Non-investment costs more than women's inequality in wages
21st century – let’s forget Mars, we are looking for life even in Venus. However, not all topics relevant to society are evolving at the same rate. One of the slowest developments is the reduction of pay inequality between men and women.
According to the Eurostat 2018, the average gender pay gap between men and women in the European Union is 14.8%. Although women already make up almost half of the workforce in most developed countries, it is estimated that closing the pay gap completely will take… you won’t believe it, but it is 200 years. Can women really afford to wait that long and what can we do today about economic equality?
Marija Gecaitė | “Orion Wealth” wealth manager
We save, but the wealth … decreases?
Did you know that statistically as much as 71% of property owned by women is held as cash? This means that even if women earn enough and can afford to “dedicate” a certain amount of income, they usually do not invest it anywhere.
Women tend to keep assets in liquid form for understandable reasons – the desire to take care of their family, their future, to prepare for unexpected life events or even to save on significant purchases – housing or a car. In reality, money held for such purposes unfortunately has the bad property of depreciating. Savings in an environment of low or even negative interest rates are affected by inflation, so savings are often not only are not earning anything, but sometimes also depreciate.
And really, after 27 years in the market, “Orion Securities” sees that women still make up only 4% of all investors. True, even if women do invest, they usually only start to do so in older age. You say – better late than never? Unfortunately, the statistically average life expectancy of women in Lithuania is more than 10 years longer than that of men, therefore, in theory, women also need correspondingly more income. Furthermore, it is no secret that with age, income inequality tends to increase.
Opportunities in inequality
So what can we do about economic equality today? We will not deny that the current situation is not on the side of women. But when we think about what each of us is doing with the money we have already earned; we have to admit that we all have equal rights and opportunities here.
Let’s look at real numbers. There is not much to be happy about, but Lithuania is still slightly above the European Union average – here women earn on average 14% less than men.
If a woman earns € 3,000 a month after taxes, the man’s salary is likely to be € 3,420, so you still think that a 20 EUR difference is not that much? That’s really a lot if we think about a longer period of time. Without a change in wages, after 30 years a woman’s wealth would be as much as 150 thousand euro less than a man’s.
We’ve already found out that women are … frugal. So the 50-30-20 saving rule would probably be nothing new. This would mean that 50% of the income is spent on necessary expenses (housing, food, transport, taxes), 30% on variable expenses or otherwise to satisfy one’s own desires (leisure, culture, events, etc.) and the remaining 20% should be saved.
So if a woman devoted 20% to saving, she would have 600 Euro left each month. After 30 years, the amount saved would exceed 215 thousand. euro. Unfortunately, this would not help in any way in terms of financial equality. And what if women periodically invested these savings? After all, investments can just as well be liquid and meet future desires and needs, while increasing the value of savings. True, no investment yields a guaranteed return, but we can look at everything quite conservatively – an average annual return of 5% sounds quite realistic in the long run, right? By periodically investing and diversifying the monthly savings, the wealth of women after 30 years would be 280 thousand euro higher and would reach almost half a million.
Now go back and remember how much wealth you may be losing just because of income inequality. True, we did not mention that women achieve a higher return on investment than men on average. So, isn’t it time to calculate your potential assets?
Fighting for equality is not only necessary, it is mandatory. It should be understood, however, that “non-investment” still costs women much more than gender pay inequality. As long as we strive for change in one way or another, let us change the stereotypes that have arisen, share success stories and be the right examples for the younger generation. Let’s lose those 200 years – when we will forget what income inequality means and say “I invest, what about you?”
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