There's a gender financial gap. But we can fix it.

May 22, 2023
© Studio Marmellata / Stocksy United

The gender pay gap has barely budged in the last 20 years. In 2002, women in the U.S. earned 80 cents for every dollar earned by men, per the Pew Research Center. In 2022? Just 82 cents. One recent analysis found that American women working full time earned an estimated $546.3 billion less than their male counterparts over the course of one year. 

Women continue to be left behind in the American economy and a host of factors contribute to it—policy, the childcare burden, lack of access to capital. The gap is even larger for women of color: Native American women make 60 cents for every dollar white men earn, Latina women make 54 cents, Black Women make 64 cents, and Pacific Islander women are paid as little as 52 cents. 

Here are three ways to help chip away at the financial disparity that continues to persist in America. 

Rethink the way we lend money

In the Indigenous communities where Jaime Gloshay lives and works, women make 60 cents for every dollar that white men make. That means that over the course of a 40-year career, American Indian and Alaska Native (AIAN) women in the United States miss out on nearly $1 million in wages from the wealth gap, according to the Center for American Progress.

“There are structures in place that make it difficult for Indigenous women to achieve economic security,” she says. And Gloshay would know, she was a mother and primary breadwinner throughout her 20s and 30s—more than half of AIAN mothers are sole or primary breadwinners—when she says she was “struggling paycheck to paycheck, and making sure I could have a roof over my head and food for my children.” This experience is part of the reason she helped co-found Native Women Lead, an organization that supports and invests in Native Women in business. She wanted to improve the financial and emotional wellbeing of Indigenous women.

The lack of access to capital—whether to open a business or secure a car loan—exacerbates the wealth gap in Indigenous communities. Indigenous women are often shut out of the traditional economy and lending system, because of the prevalence of informal economies in their communities and the lack of reporting data. Gloshay and Native Women Lead are working to dismantle the traditional Five C's of Credit (character, capital, conditions, capacity, and collateral) and embrace relationship-based lending to help give Indigenous women better economic opportunities, which she outlined in a Where to Next piece last year: 

"It's all about underwriting in a different, more inclusive way. Rather than relying on a FICO score, we want to look at the relationship with this person, their standing in the community, their own personal history, what they intend to do with the capital—instead of looking at someone's collateral or assets. We also want to make sure that they're rooted in community and they're trying to solve a problem. Relationship-based lending opens doors for everyone, from Native entrepreneurs looking for capital to working class Americans who may not be part of the mainstream economy and lack a FICO score to secure a loan. It's a community-based approach that helps improve individuals' lives, spur small business growth, and foster trust between the community and the financial institutions that serve it."

By embracing relationship-based lending—looking at what a potential business does in the community and talking to them about it, as opposed to simply looking at a FICO score—there is a real opportunity to lift up Indigenous women. “There are a lot of flaws in the current lending framework,” Gloshay says. “And it is contributing to what women earn and the cycle of poverty in Indigenous communities.”

“Right now so many women are faced with challenges, barriers, and restrictions. Economic security means the ability to work, to find joy, to dream, and to see the world as a place of opportunity and growth.”

Pass the Paycheck Protection Act

It's not just Indigenous communities either. Black and Latina women experience economic insecurity at significantly higher rates as well. 

“Women of color face the intersection of these disadvantages—both from gender and race/ethnicity,” Meghan Green, senior director of research at the Financial Health Network, says. “This begins to explain why we see such struggles for financial security among Black and Latina women.” 

Green's team conducted a study that found:

  • 44% of Black women and 42% of Latina women said they worried about running out of food—far higher than white women (21%). 
  • 39% of Black women and 36% of Latina women altered their life trajectory due to debt. 

“This makes clear the precarious reality in which many Black and Latina women live, and starts to suggest areas where policymakers can focus action,” Green says.

And where can policymakers focus action? One way to address the pressing issue of the gender financial gap is for Washington to pass the Paycheck Fairness Act, which was recently reintroduced in Washington by cosponsors Representative Rosa DeLauro and Senator Patty Murray. A version passed the House in 2019 and 2021, but stalled in the Senate. The legislation would, per Rep. DeLauro's office, “eliminate loopholes in the Equal Pay Act, helping to break harmful patterns of pay discrimination and strengthening workplace protections for women.” 

The Paycheck Fairness Act is anchored by pillars and protections that would help improve women's wages:

  • Protections that allow coworkers to discuss their salaries without retaliation from their employers. 
  • Prohibit potential employers from requiring salary history during hiring.
  • Employers must prove that pay disparities are for legitimate and job-related reasons.
  • Give employees who file a sex-based wage discrimination claim under the Equal Pay Act the same recourse  as workers who file race- or ethnicity based wage discrimination claims under the Civil Rights Act. 
  • Strip out obstacles currently in the Equal Pay Act that make it difficult for employees to enter into class action lawsuits that challenge systemic pay discrimination
  • Start a new negotiation skills training program for women and girls.

The Paycheck Fairness act will put in place protections that will go a long way to bridging the gender wage gap, especially as it pertains to women of color.

America needs stronger paid family leave

Childbirth in the American economy is effectively a pay cut for women. Yet fathering a child has no impact on a man's salary. In 2022, mothers ages 25-34—those most likely to have children under the age of 18 at home—earned 85% as much as fathers the same age. The lack of affordable childcare in America only makes this worse: one-in-four American women who lost a job during the pandemic said it was due to lack of childcare, twice the rate of men. 

“Women remain far more likely to take primary responsibility for childcare, regardless of employment status—and are thus far more likely to have one or more years with no earnings. We need to create a far more robust ‘care infrastructure' that supports women—and families in general—to manage their lives while remaining in the workforce,” Financial Health Network's Greene says. “Our research found that 70% of women had made a career change—such as quitting a job or reducing hours—because of parenting responsibilities, with many experiencing negative financial consequences as a result.” 

Providing mothers and women caregivers with more robust paid family leave could go a long way towards bridging the gender pay gap. And while America lags far behind other countries in providing this, some states implemented policies that have helped slowly chip away at the pay gap. A study from The Century Foundation found that states with paid family and medical leave policies helped reduce the wage gap. In California, which allows 12 weeks of unpaid job-protected leave for mothers and caregivers, the wage gap is 88 cents for every dollar men earn, compared to 82 cents nationally. 

But that's not enough. “The differences in the state policies, and the vast policy deficit nationwide, highlight the need for a federal policy to help extend access to paid family medical leave to workers across the country,” The Century Foundation study reported. 

Eliminating the wage gap for good

There is no single silver bullet to fix the wage gap overnight. The forces that have kept the wage gap so large in America remain pervasive: Decades of failed policy and bias. And it shows in the stark numbers—women continue to make nearly 20 cents less for every dollar a man earns.

It can be fixed, though: through measures such as policy improvements, changing how we lend money, and easing the childcare burden on working mothers. But that's just a start. “Right now so many women are faced with challenges, barriers, and restrictions,” Gloshay says. “Economic security means the ability to work, to find joy, to dream, and to see the world as a place of opportunity and growth.”

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