The gender wealth gap reveals more about inequality than the pay gap

Measuring progress in women’s economic status by income alone underestimates the extent of the financial disparities that remain between the sexes

 
Men tend to have better access to the ‘wealth escalator’, which is a combination of advantages that helps translate income into wealth, including employment-related fringe benefits, favourable tax codes, and valuable government benefits
Men tend to have better access to the ‘wealth escalator’, which is a combination of advantages that helps translate income into wealth, including employment-related fringe benefits, favourable tax codes, and valuable government benefits 
Author: Kim Darrah
October 29, 2017

Countless column inches and high-profile debates have been dedicated to the ins and outs of the gender income gap. It has become an all-encompassing measure of women’s position in economic life, used variously to document how much the lot of women has improved, or how far they still have to go.

However, this focus on the wage gap could be peddling a skewed and incomplete picture of the female financial situation. The gender wealth gap tends to be far wider than the pay gap, and its current state makes the grand gender convergence of the past few decades look far less impressive.

Wages and wealth
In the US, the pay ratio between men and women now stands 0.78, but single women own on average just 31 cents for every dollar owned by men in the same position.

The differential is far greater for Millennial women, who have a median wealth of zero. Meanwhile, women aged between 35 and 49 have a median wealth of $1,000, which is just four percent of that of men in the same situation.

The gap in Europe is somewhat less extreme, but still troubling: a recent European Commission analysis of the gender wealth gap across eurozone countries found that women hold, on average, 62 percent of the wealth owned by men.

According to the report, in Germany, women’s median holdings are 55 percent of those of men, and in France the same measure sits at 49 percent. Speaking to World Finance, the report’s author Eva Sierminska said: “Gender wealth inequality varies a lot cross-nationally, along with the institutional environment, societal norms regarding women’s and men’s positions in society, and labour market attachment of women and men, as well as culture.”

Wealth is the vital consideration in gauging levels of financial power and independence

Indeed, the data unveils dramatic differences between nations: in the Netherlands, the gender wealth ratio at the median is 0.28, whereas in Slovakia, it is 0.97.

Crucially, income has only ever been one part of the picture of a person’s economic position. Wealth is the vital consideration in gauging levels of financial power and independence: without it, one can’t take risks, make investments in the future or shoulder unforeseen payments.

More than pay
It is easy to assume that differences in wealth between men and women will move in line with the pay gap. And yet, while some of the gap can be attributed to income differentials, pay is just one piece of the puzzle.

Mariko Chang, a sociologist at Stanford University who has written extensively on the topic, brings this point into focus through her research in the US.

She noted that women who have never been married and work full time now face a far-reduced pay gap of 97 percent, yet they still hold just a third of the wealth of men in the same situation.

A similar pattern holds more broadly: even among men and women in the same pay bracket, women tend to have lower wealth than their male counterparts.

According to Chang, part of the explanation is that men tend to have better access to the ‘wealth escalator’, which is a combination of advantages that helps translate income into wealth, including employment-related fringe benefits, favourable tax codes, and valuable government benefits.

Motherhood further exacerbates the wealth gap, with the burden of childcare falling disproportionately on women. On top of this, women tend to hold less risky assets, and are less likely to own stocks and shares. The implication is that equalising pay would not be enough to narrow the wealth gap – there are wider factors at play.

Data gap
This overdone focus on income at the expense of all other indicators is puzzling until one considers that data on wealth is simply far more difficult to get hold of.

As Sierminska noted, a combination of factors has put off research in the area. For one, the topic of wealth is “quite intimate – not many people are in the habit of divulging their wealth holdings”.

Another key factor is the way in which wealth is traditionally measured. “It has been measured at the household level, which does not allow us to explore the division of assets within the household,” Sierminska explained.

With research in the area beginning to pick up pace, however, the data gap is starting to be filled; the wealth gap itself will require more work.