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The gender wage gap costs taxpayers billions of dollars every year. This is how to fix it

The founder of Pipeline Equity argues that when companies don’t provide their employees with equitable pay, your tax dollars bridge the gap—even if you’re a man.

The gender wage gap costs taxpayers billions of dollars every year. This is how to fix it
[Source image: Overearth/iStock]
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U.S. taxpayers have been subsidizing corporations and their inequitable pay practices for decades.

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When workers don’t receive fair and equitable wages, their ability to provide for themselves and their households diminishes. And when people cannot meet their basic needs, they turn to taxpayer-funded public assistance programs to fill in the gaps that their wages left. We see this feedback loop play out overwhelmingly through the intersectional gender pay gap.

Taxpayers fill the gap left by inequitable wage practices

By now most of us know that women earn less than men. On average, it comes out to $.81 on the man’s dollar. This pay disparity manifests at every level of the educational attainment ladder; no industry is immune.

And while a difference of a few pennies doesn’t seem like much, it adds up to over $10,000 in lost wages each and every year. That’s $10,000 the average working woman could use to pay off student debt, support her child’s education, make rent, buy groceries, invest for retirement, save for a mortgage, or open a business. The wage losses are even greater for Black, Latina, and Native women. The average Latina, for instance, misses out on $29,098 every year due to pay inequity.

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Inequitable wages, and thus lower household income, become a systemic problem when we remember a simple truth: As a nation, we cannot choose if we pay for people. We only choose how we pay for them. In other words, even if you’re not a woman and even if you don’t depend on one for your economic security, the gender pay gap impacts you. Because when companies don’t provide their employees with equitable pay (as well as equitable opportunities for advancement), your tax dollars bridge the gap.

Labor market inequities translated to more dependence on public assistance programs

Before the pandemic, 21.8% of U.S. families relied on at least one means-tested public assistance program, such as Supplemental Nutrition Assistance Program (SNAP), Housing Assistance, and Supplemental Security Income. To qualify for these programs, household income and assets must fall below a specified threshold. Of the households that received this form of assistance, 14.7% were married-couple families, 29.5% were one-parent households headed by men, and an alarming 50% were one-parent families headed by women.

If we isolate only the households that received SNAP benefits, the gender disparity becomes even greater. Of the 58% of SNAP households headed by a single adult, 92% of them are headed by women. The gender disparity exists in the realm of Medicaid, too, where 72.9% of enrolled households were female-led.

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This is where the data gets interesting. In 2018, nine out of ten wage-earning adult Medicaid enrollees and SNAP recipients worked in the private sector. The top five occupational categories for wage-earning adults who participate in Medicaid and SNAP are as follows:

  1. Education and Health Services
  2. Leisure and Hospitality
  3. Wholesale and Retail Trade
  4. Professional and Business Services
  5. Manufacturing

Women make up the labor base in three out of five of these occupational categories and 51% of the labor force across the five categories. There is also a $3.6 billion annual wage gap between women and men in these five categories.

Not only are the employers in these occupational categories paying unlivable wages, but they are also paying women even less-liveable wages than men. As a result, women (and the millions of children they support) must rely on taxpayer-funded public assistance programs at a disproportionate rate to meet their basic needs.

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That $3.6 billion pay gap represents only a sliver of the broader gender pay gap that exists across all occupational categories.

Closing the gender pay gap would boost the economy by billions

In my home state of Colorado, $9.2 billion could be added to the state economy by achieving gender pay equity. Nationally, closing the gender pay gap is a $512 billion economic opportunity that would lift 50% more working women out of poverty.

By committing to gender pay equity, we can take a systemic approach to fix the holes in our economy as well as reduce the magnitude of a K-shaped recovery. Pay equity legislation is a critical lever we must pull to see this commitment through.

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A “light” version of pay equity legislation would include the reinstatement of EEO-1 component 2 data reporting. This reporting standard would require companies with 100 or more employees to submit data on the total wages paid and hours worked for all employees by gender and race. If EEO-1 component 2 reporting is reinstated, it should include the following three updates:

  • Wage data should be disaggregated by gender plus race/ethnicity
  • Data should be submitted annually
  • Data should be published to provide the public with greater transparency into companies’ talent management practices.

A more complete version of pay equity legislation would take the idea of EEO-1 component 2 reporting a step further by holding companies accountable to equal pay. By holding companies accountable to equal pay, we effectively shift the “burden of proof” for pay equity away from employees and onto employers. Companies that are found to pay their workers inequitable and unfair wages would, after a grace period of two to three years, face daily fines for noncompliance—similar to Iceland’s equal pay law.

Gender pay inequity costs taxpayers billions of dollars every year. Without comprehensive pay equity legislation, taxpayers will continue footing the bill for companies’ inequitable pay practices. Now is our time to commit to closing the stubborn and persistent intersectional gender pay gap. Now is our time to build back a better, stronger, more equitable economy for all.

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Katica Roy is the founder and CEO of Pipeline Equity.