The US is leaving economic growth on the table by failing to close gender gaps in pay and hiring, Moody’s says

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elecia Lewis, 50, works at a computer behind the desk where she works as a concierge at an apartment building in Chevy Chase, MD.

  • Failure to close gender gaps in the US dampens growth and hurts recovery, Moody’s said Monday.
  • The pandemic erased years of progress for prime working-age women participating in the labor force.
  • Closing the labor-participation gap between men and women can lift GDP by 5%, according to the IMF.
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Closing gender gaps in the US labor market can accelerate the economic recovery and provide a lasting boost to overall output, Moody’s Investors Service said Monday.

Gender disparities are nothing new to the US economy. Women earned less than men on average before the pandemic, and, during it, a lack of family-leave benefits forced many women out of the labor force as they assumed caretaking roles.

The gaps weighed on productivity before the pandemic, and the health crisis has only exacerbated the problems, the team led by Shahdiya Kureshi said.

For one, pursuing gender equality can swiftly lift gross domestic product. Closing the labor-participation gap by just 25% in the US would increase output by 2%, according to the International Labor Organization. Fully erasing the disparity would boost GDP by 5%, the International Monetary Fund estimated.

The recovery so far hasn’t been promising. Employment gains for both men and women were roughly the same from May 2020 to January 2021. Yet where men have retraced more than half of their decline in labor-force participation, women have only recovered 40% of their slump. This difference “weakened household consumption and financial stability” late in the pandemic, Moody’s said.

Within the prime working-age population of Americans 25 to 54 years old, labor-force participation among women plummeted and reversed years of steady gains. The rate peaked at 76.9% in January 2020 before plummeting as low as 73.5%.

The rate stood at roughly 75.5% at the start of 2021, the same level seen in January 2018.

One driving factor behind the harsher fallout is women’s overrepresentation in sectors hit hardest by the pandemic. Pay in the food preparation, personal care, sales, and education industries – where women make up the majority of workers – is between 18% and 40% below the average median weekly earnings for women. These sectors also saw significant pay disparities between men and women, according to government data cited by Moody’s.

Mothers have also shouldered a heavier burden through the health crisis. Women aged between 24 and 44 who weren’t employed in July 2020 were nearly three times more likely than men to name childcare responsibilities for their lack of work, according to Census Bureau data.

Where Congress can step in

There are already a few clear steps policymakers can take to close the aforementioned gaps, Moody’s said. Passing national family- and maternity-leave policies can iron out differences seen across various state programs, the team said.

“As women assume most of the family caretaking role, dependent care responsibilities that are not subsidized or compensated can pose a significant barrier for women’s entry into the workforce,” they added.

Childcare costs have also surged in recent years, making the lack of sufficient leave policies even more taxing for women. Married couples with children under age 5 spend 10% of their average monthly income on care for a single child. That sum exceeds the 7% level deemed affordable by the Health and Human Services Department, Moody’s said.

There’s also legislation that can quickly narrow the gender pay gap. The Paycheck Fairness Act has recently been reintroduced and aims to improve pay transparency at companies. Taking up such legislation and other pay-equity measures can elevate women in the workplace, improve employee retention, and productivity, Moody’s said.

Some promising legislation is on the brink of passage. The $1.9 trillion stimulus bill likely to be passed on Wednesday includes a child tax credit for parents to receive up to $3,600 per child. President Joe Biden has indicated he aims to make such a credit permanent. That would revolutionize how the government assists parents and could counter the pressures women feel to pass up work for caretaking.

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CEO of Future Super: Gender equity is everyone’s business, and it isn’t a pipe dream

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Kirstin Hunter, CEO of Future Super

There’s a lot of talk about gender inequality in Australia. The glass ceiling. Women earning 79 cents for every dollar. Men holding 67% exec roles and 71% board roles. Old ladies retiring with 47% less super than old men. 

Gender inequality means all of these things.

Despite all the column inches given to gender inequality, and the “inclusive workplace policies” purporting to address it, when we look beyond words to actions the reality is that change is moving at a glacial pace. At the rate we’re going, it will be another 202 years before gender pay equity is achieved in the Australian workforce. 

I don’t know about you, but I can’t wait that long, and neither can the members of the superannuation fund at Future Super. 

Transforming business for equality

Business leaders can and should be leading the charge for gender equality. This leadership must start with an honest and data-driven conversation within your own organization. 

The great news for business leaders is that you can do this regardless of how big or small your business is, and once you start, change can happen very quickly.

At Future Super, we began by analyzing our own gender pay data (both overall and by seniority), setting board-level targets, and sharing our progress against these targets with our team. This approach has allowed us to transform our business: in four years we’ve improved our gender representation across the team (from 30% to parity) and in the leadership team (from 20% to parity), while also reducing our gender pay gap from ~25% to within our target of +/- 5%.

But we didn’t stop there.

We also reflected on the trends in our own industry, where women retire with 47% less super than men. The reasons for this retirement gap are known: women are less likely to make the senior ranks, are more likely to take time off for caring duties, and more likely to return part-time. As a small business we may not be able to fix the system, but what can we do to make sure that our own staff don’t suffer that same fate? We introduced three policies to address these drivers of inequality. Today at Future Super, all staff earning less than $80k are paid a higher rate of superannuation, all staff taking time out of work for parental leave are paid super contributions for up to 12 months, and all staff who are working part-time due to caring responsibilities are paid super at the full time rate. 

But it’s not enough for us to think only of our own team. As a superannuation fund we must also act with our members’ retirement outcomes in mind.

Investing for gender equity

When Future Super makes investment decisions on behalf of our members we need to consider a company’s long-term economic prospects. When it comes to gender, the data has shown time and time again that diverse teams perform better. 

If diverse teams perform better, it stands to reason that teams lacking diversity will perform worse. 

What that says to me is that a business that fails to build a diverse team is a bad investment: these businesses are willing to ignore the data and leave money on the table to protect the status quo. That’s why we stopped investing in companies that have all-male boards.

Advocating for gender equality for our members

When systemic factors make it more likely that our female members will retire with less than our male members, it becomes our responsibility to challenge that system.

In the 2020 Equality is Everyone’s Business report into gender inequality, we found that one of the most effective actions that businesses can take to improve gender pay equity within their organization is to improve transparency on actions and performance on gender pay equity. Despite this also being one of the most simple actions businesses can take, our research found that more than 50% of companies in the ASX100 are still refusing to do this.

Gender equality is not just good ethics, it’s good economics. Gender equality is everyone’s business: it’s up to all business leaders to be part of the change, to promote and improve workplace gender equality. Your employees and your investors will thank you.

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