While there has been intense focus on general pension underfunding throughout the developed world, many have overlooked how much worse the problem is for women.
When greater numbers of women entered the workforce in the 1970s, they typically earned only 60% of a man’s income, so it should not come as a surprise that their retirement savings are lower. At the time, authorities assumed women would achieve income equality in short order, but their income has remained lower than men’s, and pension systems have made no adjustment for women’s different career paths. The World Economic Forum’s 2017 report projected that it would take 217 years before women would be making as much money as men.
Because retirement funds are built up from gradual savings from income, it is obvious that those who earn less money will accumulate smaller pension pots. Unfortunately, a number of other factors have stacked the equation against women.
Unpaid gaps in employment are one of the biggest reasons for the reduced retirement savings of women. The average woman in the US absent is from the paid workforce for about 5.5 years to tend to children. Another, less noticeable, gap occurs because women tend to marry older men. When the husband retires, the wife tends to leave the workforce before her statutory retirement age.
It gets worse when one considers who looks after for elderly relatives, because women are not paid for the care they provide to family members. However, when women reach the age when they need care themselves, they have often been widowed, and so must pay for the services they once provided for free to others. Compounding this problem is the fact that women are disproportionately afflicted by the chronic disabling diseases of old age.
Longevity creates the risk of outliving one’s savings. At present, a woman will live about five to seven years longer than her husband, yet will have to support herself with pension savings estimated to be 30%-40% lower than his.
Urgent remedies are needed. Some solutions would require a cultural revolution, such as encouraging women to marry men who are younger, so wives won’t be tempted to drop out of the workforce to accompany their husbands into retirement.
First, to correct salary injustices of the past, any social security scheme or pension fund that was based on income should be grossed up to adjust for women’s lower pay, until women are shown to earn the same amount as men.
Thus, any pension payment based on a woman’s work when women were earning 60% of a man’s salary should be divided by 0.6, or increased by the fraction that makes it equal with that of her male peers. Without this kind of adjustment, pension systems would effectively perpetuate gender wage gaps of the past.
Second, support mechanisms such as paid maternity leave or affordable childcare should be provided to families with young children, to avoid forcing mothers to choose between jeopardising their careers and neglecting their children. Enabling mothers to stay on the payroll, even if only part time, not merely generates income but also keeps women’s skills and professional connections current.
Third, some allowance for unpaid childcare or eldercare services should be incorporated into retirement schemes, such as minimum contributions to pension plans for persons caring for infants and elders.
The old saying ‘a woman’s work is never done’ left unspoken that a woman’s work was never paid. Now that women have joined the workforce, it is time to rebalance the workload.
Once women attain paycheck parity and men share equally in the joys and tribulations of the home front, it will be far easier to balance the pension equation.
Suzanne Bishopric is Managing Partner at Global Sovereign Advisors and was formerly Treasurer at the United Nations and Director of its Joint Staff Pension Fund.