6 Ways the Next President Could Actually Close the Wage Gap

Via LearnVest By Alden Wicker ~

This just in: Female graduates earn $8,000 on average less than male graduates only a year out of college, according to the latest study. (Yes, this is a new study. Yes, it does sound depressingly familiar.)

Even when the study controlled for factors like what kind of careers men and women chose and hours worked, it found that men still out-earn women by 7%.

So what does this have to do with the election? Actually, everything. The gender gap is at a historic high this year–and we’re not even talking about wages anymore. We’re talking about the voter gap. Women are actually much more likely to vote for Obama by about nine percentage points, while men are more likely to vote for Romney by the same number.

The All-Powerful Female Voter

But grabbing the female vote has become somewhat of a priority for both candidates as we head into the final stretch. That’s because undecided female voters in swing states could have the power to tip the election one way or another.

And what do these swing voters care about? The economy. That’s the reason why she is so undecided–she doesn’t feel like Obama has done a great job boosting the economy, but she doesn’t feel like Romney actually cares about women’s concerns at all, including the wage gap.

To corral these female voters, Obama has been playing up Romney’s, erm, less-than-satisfactory answer in the second debate on equal pay for genders (if you’re tired of Tumblr posts, here’s a fabulous remix). Meanwhile, Romney is pointing to the fact that the number of women in poverty has risen since Obama took office. (Check out our post on whether we are better off than we were four years ago.)

But interestingly, the next president could almost erase our economic woes by addressing women’s concerns in a one-two punch: economists think that closing the gender wage gap could be a much more effective stimulus than even Obama’s 2009 giant spending package, growing the economy by a potential three to four percentage points. There are several reasons why, but the main point is that women tend to spend more of their additional dollars on themselves and their families than men do. So pay them more, and watch them reinvigorate the economy.

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So, What Will Romney and Obama Do for Women?

Romney and Obama are trying to prove that they’ve got women’s backs, but in different ways:


Romney–in the second presidential debate and in recent speeches–points to the economy as being at fault for the poverty affecting women. His plan to help women achieve economic empowerment is simply by boosting the economy at large. But is this an effective strategy?

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Unfortunately, it isn’t. During good economic times the wage gap actually widens, as men reap more pay in the form of bonuses, merit-based raises and overtime work. During the recession, real earnings for men fell 2.1%, while women’s earnings fell by only .9%. As the economy has recovered, men have gotten the majority of new jobs again. Romney would have to try something else to get the rising economic tide to lift all boats, instead of leaving women tied up at the dock.


Obama has the advantage of pointing to policy that he’s already implemented: the Lilly Ledbetter Act. It removed the statue of limitations for suing a company when you find out they’ve been underpaying you. It’s not bad, but it’s not a great leap forward either. After all, as one of our own readers pointed out, “All the act does is say I can sue the pants off people.” And Vice President Joe Biden himself said “it’s not a big deal in terms of equal pay.” More will have to be done.

Let’s Get Real

Let’s skip the platitudes and get down to the truth of it all: How could the next president address our concerns about workplace equality and the wage gap in a focused and targeted way? Some things might be out of their purview (no law can make women adopt a more assertive posture), but we found several scientifically and real-world-tested, government-driven solutions to the gender gap.

Mr. Romney, Mr. Obama? Here are six things you can do to actually narrow the wage gap. We’ll consider it a win if you can at least nudge the United States back into the top-20 list of the best countries for women from 22nd place. (22nd?!) 

1. Sign the Paycheck Fairness Act

The Paycheck Fairness Act, which failed in the Senate in June, would require companies to give a “business reason” for paying female employees less, and prevent retaliation against employees who inquire about wage disparities. It’s not clear the first provision would do much to raise wages–some argue that it just codifies what large companies are already doing. For example, IBM asks its managers to explain discrepancies during company-wide audits, and companies can give “experience” as a business reason for paying women less, such leaving the workforce for a period of time to have children.

But the second provision has a good shot at nudging us closer to fair pay: Women often don’t even know they are being paid less until an intentional tip or unintentional slip by another employee clues them in. (That’s why women should be more open about their salaries!) But many companies expressly forbid sharing salary information. Because of this, researchers say you can’t argue that the market for labor will operate most efficiently (i.e. fairly) with a  hands-off approach. An efficient market, by definition, involves all parties having perfect information.

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2. Raise the Minimum Wage

We’ve written about how raising the minimum wage would help the economy. It would also disproportionately benefit women, who make up two-thirds of minimum wage workers. [2] According to the National Women’s Law Center, raising the minimum wage would raise the earnings of about 15.4 million women. [2] In fact, in the ten states with the narrowest wage gap in 2010, half had minimum wages of $8 or more (the federal minimum wage is currently $7.25 an hour).[2]

3. Institute Guaranteed Paid Maternity Leave

January report by the Rutgers Center for Women and Work found that women who are provided paid maternity leave are not only more likely to be working a year after giving birth, they are also more likely to report getting a raise in the year following the birth. (The study doesn’t posit why this is.) The report also found paid maternity leave can save the government money. Women who have paid maternity leave are 39% less likely to receive public assistance and 40% less likely to receive food stamps in the year following a child’s birth compared to those who don’t take leave.[3] Most surprisingly, companies save money with paid maternity leave by cutting down on turnover and training costs to replace departing new mothers.

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But the U.S. is one of the last remaining developed countries that does not have a national paid maternity leave policy. While the 1993 Family and Medical Leave Act prevents your employer from giving away your job during 12 weeks of maternity leave, it doesn’t require employers to pay you during that time. And it only applies to companies with 50 employees or more.

Iceland–which, by the way, is the top-ranked country for women–has a system where new parents get paid 80% of their salary by their company for a combined nine months. Mom and Dad each take three months, and the remaining three months can be allocated between them however they see fit. [1] This solution neatly addresses the worry that requiring paid leave for new mothers would scare companies into not hiring women. In Iceland, you never know if it could be that just-married guy taking off three to six months next year, instead of the woman with the big bad wedding ring on her finger.

(P.S. Longer maternity leave isn’t just good for mothers’ wallets, it’s also good for babies’ health!)

4. Provide or Subsidize Affordable Childcare

Ask any mom, and she’ll tell you that she needs reliable childcare in order to focus on her job. But childcare in the United States is expensive, and there’s often an inadequate supply. In a 2002 study out of California, the UC Berkeley Labor Center found that–regardless of whether a mom was single or married, college-educated or not–lack of childcare is the most frequent barrier to employment.

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And this large gap in employment for mothers leads to lower lifetime earnings for women. Interestingly, the effect of unstable childcare is most pronounced on the middle class (something that should make presidential candidates’ ears perk up). Low-income women are more likely to turn to relatives for help, while high-income women can afford high-priced care. The California study also demonstrated that every dollar spent on childcare results in two dollars of economic output.

One bold government initiative would be to pay for childcare, like the free universal preschool provided in France. But UC Berkeley researchers estimate lowering the cost of childcare (a.k.a. subsidizing it) by just 10% would increase female workforce participation by 10% among married moms and 2% among single moms. Baby steps? (Pun intended.)

5. Support Unionization

Unionization and collective bargaining has a well-recorded tendency to raise wages across the board, but research shows [PDF] it also tends to raise women’s pay relative to men’s by up to 8.7%, depending on the industry. Researchers surmise that this is because unionization means more bureaucratic measures and standards are put into place for deciding on pay.

6. Institute Quotas for Corporate Boards

Right now, the percentage of women on corporate boards is only at 16%. There could be many reasons for this: Women don’t promote themselves enough, they can’t break into the old boys’ network, and/or being the point person for every family emergency make them (or make them seem) less able to put in the hours. But maybe it’s just because companies aren’t looking hard enough for capable women.

Take for example, Norway (number three on the list of best countries for women). In 2006 it instituted an aggressive law requiring companies to fill 40% of board seats with women, or face harsh sanctions up to and including dissolving the company. Companies complied, and now even middle management positions in Norwegian companies are increasingly filled by women. Spain and France have quotas now, and the European Union is seriously considering one as well.  

Is performance affected by forcing companies to take on more female leaders? Yup. Research shows that companies with the most female board members outperform companies that have few. And startups with women on the executive team are more likely to succeed.

LearnVest is the leading lifestyle and personal finance website for women.


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