What will it take to address the gender finance gap?

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  A personal finance advisor I follow asked  working women to share  some of the  changes  they  experienced in their earnings and  overall  career trajectory  after they became mothers. Being made to sign contracts stating they wouldn’t get pregnant within the first 1.5 years of employment, returning from maternity leave and finding themselves replaced and generally feeling like they had regressed in their career were some of the responses that came through.

 

We pay the price for daring to have a baby!

 These personal accounts are examples of the motherhood penalty , a term used to  describe the systematic disadvantage that women encounter in the workplace when they become mothers, in terms of pay, perceived competence and benefits compared to other workers.

 Henrik Kleven, an economist at Princeton University Kleven used data from Denmark, a country with one of the world’s most robust social safety nets  to show that even with these protections in place having  a child leads to an immediate drop in employment and earnings for women. Women’s earnings reduce by about 24 percent in Denmark; 33 percent in the US.

 

The gender pay gap

 Kleven further makes the  case  that  the motherhood penalty  contributes  a significant portion of what is known as the gender wage gap, defined by the  Organisation for Economic Co-operation and Development   (OECD) as the difference between median earnings of men and women relative to median earnings of men.

  Globally the gender pay gap  has risen since 2022 by 7.7% for full-time employees, and 14.3% for all employees. In Uganda for example women earn  25.2 per cent  less than men , at the hourly level and 32.3 per cent  less at monthly level.

In Europe, Women earn 12.7% less than their male counterparts. And,  according to the 2024 Women in the Workplace study, women are more likely to experience discrimination at the job, and to work in industries where their work is underpaid. They’re also, on average, less financially literate than men.

A  2020 study by the OECD, shows that, on average, men score higher in financial literacy tests than women by 4 points out of 100. In some countries, the difference is even larger at more than 10 points. Out of the 16 countries studied, there wasn’t a single one where women outperformed men.

 The problem isn’t individual, it’s structural and rooted in history, politics, and culture.

How can women become more financially empowered?

While there’s no one single way to close the gaps in women’s earning and knowledge about finances, there are things we can do — individually and collectively — to change things.

The more we as women know about finance, from budgeting to investment, the more likely we are to make solid decisions when it comes to money.

1.       At a personal level, one of the keys is to upgrade our financial literacy. Financial literacy is the ability to understand and effectively apply various financial skills—including personal finance, budgeting, saving, and investing— to our lives. In this age of information overload, financial literacy also involves being able to differentiate good advice from bad, and overall, being in charge of our finances. The more financially literate we are, the more opportunities we have to build wealth and set ourselves up for success over the long term. Financial literacy can help set women  on the path to financial independence, which in turn helps us weather unexpected events, including losses in income  such as those related to child bearing and caregiving.

2.      Budgeting is key. Creating a budget is one of the foundations for meeting financial goals. A budget helps us understand our spending habits; identify leakages that we need to plug including unnecessary expenditures as well as to highlight how much we are saving and investing.

3.      Preparing for the unexpected: the emergency fund. If life has taught us anything, it’s that you never know what financial emergency lies around the corner. A good rule of thumb is to have about three to six months’ worth of your usual salary saved to cover any unexpected expenses. That way when we come up against an unexpected loss of income from job loss or reduction in earnings, we have a buffer to tide us over as we assess our options.

4.      Taking care of our debt. The experts recommend that if you can, make it a priority to pay off debt, including, and especially the full credit card balance each month. If this isn’t viable right now, pay more than the minimum payment each month as this will allow you to clear your debt far quicker. It’s also worth keeping note of when payments are due, as overdue payments can have a negative impact on our credit score.

5.      Speaking up, seeking opportunities to reduce the gender pay gap. Former Meta Chief Operating officer Sheryl Sandberg, writes in her book Lean In: Women, Work, and the Will to Lead: “The data shows that men are able to negotiate for themselves without facing any negative consequences, but when women negotiate, people often like them less and want to work with them less,” “Even if women haven’t studied this or seen this data, they often implicitly understand this, so they hold back.” Speaking up and asking for better pay and equal opportunities is a delicate balancing act. Women are required to ask, but ask nicely. Demand, but with a smile. It’s not fair — yet understanding these dynamics can be the key to overcoming them,” Ms. Sandberg says.”

The more we as women talk openly about money the more we can make our voices heard and contribute to conversations to help advance policies around equal pay for equal work, paid parental leave, affordable childcare, and better financial education.

By Martha Songa