By Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI
It is 2017. Why would millions of women around the world feel the need to march for equality? Is half the world’s population actually oppressed? Let’s take a look at the financial inclusion gender gap. And given the relationship between financial inclusion and financial health, let’s also examine how the financial well-being of women is systemically compromised. Here are some of the ways that our financial worlds exclude or marginalize women, ultimately resulting in their being more financially vulnerable and more likely to live in poverty than men. In outlining these ways I pull heavily from an Ellevest guide called “Mind the Gap”, which highlights and quantifies a number of ways women in the United States still face financial inequalities. Though these Ellevest figures are for the U.S., these gender gaps are even more prevalent in nearly all other countries around the world.
1. Gender pay gap – The range varies, with women of color making less, but on average, women in the U.S. make 78 cents to every $1 a man makes. This stems from a number of things, including implicit gender biases and the fact that women are less likely to ask for raises (and when they do, they are more likely to be punished in the workplace for it – see evidence here and here). This current reality costs the average woman in the United States $1,300,000 over her lifetime!
2. Financial account ownership gap – The most recent Global Findex tells us that although financial account ownership has improved globally in recent years, the account ownership gender gap has persisted. Globally, 65 percent of men have access to a financial account as compared to 58 percent of women. In developing countries this gap is 9 percent. In some regions the gap is much bigger, such as South Asia with an 18 percent gap.
3. Financial literacy gap – The Standard & Poor’s Ratings Services Global Financial Literacy Survey found that there is a global financial literacy gender gap at 5 percent. In the United States, this figure is higher at 10 percent. For both account ownership, and financial literacy, there is a litany of potential reasons for these persistent gaps, including biases from husbands and families and financial institutions that exclude women from enrolling in formal finances and education systems. The costs of these gaps are no doubt high but difficult to capture.
4. Debt gap – In terms of loans, on average women in the United States pay an extra half percent APR on credit cards, and single women pay higher rates for their mortgages than single men. This debt discrepancy is exacerbated by (and partly a result of) the gender pay gap. Because women are paid less than men, it takes them longer to pay off debt, and with the effect of compound interest, this bucket adds up to an estimated $165,000 over the average female lifespan.
5. Investing gap – On the flip side of the debt gap, women are statistically less likely to invest, which means they miss out on having compound interest work for them. Perhaps women are more risk-averse, or their discrepancy in income means they have less available money to invest, or they don’t experience the same societal encouragement to invest. Similar to base of the pyramid clients taking up savings or credit products for the first time, there are barriers to first-time adoption of investment products. Regardless of reason, by not investing, even though women have been shown to be better investors than men, they are missing out big time. For instance, if you make $85,000 a year, and save instead of invest 20 percent of your salary, you could be missing out on roughly $100 per day in investment earnings. This adds up to an average of $700,000 that women miss out on, and equates to five extra years of work earnings.
6. Funding gap – Of the global pool of venture funding, an astonishingly low 10 percent goes to companies with at least one woman co-founder. This is in spite of research findings that investments in companies with at least one woman founder outperform other investments by 63 percent. It is hard to estimate this gap over a lifetime since it doesn’t apply to all women, but it’s certainly one to be aware of as we encourage the best and brightest entrepreneurial minds to develop solutions to the world’s social issues, including financial inclusion.
7. Pricing gap – Referred to as the “pink tax”, this pricing discrepancy describes the fact that from birth, women’s versions of products cost more: pink onesies cost more than blue ones, a red scooter at Target costs $25 while a pink one costs $50, women’s dry cleaning costs more than men’s, and pink Bic pens cost twice as much as the blue ones, among countless other examples. Cars, iPhones, clothes, you name it — there is a “women’s version” of many products, and it’s often higher priced. This is sneaky and hard to estimate, but according to a 1994 California study, women pay what they call a “gender tax” of approximately $1,351 per year for the same services as men. Over an average lifespan this discrepancy is conservatively projected at $76,000.
8. Work achievement gap – Executive leadership teams and boards are almost always male dominated. The New York Times found that there are more CEOs named John than there are women CEOs of multinational companies. Some of this is due to confidence gaps and gender bias in the ways we think about leadership. However, women are also less likely to have internal sponsors and mentors who will advocate on their behalf, and less likely to get the honest feedback they need to grow in their careers. Women who have children are more likely to get penalized for maternity leave and to get mommy-tracked in their careers. They may actually be seen as less competent. This work achievement gap adds up to a cumulative $800,000 over the average woman’s life.
9. Unpaid labor and career breaks – Women often do more of the unpaid housework and child care than men, which takes time away from their careers. And, perhaps because of the imbalance at home, women are more likely to take career breaks. Ellevest calculates these two areas add up to $800,000 and $1,300,000, respectively, for a woman over time.
In terms of overcoming these challenges and gaps, I can’t endorse the full “Mind the Gap” guide highly enough, as it provides a wealth of recommendations. Some of the summary lessons I took away from the guide were:
- Ask, ask, and ask again! Be confident, do your homework, and know your worth.
- Look for mentors and sponsors.
- Use your buying power, and don’t pay more for pink.
- Don’t be afraid to invest. Let compound interest work for, not against, you!
- Outsource your household duties as much as possible – use Task Rabbit, Peapod, or any other number of services to reduce your unpaid labor.
For now, I leave you with $5,141,000 reasons why women marched.
This post originally appeared on Accion’s Center for Financial Inclusion Blog on February 2, 2017.
Danielle is a Manager at the Center for Financial Inclusion at Accion and part of the first MIB class at the Fletcher School. She can be reached at firstname.lastname@example.org.