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How the gender pay gap cuts through the U.S. economy

Closing the gender pay gap could add $512 billion to the GDP, not to mention how the inequity impacts everything from healthcare and higher education to international trade and the middle class.

How the gender pay gap cuts through the U.S. economy
[Photo: John F. Kennedy Presidential Library and Museum; JosephJacobs/iStock]

As a breadwinner mom, the issue of equal pay is top of mind.

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The impact of pay inequity impacts almost all dimensions of our society: Social Security, healthcare, higher education, the middle class, criminal justice, immigration, international trade, Wall Street, democracy and election integrity, LGBTQ+ rights, venture capital and entrepreneurship, GDP and economic growth, binding arbitration, climate change, and foreign policy.

With the increasing number of conversations about women’s rights and equal pay, it’s time we finally lift the curtain on today’s most pressing campaign issues to see just how much the gender pay gap constrains the economics of America.

Equal pay 2020: myth or reality?

It has been 57 years since President Kennedy signed the Equal Pay Act into law, and yet, the needle has barely moved on equal pay. In fact, between 2010 and 2018, the aggregate gender pay gap widened. Women currently earn 80 cents for every dollar their male counterparts earn—and that’s the average for all women across the U.S. For women of color, the gender pay gap is generally larger. Latinas, for example, earn 53 cents on the dollar and more than half of Latina mothers are the breadwinners of their families. That 53 cents on the dollar adds up to $1.1 million in lost wages over the course of a Latina’s full-time, 40-year career.

But the issue of pay inequity doesn’t “stop” at the household level. It affects everyone. Closing the gender pay gap alone would increase GDP by $512 billion. How? Let’s examine three issues—higher education, criminal justice, and international trade—to get a glimpse of how and why the gender pay gap cuts straight through the economics of America.

Higher education is no longer the great equalizer

When we tell our youth that higher education is the path to economic mobility, we are only telling them half of the story. We cannot forget about student loan debt and the female graduates who disproportionately shoulder its burden. Women represent 57% of undergraduates yet hold 67% of all student loan debt. In 2000, they made up 45.1% of the college-educated workforce. Today, they are 50.2%—meaning they are the most educated cohort in the workforce.

And yes, educational attainment correlates positively with income. However, educational attainment also correlates positively with the gender pay gap. Not only do women carry more student loan debt, but their return on education also diminishes in proportion to men’s with every degree they earn. Women with bachelor’s degrees earn 71.4% of what men with bachelor’s degrees earn. Women with graduate degrees earn 69.1% of what men with graduate degrees earn.

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The wage gap makes it harder for women to pay back their loans, and defaulting on loans is expected to cost taxpayers $31.5 billion in the next 10 years. Any reform to higher education must account for these inequities. Punishing half of the labor force, our future talent, for receiving an education is not in our economic best interest, especially on the heels of a labor force shortage of five million skilled workers.

Criminal justice and the gender bail gap

Incarceration rates overall have been falling since 2008. When gender-disaggregating the numbers though, we find that the drop only applies to men. For women, the rates are going up. In 1983, women represented 9% of jail admissions. By 2016, their share jumped to 23%. It might appear, then, that women’s behaviors are becoming more of a threat to civil society—until we factor in how the gender pay gap influences bail.

The population of female prisoners in state prisons has grown by more than 800% in the past 40 years. Many of these women are incarcerated due to non-violent offenses and haven’t been convicted of a crime. Rather, they simply cannot post bail as they await their trials. Women who cannot make bail earn a median income that is nearly 30% lower than the median income of men who cannot make bail. As a result, the gender pay gap has effectively created the gender bail gap.

Beyond issues of fairness, the gender bail gap is a threat to our future generation, democracy, and economy. Of the 102,000 jailed women, 80% are mothers. Children with incarcerated mothers experience increased risk of violence, health problems, and school dropout. Jail time also weakens our democracy, as the probability that someone will exercise their right to vote decreases after spending time in jail. And from a fiscal policy perspective, we allocate between  $63 billion and $75 billion every year to maintain our prison system.

These are our tax dollars at work. Let’s invest them into resources that provide people with a path to economic self-sufficiency and prosperity.

International trade is where the pink tax lives on

Women and men do not pay the same price for similar goods such as shampoo, pens, and jeans. “Women’s” products cost 7% more than “men’s” products 50% of the time. This gender-based price difference is called the pink tax, and U.S. import taxes exacerbate it.

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When merchandise enters the U.S. from other countries, fees (i.e. import taxes or tariffs) are placed on those incoming goods. The tax rate for every piece of merchandise is based on the statistical category under which it falls. Some statistical categories delineate by gender (e.g., apparel and footwear), such as men’s wool socks versus women’s wool socks.

The average tariff on male clothing is 11.9%, whereas the average tariff rate on female clothing is 15.1%. Since the cost to import is frequently passed on to the consumer, women shoulder a larger portion of the tariff burden. As a result, women not only have less money coming into their wallets via the gender pay gap, they also have more money going via the pink tax.

We need a true equal pay law

In 2020, we need a presidential candidate who recognizes the $512 billion economic importance of pay equity. Closing the gender pay gap is not only the right thing to do, but it’s also the smart thing to do for women, their households, and our country.

Fifty-seven years after President Kennedy signed the first Equal Pay legislation into law, it’s time to make tangible progress toward closing the gender pay gap in the U.S. once and for all. Similar to Iceland’s model, the U.S. should pass true equal pay legislation that holds employers accountable for proving that they pay equitably. Let’s ask our legislators how they plan to close the gender pay gap and stand behind efforts to make pay equity a reality for all Americans.


Katica Roy is the founder and CEO of Pipeline Equity.

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