Earlier this month, California adopted one of the strongest pay equity laws in the U.S. aimed at decreasing the wage gap. Women have always been paid less than men for the same work, currently a median 84 cents for every dollar a man earns, according to the U.S. Census Bureau. That means women would have to work 40 additional days to earn what men did in one year. The gap is much larger for women of color.
While it makes ethical sense to pay women the same wage as men for similar work, it also makes economic sense. Fair wages would not only benefit the individual, but the economy would see a significant boost and there would be a positive impact across sectors.
Economists have estimated that the U.S. economy would grow by at least three percentage points if women earned equal pay. Equal wages would also likely draw more women into the labor force, which Goldman Sachs calculates would raise GDP by 9%, if women’s participation in the labor market was equal to that of men.
More notably, if more women joined the workforce and received equal wages, the impact would go far beyond the economy. Women would have greater incomes and be more likely to have greater purchasing power within their households. Studies in developing countries over the past 20 years have researched cultural and gender norms in household spending to understand how resources are allocated. Repeated findings have shown when women control household purchases there are positive impacts on child well being. More recent studies in the U.S. have had similar findings. Using a large U.S. dataset, a study found children are more likely to receive needed mental health specialty treatment when women have greater decision-making power. Another study of U.S. households found that in low- to moderate-income two-parent U.S. households, children are less likely to experience food insecurity when their parents’ pooled income is controlled by their mother rather than their father. This impact also goes beyond nutrition. Food insecurity is associated with children’s well being in several important areas, including health, cognitive and behavioral outcomes. Food insecure children’s odds of being hospitalized since birth are almost a third larger than food-secure children. They also have poorer reading skills and social skills development and are more likely to be overweight. If the wage gap were eliminated in California, a working woman would have enough money for an additional 58 weeks of food for her family. Imagine the impact that could have on the future generation.
Equal pay is also related to a slew of other positive impacts across sectors, such as decreased reliance on federal assistance. More than 15.2 million families are headed by women, 31% of which have incomes that fall below the poverty level. With women making up 70% of Medicaid recipients, fair wages would allow many to become self-reliant. Addressing related issues such as paid family leave and affordable childcare would also help to decrease or eliminate the wage gap.
With positive impacts for children and across sectors, addressing the wage gap is not just a “women’s issue”.