The Value of Equal Pay to the U.S. Economy

A woman participates in a rally and march as part of International Women's Strike NYC, a coalition of dozens of grassroots groups and labor organizations on International Women's Day, Wednesday, March 8, 2017, in New York.

This year, Equal Pay Day falls on April 4. This means that the average woman had to work from the start of 2016 through April 4, 2017 to earn as much as an average man did in 2016 alone. Put another way, women currently earn 80 cents for each dollar that men earn.

As a result of these factors and others, women can lose hundreds of thousands of dollars in earnings over the course of their careers. But it isn’t just women’s individual bottom lines that suffer: The gender wage gap is also a drag on the U.S. economy, and closing the gap should be a top priority of any economic policy agenda that seeks to strengthen and grow the economy. In fact, comparing it to the current top priority of the GOP—tax cuts for the wealthy—equal pay would put twice as much income back into our economy as their current proposed tax cuts.

There are a number of factors that contribute to the gender wage gap. Women still encounter persistent structural barriers in the labor market. Take, for example, the fact that women are often offered less pay than their male counterparts for the same work. Or that women are often driven into female-dominated occupations that are devalued, such as care work. Then, of course, there are instances of outright sexist discrimination.

Wage discrimination, occupational segregation, less job experience—often owing to taking time off to care for family—and other factors result in lower earnings for women regardless of their productive abilities. And the gender wage gap is even worse for women of color: African-American women earn 63 cents for each dollar that white men earn, and Latinas earn 54 cents for each dollar that a white man earns.

According to the Institute for Women’s Policy Research, or IWPR, women’s increased pay as a result of equal treatment in the labor market would add $447.60 in additional income to the U.S. economy. IWPR calculates this lost income by giving women the same rates of return as men for their human capital, such as education and years of work, and job characteristics, including occupation and industry. For example, women get less of a pay bump for receiving higher education than men do, so IWPR’s calculation applies the pay bump men receive for more education to women equally. They find that if women were treated fairly, then they would collectively earn almost $500 billion more per year.

To put this in perspective, as the current administration and congressional Republicans are arguing for tax cuts to spur economic growth, since they believe that lower tax bills, especially for wealthy families, will lead to more growth. The Tax Policy Center’s analysis of the House Republican tax proposal blueprint announced June 2016 shows that the GOP is prioritizing tax cuts equal to $203.6 billion in 2017. However, there’s no clear evidence that tax cuts will increase economic growth, especially when the primary beneficiaries are wealthy Americans who will be less likely to spend their income in the economy.

But increased earnings for women workers and their families are more likely to increase economic growth, since women are more likely to be lower-income and middle-income workers, and these workers are more likely to spend a larger portion of their income on consumption, boosting aggregate demand and leading to spillovers in the economy that encourage economic growth, like those projected by minimum wage increases that also affects low-income workers.

An economic agenda focused on gender equity and closing the gender wage gap can start by robustly addressing wage discrimination and implementing comprehensive work-life supports, including paid family and medical leave, paid sick days, fair scheduling, and affordable child care. There are already a few federal bills on the table that, if passed together, would address these issues and expedite the closing of the gender wage gap.

The Paycheck Fairness Act would enhance retaliation protections, bolster damages for victims, and hold businesses accountable to address their own wage gaps. Additionally, the Healthy Families Act would allow workers paid sick days to recover from a short-term illness or take a sick child to the doctor, and the FAMILY Act would allow workers to take longer-term paid time off to care for themselves or a loved one. The Healthy Families Act and the FAMILY Act are particularly beneficial for women since they primarily still take on caregiving duties.  Policy can be the first step toward pushing a culture that values women’s work equally to men’s and reverses systemic devaluation that has led to the persistence of the gender wage gap.

Kate Bahn is an Economist at American Progress.