Inflation —- The high inflation has been difficult for everyone with prices surging at a rapid rate, but women are suffering a greater deal than most.
Child care prices have soared, prompting women to leave the workforce.
In recent years, US child care costs have outpaced wage growth.
According to the Bureau of Labor Statistics, day care and preschool prices jumped 5.7% annually in February 2023 and 25% in the last decade.
From 1990 to 2022, child care inflation increased by 214%, outpacing the average family income gains, which rose by 143%.
Simultaneously, sectors with the highest share of female workers are seeing inflation beat wage increases.
75% of the healthcare and education sectors consist of women, but they have had the second lowest increase in nominal wage last year.
The Ellevest Women’s Financial Health Index monitors indicators like employment rates, inflation, reproductive autonomy, and pay gaps.
Recently, the index found progress to be mixed.
While it rose slightly from the November 2022 lows, ongoing inflation casts an overhang on further improvements.
The 2022 drop in women’s financial health lined up with inflation levels hitting double digits.
Dimple Gosai, the head of US ESG strategy for the Bank of America, offered her insight.
“While women are paying more, they also earn less,” she explained.
“The pandemic made the child care crisis undeniably worse, and inflationary pressures are adding fuel to the fire.”
“Surprisingly, over 50% of parents spend over 20% of their income on child care in the US.”
Gosai also noted that child care costs can not only keep women out of the workforce, but also push them out, which would remove the recent progress to close gender parity.
“Caregiving responsibilities are preventing more women from getting into, remaining, and progressing in the labor force,” she continued.
“This is more the norm than the exception.”
“The pandemic worsened this gap, with women taking on more of the traditional child care burden than men.”
The child care industry is suffering from a supply crunch thanks to low worker retention, which is affected by low wages – an issue that has lingered before the pandemic.
Child care providers are dealt with a dilemma of offering better wages and affordable prices to families and caregivers.
Mike Madowitz, the director of macroeconomic policy at the Washington Center for Equitable Growth, offered some insight.
“We have seen a negative shock to the supply of child care providers in this recovery, and that could make this problem even worse going forward, but child care costs are more systemic than other shorter-term inflation pressures we’ve seen,” said Madowitz.
“Absent public investment, there’s just not much margin to give in this market, and that’s one reason the Treasury department found child care is a failed market.”
However, it isn’t just women with children who are affected by inflation.
Gosai noted that underrepresented women and minorities in higher wage industries like tech or finance are more insulated from inflation pressures.
In addition, the economic landscape has shown that women’s shopping carts are more expensive at a faster rate.
The negative impact of rising prices isn’t just a short-term problem, but could have a lasting impact on their financial health.
The Bank of America Institute recently found that women’s 401(k) balances are two-thirds compared to men’s.
Ariane Hegewisch, the Institute for Women’s Policy Research program director of employment and earnings, shared her thoughts.
“Because of both [the] COVID and inflation crisis, women are much more likely to have broken into their retirement savings,” she offered.
“Debt is much higher, [and] rental costs have gone up.”
“So, there’s now an even bigger hole in retirement or in wealth or any kind of security right the financial security that [women] may have, and that needs to be rebuilt.”
Madowitz said the Fed’s aggressive interest rate hikes could impact the improvement of women’s economic health and opportunity.
The Fed has been raising rates since 2022.
“If the FOMC raises interest rates too high in an effort to reach its 2% inflation target faster, that would hurt worker demand and harm those already facing more labor market barriers,” Madowitz noted.
“Namely, women workers and workers of color.”
Hegewisch also said the higher rates could lead to higher unemployment, affecting women.
“Unemployment is always higher for women of color, and men of color, than it is for others,” Hegewisch noted.
“Unemployment is double for black women compared to white women and almost as much for Latinos.”
“And so, if it doubles, it goes [up] at a much higher rate for black women than it does for white women.”
Gosai said that one solution could lift the pressures of inflation on gender parity if companies invest more in their employees’ well-being, including:
- Enhanced reproductive health care benefits
- Subsidized child care
- Flexible work arrangements