Here’s what we know: we know that the retirement savings crisis is enormous; by some estimates, Americans are under-saved by up to $14 trillion.1 We know that this number, as large as it is, may in fact be understated, because it assumes Social Security and Medicare solvency …a big if. We know the solutions to this problem are generally assumed to be a real negative for the economy. As a result, the challenge is so significant and the possible solutions so unpalatable that we are frozen on this problem.
But here’s the dot that few have connected: the retirement savings crisis is also a women’s crisis.
That’s because women retire with 2/3’s the savings of men, live six to eight years longer and have higher medical costs. 80% of women are single in their final years.2 And it may actually be getting worse: because retirement savings tend to be driven by lifetime wages, we may be moving in the wrong direction, as women’s labor force participation declines.3
By looking at this issue through this additional gender lens, the possible solutions take on a decidedly different character.
They become less about an inevitable, looming wealth transfer and much more about increasing the economic engagement of women. At the same time, the national discussions we’ve been having about advancing women in the workplace shift as well; they move from we-should-do-this-because-it’s-the-fair-thing-to-do to we-should-do-this-because-it-helps-solve-a-ridiculously-large-problem.
Unfortunately, there does not then follow a single “soundbite,” pop-culture answer; it’s certainly not as simple as telling women to try harder or to “fix” them so that they act more like men.
Instead it’s about making the investment in shifting the workplace as we know it to a more inclusive, more modern one. It is thus less about changing the women and much more about changing the workplace.
A good place to start is by fully valuing the work of women by closing the gender pay gap (which is, after all, the law of the land); this would in turn close the Social Security savings gap by a third, according to Social Security Works.4 That’s because those higher earnings would in turn fund retirement plans and pay into Social Security.
A second avenue is instituting longer company-paid parental leaves. Many companies, including Google5, have found that longer maternity leaves mean more mothers return to work after having children. Given that replacing a worker can cost from 150%-200% of their salary, this can be a smart investment for the company. And again, over time, this drives higher retirement savings for the parent.6
The same logic can hold at the public policy level. Indeed, were the U.S. to leave the ranks of Papua New Guinea as one of the few countries in the world without a government-mandated paid maternity leave, this would not just benefit those women pesky enough to have children; we would be investing in shoring up Social Security, enabling more people to pay into the system.
These actions will pay off in other ways as well. By some estimates, if women were fully engaged in the U.S. economy, gross domestic product (GDP) would grow by up to 9%. That’s good for everyone. And multiple research studies show that companies with diverse leadership teams themselves benefit, outperforming others on an array of metrics, including higher returns on capital, lower risk and greater innovation.
In fact—and, to some, perhaps counter-intuitively—companies that adopt family-friendly policies are met with a positive reaction in the stock market7, as it presumably forecasts positive returns from such policies and the more engaged workforces that result.
I recognize that it can be tough to make progress on diversity. I’ve seen this first hand. I recall one company at which I worked closing a worksite’s daycare center—and making the decision without analyzing the impact on employee absenteeism or turnover (which was significant). I remember the company having in place flexible work programs; but employees were nervous about accessing them, for fear that they would be viewed as less committed to their jobs than those who were putting in long hours of “facetime,” particularly in the aftermath of the financial crisis.
And while it’s been years since I witnessed overt discrimination, I often saw the subtle biases that “we need someone we can really trust in this important job”—and that someone was typically the mirror-image of the executive making the decision—“but next time we’ll be sure to put in a woman, or a person of color, or someone else who doesn’t look just like us.” But those individual decisions were allowed to win the day, again and again. And thus my old industry, Wall Street, has gone backwards on gender diversity, though I think there are few who would argue that was a desired outcome, given the financial crisis.
The road we are on today is to chip away at the gender issue bit by bit by bit.
At this rate, we will achieve gender pay parity by 2058.8 But the discussions of the retirement savings crisis and the economic engagement of women should no longer be separate conversations; they are highly inter-related. And it’s not a question of whether we can afford to make the changes to get women more fully economically engaged …it’s a question of whether we as a country can afford not to.
Oh, and it’s also the fair thing to do.
1 Nari Rhee, Ph.D., “The Retirement Savings Crisis: Is It Worse Than We Think?” National Institute on Retirement Security, June 2013.
2 Women’s Institute For A Secure Retirement, “5 Money Myths That Get Smart Women In Trouble,” 2011.
3 Claire Cain Miller and Liz Alderman, “Why U.S. Women Are Leaving Jobs Behind,” New York Times, December 12, 2014.
4 Social Security Works, “Closing the Gender Pay Gap Would Improve Women’s Social Security Protections and Strengthen Social Security’s Financing,” July 17, 2014.
5As of 4/30/15, Google, Inc., Class A was 0.5% of holdings of the Pax World Balanced Fund, 2.2% of holdings of the Pax World Growth Fund, 0.9% of holdings of the Pax Ellevate Global Women’s Index Fund. As of 4/30/15, Google, Inc., Class C was 0.5% of holdings of the Pax World Balanced Fund, 1.4% of holdings of the Pax World Growth Fund, 0.9% of holdings of the Pax Ellevate Global Women’s Index Fund. Holdings are subject to change.
6 Susan Wojcicki, “Paid Maternity Leave Is Good for Business,” The Wall Street Journal, December 16, 2014.
7 Executive Office of the President of the United States, “Eleven Facts About American Families and Work,” October 2014.
8 Institute for Women’s Policy Research, “Status of Women in the States: 2015 Employment and Earnings,” 2015.
Pax Ellevate Management LLC
The Pax Ellevate Global Women’s Index Fund, managed by Pax Ellevate Management LLC, is the result of a partnership between Pax World Management LLC and Ellevate Asset Management LLC, whose principal is Sallie Krawcheck. Pax and Ellevate came together because they share the same vision about the critical role that gender diversity plays in business success over time, as well as the investment opportunity associated with investing in women. Pax has long been a recognized leader in investing in women and advocating for greater representation of women on boards. Ms. Krawcheck, one of the most powerful advocates for women in the financial services industry, is Chair of Pax Ellevate Management LLC and a trustee of the Fund.
Pax World Management LLC
Pax World Management LLC, investment adviser to Pax World Funds and creator of the Pax Global Women’s Leadership Index,* is a pioneer in the field of sustainable investing. Pax World integrates environmental, social and governance (ESG) research into its investment process to better manage risk and deliver competitive long-term investment performance. Across all of its funds, Pax World withholds support from all-male corporate board slates, and working with other institutional investors, actively engages with companies to embrace gender diversity on their boards and advance women in the workplace. For over 45 years, Pax World has made it possible for investors to align their investments with their values and have a positive social and environmental impact. Today, its platform of sustainable investing solutions includes a family of mutual funds, as well as separately managed accounts.
* A custom index calculated by MSCI. One cannot invest directly in an index.
Ellevate Asset Management LLC
Ellevate Asset Management LLC was formed by Sallie Krawcheck to provide investors with a means of directing capital to companies that actively embrace gender diversity and female leadership as a lever for business success. Krawcheck also owns Ellevate Network (formerly 85 Broads), the global professional women’s network. Both of these organizations are dedicated to the economic engagement of women worldwide.