting Financial Samurai. But by starting one financial crisis day in 2009, Financial Samurai actually makes more than my entire passive income total that took 15 years to build. If you enjoy writing, creating, connecting with people online, and enjoying more freedom, see how you can set up a WordPress blog in 15 minutes with Bluehost. You might one day make enough where you never have to work a day job again!
Updated for 2017 and beyond.
- “Breadwinner Moms,” Pew Social Trends, 2013
- “Closing The Gender Wage Gap Would Create ‘Huge’ Economic Stimulus, Economists Say,” The Huffington Post, October 24, 2012
- “Graduating to a Pay Gap: The Earnings of Women and Men One Year after College Graduation,” American Association of University Women, October 24, 2012
- “President Obama’s persistent ’77-cent’ claim on the wage gap gets a new Pinocchio rating,” The Washington Post, April 9, 2014
- “The Gender Pay Gap Got Worse, Not Better, In 2012–And It’s Great For Women,” Forbes, February 13, 2014
- “The Simple Truth About the Gender Wage Gap,” American Association of University Women, 2014
- “Want a pay rise? Then you’d better become a father as study reveals men with children earn a FIFTH more,” The Daily Mail, Dec 23, 2012