In circles that focus on the importance of diversity, equity, inclusion and belonging, the general tenor is that if you are stuck on ROI or creating a business case to justify these conversations at your workplace, you are likely behind your peers. Some have even suggested you may be too far behind to recover. There is evidence that DEI and belonging initiatives fall flat when they come from the place of “check the box” or litigation avoidance or ROI. I have argued similarly with financial wellness. If you are a company that promotes inclusion or financial wellbeing because you want your employees to be healthy, productive, and proud to come to a place where they feel they belong every day, then you understand the tremendous benefits that come with this kind of thinking. Whatever your philosophy, you will want to read on to understand how this affects your company.
There are pay equity laws being passed in many states, including New Jersey. There is data that suggests that women and other marginalized groups are way behind their white male counterparts when it comes to saving for retirement. For purposes of this article, we will focus on gender differences. New Jersey specifically addresses benefits as being covered under its Equal Pay Act. It is vague, but it is addressed. Let’s discuss how this may be a blind spot in your company's retirement plan.
For those 65 and older, 70% of men are married, versus just 45% of women. One in four women is either the sole or primary breadwinner. Women also spend 65% more time per week than men doing unpaid work, causing them to be time-starved and making it almost impossible to set aside time for financial planning. Also, 66% are caring for an aging or disabled family member, compared to 34% of men.1
Preretirement women reported in a recent Prudential survey that 25% of them do not feel like they will ever be able to retire, versus 14% of their male counterparts.1
Additionally, women’s advances in education and income have been accompanied by higher levels of borrowing for women of all ages. In fact, 29% of women now graduate with excessive student debt compared to 24% of men. Older women’s debt has skyrocketed. In the 12 years from 1998 to 2010, the average debt carried by women ages 57 - 61 went from $4,175 to $31,320.1
Add all of this up, women are living longer and having to deal with smaller Social Security checks from prior gender wage issues, causing women to have 42% less retirement income than men.1
In 2018, women ages 21 – 37 saved 5% of their pay, versus men of the same age who saved 8% of their pay. This resulted in an average retirement plan balance for women in this age group of $12,000, versus men at $42,000.2
The reasons for this gap can be discussed at length, but, whatever they are, this is certainly a blind spot!
Under the Diane B. Allen Equal Pay Act (EPA) in New Jersey, it is unlawful for an employer to pay its employees who are members of a protected class at a rate of compensation, including benefits, that is less than employees who are not members of the protected class for substantially similar work. Of course, compensation, including benefits, are terms that are not defined.3
So let’s just take, for example, the difference between 5% and 8% savings rates stated above. At face value, this may qualify as a lower benefit based on gender. However, when we take into account the fact that the median 401(k) plan matches up to 6%, there may well be a direct compensation difference based on gender, as women are leaving some of the company match on the table, while men are not. I would not expect this to be the subject of an inquiry, but it could certainly be included as part of a larger examination or audit. At the very least, I would want to know as a company if this disparity does exist, then I would want to document that it has been discussed, along with action to correct it.
In summary, if you are a thought leader who understands the value of having a truly inclusive culture, you will likely want to know about this blind spot and what can be done to fix it. If you are an organization more focused on risk management or litigation avoidance, you, too, will want to understand this potential blind spot. Almost all companies fall into one of the two categories.
1 Closing the Retirement Income Gender Gap, The Opportunity is Now, Janice Co, Vice President and Head of Marketing and Strategy, Prudential Retirement
2 T. Rowe Price
3 Equal Pay Audits: Essential Action in Light of NJ’s Broad Equal Pay Act, Kristen Scheurer and Carole Lynn Nowicki, New Jersey Law Journal, May 23, 2019