Today is Equal Pay Day. Effectively, taking the pay gap into account, today is the day women stop being paid for the year’s work.
It’s been 53 years since it stopped being legal to pay men more than women for the same job. So, it’s frustrating that we’re still pretty much working well over a month without pay. But it’s not just about what women earn, it’s about what that means for us – what we have and what we keep.
This article isn’t personal advice. If you’re not sure if a course of action is right for you, ask for financial advice.
What do the numbers tell us about the gender pay gap?
The data tells us an awful lot about where the problem comes from. There’s apparently very little difference when we’re younger – in fact on average women aged 18-21 earn more than men of the same age.
It’s not at the typical age of childbirth that the gap starts to open either. It’s later in our 40s, when the burden of caring responsibilities is still overwhelmingly shouldered by women, that the gap widens.
In some cases, this is because women are more likely to make career compromises to accommodate parenthood. Compromises like working part time, taking a job that’s closer to home or actually working from home.
Meanwhile, some will drop out of the workplace for a period. Others, by taking a step back, expecting to return to work when the children are older, find themselves in the frame for looking after elderly parents.
And all of this matters
We know that earning less leaves women with short-term problems. Like a lack of emergency savings, so the cost-of-living crisis means they don’t have as many options before falling back on borrowing.
Then there are even bigger long-term issues like the enormous gender pensions gap. This means women will either spend retirement struggling, or relying on their partner.
The gender pay gap is just over 14%, but because of how it builds over a lifetime, the gender pensions gap is a much bigger 35%.
Women are also less likely to invest, which we know makes a huge difference to their future financial resilience, and seriously hampers any chance to close the gap.
So, what’s the solution?
The problems are clear, but the solutions aren’t.
We can shrug our shoulders and say that lower pay is the price for flexibility. But that’s clearly unfair. It’s not just the question of why it’s women who have to be flexible, but it’s also why there should be a flexibility penalty at all.
Likewise, we could say the pay gap is a fact of life, so women need to work harder to save and invest while younger, to get a head start before the pay gap opens up. But this is unfair too.
The full solution needs a societal shift, but in the meantime, we need to take care of our needs. Because while the world needs to change, we still deserve to thrive in the world as it is today.
Here are a few steps we can take to close the gap now.
- Plan as a household, so one of you doesn’t end up with all the childcare costs while the other has all the savings.
- Consider both of your pensions, even if there are periods when one of you isn’t working. The working partner can pay up to £2,880 a year into the pension of the non-earner. This will be topped up with tax relief to £3,600, even if they don’t pay tax.
- Make sure child benefit is paid into the account of the non-working partner, and that you’re claiming – even if one of you earns more than £50,000 and has to pay at least some of it back. That way the non-earning partner will get NI credits that count towards their State Pension.
- Once you have emergency savings and cash to cover planned expenses for the next five years, consider a Stocks and Shares ISA for the long term, instead of a Cash ISA. This will provide the best possible opportunity to grow your money over the long term.
This isn’t personal advice. If you’re not sure if an investment is right for you, you should get advice. All investments can rise and fall in value so you could get back less than you invest. Tax rules can change and benefits depend on individual circumstances.
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