If You Really Want to Close the Wage Gap, Here’s How

We’ve all heard the statistics, that women only earn 81 cents for every dollar that a man earns or some such number.  Progressives argue that this is due to sexism and discrimination, so we must have the government go in and set salaries, have affirmative action in promotions and hiring, and probably remove some men from CEO seats and insert women.  But these solutions are neither fair nor will they be effective at both creating an equal society and one at maximum productivity.  As usual, Progressives can make us all equal but they do so by making everyone broke (except for a few progressive oligarchs).

I was reading a really interesting post on Money After Graduation called The Impossible Price of the Motherhood Tax.  In this post, Bridget Casey really nails it when it comes to the reason for the wage gap, at least when it comes to men and women of equal education and vocations.  On average, women and men make similar incomes coming out of college and through their early twenties, but then they diverge.  The reason that men make more than women after this point comes down to one obvious reason:  children.

In Canada, where the author resides, new mothers can use the unemployment system to take either a year or a year and a half off (depending on where you live) when they have children and receive a little over half of their pay while they are off (they can actually start a couple of months before they have children).  (Dads can take some time off as well, but it starts after the baby has been home a few months.)  Their employer is required to take them back in the same job and at the same pay when they return.  In the US we obviously have no government mandated system, but many women (and some men) take time off when they have children.  Some, those who wish to continue to work, then put their children into daycare at 6 months or at a year or two.  If they have very understanding employers, they may be able to come back into their old job.

Others stay home until the children are in kindergarten or older, which normally means finding an entirely new job, possibly in a different line-of-work.  Because they are not able to work full hours even once the kids are in school, they often take part-time jobs in whatever is available with the needed hours and flexibility.  Even when the children are in high school and full-time work is possible, many find that they don’t want to work full-time anymore since their priorities have changed or they don’t want to go through the effort needed to regain skills and get on-the-path again if they even can.

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As the author points out, the reason for the wage gap is that parents who stay home as full-time parents, even for a couple of years, miss out on experience, raises, and promotions.  This is not a temporary issue since future raises and promotions typically build upon where you are now.  If you miss out on 20% now, you’ll always be 20% behind, even if you work full-time after that.  And because most of the time it is the woman who stays home, men in their thirties, forties, and later will tend to make more than women in the same industries. It has nothing to do with sexism by the employer.  It is due to a break in a career.  There could be some sexism involved, in that an employer who fears that a woman of child-bearing age might go on maternity leave, might not select her for a critical position.  Women who never have children might, therefore, be passed over for the best opportunities.

She advocates that it is an investment to pay for daycare since then women (and men) who are the initial primary caregiver for the children will not miss out on as much time at work.  (She does not advocate that Canadians forego the year of paternal leave, although doing so would make sense if your career were your primary concern since taking a year off per child does not help your career progression either.  I’m guessing that there is a feeling of entitlement to that paid leave, so while daycare is an investment, foregoing paid leave is not.)  While I agree that taking less time off would help, it would not solve the issue.

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The problem is that while you can lessen the initial effects of having a child on your career by limiting your time off, the person who remains the primary caregiver for the children will continue to see their time split between kids and work.  If a child has a cold or another illness, the caregiver must take time off work.  If the kid’s school gets done at 3:00, the caregiver must leave work on a schedule to pick up or meet the children.  The people who make the most in the workforce are those who have their employer as their primary responsibility.  They are able to work over as needed, come in weekends sometimes, and perhaps travel on short notice.  Unless you have someone who can take the children when plans change, often on short notice, this cannot be a person who is primary caregiver.

While Ms. Casey advocates for 32-hour work weeks and the ability to work from home so that stressed mothers can take care of that pile of laundry, the truth is that those who make the big incomes are often putting in 100-hour weeks and are always at the office.  (They are also not doing laundry when they are supposed to be on-the-clock.)  Their employer knows that they are dependable and able to drop other things to be there when the business needs them.  Someone who is the back-up when childcare falls through cannot meet that kind of responsibility.

One idea would be to have both parents split the responsibilities.  The issue here is again, to really advance in salary and position, you need to be able to put work first.  If both parents are putting in just enough hours at work and taking time off sporadically due to the normal childcare issues, neither parent will get into one of these high-paid roles.  They will both top out in salary and stature.

The only solution I can see, if your goal is to equalize pay, is for more women to choose to be the primary bread-winner and more men to choose to become full-time parents while the kids are young and then part-time or self-employed workers when the kids are older.  This will mean that women who are planning to focus on career will need to choose men who have traits of great parents (patience, charisma, responsibility, energy, organization) rather than the type-A traits of a CEO.  They will need to also shy away from professionals with gobs of college and look for guys who would be willing to give up whatever they do to focus on parenting.  Women will soon discover what men have known for ages:  To be successful in a career, you need someone behind you that will relieve you of other responsibilities so that you can focus on career.

For the guys, I think the real issue is that men currently gain most of their identity and their pride from their work.  This will be difficult to overcome, but eventually, I think that they will find that being a fulltime parent is far more important than things that most people do at work in a given day.  They may also find that the benefits when the kids get older – having more time off during the day and the home to themselves – also can be nice.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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