While general financial planning principles apply equally to men and women, the circumstances we face are different. One of those circumstances is the wage gap. Across all education categories, fields and experience levels, women earn less than men. On many levels this hurts. I remember early in my career, very quickly I was given more and more responsibility as the organization I worked for went through a restructuring. When I shared my expectation of a raise and promotion to reflect what effectively was a different role than I had originally be hired for, I was brushed off. While I was willing to wait for the corporate reorganization to be complete for the recognition, the day an email came in from the top of the food chain that started “Dear Gents”, I knew the writing was on the wall. The resume got updated that night.
There are many reasons suggested for why this wage gap exists. These include:
- Women don’t ask – meaning we don’t negotiate for higher incomes
- The Mommy Penalty – years out of the workforce, or that we might take time out for children
- Women choose fields that are lower pay – support roles, caring roles instead of higher paying careers
While personally I believe the issue to be far more nuanced than any one reason for why the wage gap exists, what I know is that the financial cost to women and their financial futures is staggering. The Institute for Women’s Policy Research in the United States found that on average, a woman with post-secondary education will miss out on about $800,000 of earnings over the course of her career due to the wage gap. Now, you would have to pay tax on that $800,000, but assuming that those missed earnings had been saved, invested and the returns just earn back those tax dollars, that $800,000 would have resulted in $32,000 of annual retirement income assuming a 4% withdrawal rate. The wage gap hurts. It hurts our ability to achieve a lifetime of financial independence and our ability to live and maintain a comfortable lifestyle, for our lifetime.
Fortunately the wage gap is an important topic for HR departments and there is more and more pressure to fix it. But rather than waiting around for others to get to this issue, what can we as women do to take charge of our financial future? Know Your Worth. Keep track of your accomplishments. Research wage ranges in your field. And build yourself up – you are worth it, so when the time is right, when you have information backing you up and confidence in yourself, negotiate to close that gap. For those who work for someone else, even if it doesn’t happen on your first try, at least you have informed your employer of your expectations and have started the conversation. If you find yourself in a situation where that gap persists, or working for a company that doesn’t appreciate their female employees as much as their male employees, perhaps its time to consult a recruiter. Not only because you are worth it, but your financial future does depend on it.