Everyone has heard the wage-gap statistic that women only earn 79 cents-on-the-dollar compared to what men earn. This isn’t primarily the result of discrimination against women, but as a Department of Labor report says, it’s almost entirely due to the different choices women and men make.
Still, as women make choices - often sacrificially - to care for their families and pursue priorities outside of the workplace, they do take home less cash on average. This results in a savings gap, as well, which leaves women financially vulnerable. Lawmakers should consider ways to make it easier for women to save responsibly for the future, whether for a rainy day, education expenses, periods of leave from work or retirement.
Women tend to have a greater need for savings than men do, making this issue all the more urgent. Women are more likely than men to hold jobs that don’t offer robust family-leave or retirement benefits, like part-time jobs, and they are more likely to have a nontraditional career path - meaning they change jobs more frequently and often take periods out of the workforce entirely.
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There is nothing wrong with these choices. In fact, we should celebrate that many women are finding ways to balance work and family life in ways that suit their individual needs and preferences, and those of their families.
Importantly, many women must find ways to balance home and work, especially if they are single parents. A few years ago, Pew Research reported that some 40 percent of households have female breadwinners, and in about two-thirds of those households, women are the sole breadwinners.
The landscape surrounding women and work has shifted dramatically during the past 50 years. But some of our workplace and tax laws are behind the times. In “Working for Women,” a new report from the Independent Women’s Forum, we examine some fresh ideas to advance women’s economic prosperity, including several ideas that promote more saving.
For example, although the Family and Medical Leave Act guarantees many working women an unpaid maternity leave period, many feminists are calling for a government-guaranteed paid-leave benefit. This is a well-intended proposal, but paid-leave mandates come with serious costs for businesses, which also means serious costs for women, including fewer jobs and reduced take-home pay.
A better way to help women financially during maternity leave would be to offer Personal Care Accounts: tax-free savings accounts where workers and/or employers can contribute in advance of a family or medical leave period. This would give businesses the maximum flexibility to help workers as they can, without the unintended consequences of inflexible mandates.
Even pro-family, non-profit organizations could contribute to workers’ Personal Care Accounts, providing an added avenue for contributions. If women (or men) do not use the money in their accounts before retirement age, then these accounts could easily be treated as Individual Retirement Accounts (IRAs).
Childcare and preschool expenses are another significant financial burden on working women. Women (and men) should be allowed to use 529 educational savings accounts toward early education expenses for their children. Today, these accounts are primarily used for college expenses, but as many moms know, early childhood education can often be just as expensive - and just as important - as college.
Finally, one thing that hasn’t changed in the past decades is that women are living longer than men. On average, women live to about 81, while men live to about 76. But when it comes to retirement savings, women lag behind men by about 50 percent on average.
To address this, lawmakers should consider the typical career paths of men and women. While men are likely to enter the workforce at age 18 or 22 and work continuously until retirement, women are more likely to exit the workforce during their child-bearing years (to be caregivers) and re-enter it several years later.
Policymakers should allow catch-up contributions to retirement accounts for workers who miss the opportunity to save in one year (whether due to unemployment or time taken off to care for children or other family members). This would move away from a system that penalizes caregivers, as well as help people save more so that they have their own safety net ready for retirement.
Saving is empowering - it offers a sense of self-sufficiency and confidence about the future. Rather than focusing on the “gaps” or differences between women and men, let’s move the conversation forward and consider real changes that can result in greater security and prosperity for all.
Hadley Heath Manning is a senior policy analyst and director of health policy at the Independent Women's Forum (www.iwf.org) and the Independent Women's Voice (www.iwvoice.org).
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