By Anne Tergesen
A new report contains some bad news for women: After shrinking in the 1970s, ‘80s, and ‘90s, the wage gap—or the difference between the median wages of men and women—has stopped narrowing. And in addition to leaving women with median paychecks that are 23% smaller than men’s, the trend also puts them at risk when it comes to saving for retirement.
According to the report, one of the widest gender pay gaps occurs between ages 45 and 54—a time when most workers build the bulk of their retirement nest eggs and a growing number of women find themselves single.
“The gender pay gap hasn’t budged in the past 10 years,” says Catherine Hill, director of research at The American Association of University Women, which conducts an annual analysis of the gap. When combined with the fact that “women have more responsibility for their own economic well being,” the trend potentially spells trouble for women in retirement, says Hill.
According to the report, titled “The Simple Truth about the Gender Pay Gap,” women typically earn about 90% of the median wage of their male counterparts until around age 35. At that point, “median earnings for women start to grow much more slowly than median earnings for men,” the report says.
Among the reasons for the widening gender pay gap, Hill says, is that women are more likely to take time off from work to care for children. Upon returning to the workforce, they often accept lower wages than their male counterparts, whose careers are typically uninterrupted.
Over the past 40 years, the gender pay gap has declined. In 1971, women earned about 60% of their male counterparts’ wages, versus 77% today. But starting around 2000, progress toward narrowing the wage gap stalled as women caught up to men in terms of education, Ms. Hill says. “It raises the question of whether we are seeing discrimination,” says Ms. Hill, whose organization documents a persistence in the pay gap among men and women with similar educational backgrounds and in various professions.
The wage gap can exacerbate financial insecurity for women as they approach and enter retirement, since divorce, widowhood and longer life expectancies for women make it more likely that they’ll be single as they age. According to the Census Bureau:
Among 55 to 59 year olds, 30% of men vs. 35% of women are single.
Among 60 to 64 year olds, 28% of men vs. 38% of women are single.
Among 65 to 74 year olds, 25% of men vs. 44% of women are single.
Among those who are 85 or older, 44% of men vs. 82% of women are single.
Aside from setting aside more money during their working years, there are other ways that women try to build a stronger retirement safety net. Women who become involved in divorce proceedings should negotiate for a share of any retirement savings held in their spouse’s name, says Hill. (For more, see “ How to split a 401(k) in a divorce ,” in the Wall Street Journal.)
Couples can also take steps to make retirement-planning decisions with the goal of leaving the woman in better financial shape if she outlives her spouse. For example, one way to boost a survivor’s lifelong income is for the higher earner to delay claiming Social Security. Assuming one qualifies for coverage, purchasing life insurance can help a surviving spouse cover future medical expenses or make up for the loss of a spouse’s Social Security benefit. (See the Wall Street Journal’s “ Plan finances for surviving spouse .”)
The gender-gap report is published in advance of Equal Pay Day, “the symbolic day in April when women’s wages finally catch up to the men’s from the year before,” says the report. This year, Equal Pay Day falls on April 9.