Abacus: The Gender Pay Gap
The Equal Pay Act of 1963 made it mandatory for employers to pay equal wages to workers doing identical work, irrespective of the gender of the employee. Half a century later, gender pay gap still looms in our society, costing billions of dollars to the economy.
In 2019, amidst of the #Metoo movement, where equality amongst the sexes is one of the hottest topics, women still earn 80 cents to every dollar a man earns. This gap is even wider for women of color with African American women earning only 62.5 cents on the dollar along with hispanic women earning only 54.4 cents on the dollar when compared to a white male.
On a global scale, women earn only 54 cents to a man, and at today’s progress, it might take up to 202 years to close this gap. On average, women who work outside their homes earn $11,000 less than a man.
An equal pay for men and women both can be a boon for the economy. Equal hours, equal participation of both the sexes along with equal pay can lead to a 31 percent increment in the global GDP by 2025.
An easy way to fight gender pay is with education. In the past 20 years, countries across the globe have made tremendous progress in alleviating the educational gap in the US. In 2018, 35 percent of the graduates in the country comprised of women as compared to 34 percent men. With rising education, the gender pay gap has decreased over time by nearly 7 percent in the past three decades, yet the issue still stands tall and strong.
Despite attaining the same education as men and having a better rate of graduation, women are still paid less.
According to a study by The American Center for Progress, women have to earn an additional degree to make the same amount as a male co-worker despite having identical jobs.
Ignoring the role of women in the labor market can have detrimental effects on their income and occupational pension. This, in turn, undermines the economic independence of women, making them more reliable on men for economic support.
Women take on 2.5 times more unpaid work as compared to men like motherhood, taking care of the household and other activities which hinder their economic opportunity.
According to the Organization for Economic Co-operation and Development (OECD), women go through a motherhood penalty where organizations have 7 percent wage cut per child. One of the most important step to close on the gender pay gap would be more equitable sharing of parental responsibilities between partners. Paid parental leave should be allowed to both men and women. This will not only help in reducing the gender pay gap but will also increase a father’s participation in childcare and eliminating gender stereotyping in childcare.
In the Nordic countries, there is significant support for childcare from the government while parents work. This enables parents to take care of their children without going out of the labor market.
Equal pay for men and women will also bring more women to the labor market. With more employment of both sexes, the unemployment rate will shrink. If the gender pay gap is eliminated, the overall employment rate might jump up to 80 percent by 2050 as compared to 65 percent with the current disparity.
According to Institute for Women’s Policy Research (IWPR), equal pay would add $500 billion more in the economy over the course of the next decade, in terms of wages, expenses and retained earning.
Economic growth is usually followed by equity index growth, due a to a multiplier effect. In simple terms, a rise in the economic growth of a country will lead to a growth in individual sectors and companies at large, leading to more retained earning and higher investments.
Having more involvement of women in the workforce can lead to a positive surge in the financial market as well. According to the World Economic Forum, equal participation and pay for women will increase the US market (S&P 500) by $3.17 trillion over the next decade.
The Paycheck Fairness Act aims at prohibitions against sex discrimination in the payment of wages. Being introduced to the House of Representatives in 2015, the act still remains a bill. If the PayCheck Fairness act is passed, it would reduce the income disparities in the modern work culture and promote equal pay.
Different economies and different cultures around the world, it is easy to notice that many of the barriers for women coming into the workforce can be cultural, historically assigned work or economic. Familial obligations are one of the biggest factors that reduce women’s participation in the workforce and until the social outlook won't change, nothing will happen in terms of equal pay.