LOST EARNINGS OVER A 40-YEAR CAREER

When looking at the gender pay gap statistics as fractions of a dollar, it can be difficult to understand the impact on earnings over a lifetime. This is difficult in part because compensation over time for an individual is not static. Annual pay for individuals tends to increase over time. However, a rough calculation can be revelatory.

For example, let’s assume the average woman starts working at age 22 and retires at age 62, a career of 40 years. Let’s also look at the median pay earned by women in 2020 for the uncontrolled group ($49,800) and the median pay earned by women in 2020 for the controlled group ($60,700) compared to men ($61,700). These differences in women’s earnings are based off a gap of $0.81 and $0.98 on the dollar respectively. In 2020, the average lost compensation for women in the uncontrolled group compared to men is $11,900. For the controlled group, the average lost compensation in a year compared to men is $1,000.

So how much do women lose over a 40-year career? Let’s assume that over this 40-year span, the gender pay gap does not change and that employers offer an average 3 percent base pay increase to their employees each year (as past research from our Compensation Best Practices Report has shown to be the trend). If we apply this 3 percent annual base pay increase to women’s uncontrolled median pay across 40 years, a woman’s lifetime earnings add up to $3,750,000. For the controlled group, when women’s job characteristics are similar to men’s, lifetime earnings increase to $4,570,000. Using this same calculation, we find that the lifetime earnings for all men is $4,650,000.

We see that the average amount of money earned by women throughout their career is $900,000 less than that of men. When we control for women’s pay, it is $80,000 less. In other words, women with the same job title and qualifications as a man, making a median annual salary of $60,700 in 2020, would need to work more than a year longer to earn the same as a man.

The $900,000 gap in lifetime earnings is also just a rough calculation based on current trends. It leaves out the compound interest that might be earned if women were to invest these lost wages, which is even more substantial. In addition, women who face a deeper gender wage gap for their occupation, industry or location relative to the median will face deeper losses. This includes women of color, who are more susceptible to greater losses in lifetime earnings. American Indian and Alaska Native women have the most extreme lifetime wage gap relative to men, with lifetime earnings for these women accruing to $4,130,000 in the uncontrolled group. That is $520,000 less than the lifetime earnings for men. Even when we use the controlled median pay for this group, the difference comes out to $140,000.

Evaluating lifetime earnings in this way offers us a bigger picture of gender and racial economic disparity in the United States. Even a matter of being pennies short of a dollar can amount to tens or hundreds of thousands of dollars over the course of a 40-year career. For women in some racial ethnic groups, catching up to men’s earnings would mean working an additional two years or more.