Gender inequality and financial planning.
2023 Nobel Laureate in Economics, Dr. Claudia Goldin, has helped us understand the evolution of women in the labour market. From her decades of ground-breaking research, she pioneered the concept of the “Earnings Gap.”
Goldin understood that overt discrimination does account for much of the wage inequality. She also observed that over the lifetime of workers, a gender earnings gap exists even when accounting for a reduced wage gap in a given career.
The earnings gap could also be explained partially by women choosing career fields where women are overrepresented and underpaid, like health care, social work and education.
These career choices also are flexible for women in need of ‘work-life balance’ that comes from being the primary caregiver in the household. This may be keeping women from asking for better compensation.
The ILLUSTRATION shows the earnings gap and presents some explanations of key facts:
1️⃣ Much of the wage gap has been narrowed regarding early career—largely thanks to BIRTH CONTROL.
2️⃣ As women start having children, the need to act as primary caregivers PLUS our structural and cultural barriers slow their ability to advance in their careers—and limit their earning potential for life!
3️⃣ Statistically, women will live much LONGER than men!
HOW CAN A FINANCIAL ADVISOR HELP?
Financial advice and financial planning CANNOT correct for this structural inequality! At best, it can keep women from making costly mistakes and experiencing further setbacks.
Here are a few ways I can help women or child-caring spouses…
1️⃣ I encourage spouses to seek better compensation. We can model potential outcomes that may occur given current compensation vs. a higher potential compensation.
2️⃣ Calibrate more equitable spending decisions. 50-50, pro-rata, full-integrated spending; it doesn’t matter. Your spending decisions HAVE TO REFLECT OUR REALITY.
3️⃣ Women. Live. Longer. Women need to prepare for longer retirement, and given less pay, they must proportionally save more!
Some women can do it alone. Some might just need a GOOD ADVISOR — me!
