How inflation disproportionately harms ladies

People shop at Pioneer supermarkets in the Flatbush neighborhood of the borough of Brooklyn in New York City on January 12, 2023.

Michael M Santiago | Getty Images

There is one group of people who are disproportionately affected by high inflation: women.

The unstoppable rise in prices is doubly damaging to women. First, soaring childcare prices have begun to push women out of the labor force. Childcare costs in the U.S. have outpaced wage growth in recent years, with childcare and preschool prices up 5.7% year over year in February 2023 and 25% over the past decade, according to the Bureau of Labor Statistics . Childcare inflation, which rose 214% from 1990 to 2022, has outpaced median family income gains, which rose 143%.

At the same time, sectors with the highest proportion of female workers are experiencing inflation outpacing wage increases. The health and education sectors, where 75% of workers are women, saw the second lowest increase in nominal wages in 2022.

The Ellevest Women’s Financial Health Index, which examines indicators such as employment rates, inflation, reproductive autonomy and the wage gap, finds that recent progress has been mixed. While the index has edged up slightly from its lowest point in November 2022 – which was lower than at any other point during the pandemic – persistent inflation poses an overhang for further improvements. The sharp decline in women’s financial health over the past year has coincided with double-digit inflation rates.

“While women pay more, they also earn less,” said Dimple Gosai, head of US ESG strategy at Bank of America. “The pandemic has undeniably worsened the childcare crisis and inflationary pressures are adding fuel to the fire. Surprisingly, over 50% of parents in the US spend more than 20% of their income on childcare.” Gosai added that rising childcare costs could both keep and force women out of the workforce, reflecting the advances made in recent years would be nullified in the closure of gender parity.

“Caring responsibilities prevent more women from entering, staying and progressing in the workforce. It’s more the norm than the exception,” Gosai said. “The pandemic has exacerbated this gap, with women bearing more of the additional childcare burden than men.”

The shortage of supplies in the childcare industry is due to low employee retention due to low wages, a problem that existed prior to the Covid pandemic. Childcare providers are now faced with the dilemma of offering competitive wages to their employees and affordable prices to families and carers.

“We’ve seen a negative shock to the supply of childcare providers in this recovery and that could exacerbate this problem going forward, but childcare costs are more systemic than other shorter-term inflationary pressures we’ve seen. With no public investment, there just isn’t much room in this market, and that’s one of the reasons the Treasury Department has determined child care is a failed market,” said Mike Madowitz, director of macroeconomic policy at the Washington Center for Equitable Growth.

Not only women with children are disproportionately affected by inflation. Gosai noted that women and minorities are underrepresented in high-wage industries such as technology or finance, which are more shielded from inflationary pressures. The researcher referred to the phenomenon as “occupational segregation”.

In addition, inflation has made women’s shopping carts more expensive at a faster rate – exacerbating the problem of the “pink tax,” or cost premium, in women’s goods and services markets compared to similar products for men.

Long term effects

The negative effects of rising prices on women are not only short-term, but have long-term effects on their financial well-being. The Bank of America Institute found in January that women’s 401(k) balances are only two-thirds those of men.

“Because of both [the] Because of the COVID and inflation crises, women are much more likely to have had their retirement savings slumped,” said Ariane Hegewisch, Program Director for Employment and Income at the Institute for Women’s Policy Research.

“The debt is much higher [and] Rental costs have gone up. So now there’s an even bigger hole in retirement, or in wealth, or in any kind of security, precisely financial security [women] might have, and that needs to be rebuilt.”

Madowitz of the Washington Center said the Federal Reserve’s aggressive rate hikes to fight inflation could be “the opposite of helping improve women’s economic health and opportunities” in the short term. The Fed has been raising interest rates since last year when the federal money market went to zero. It currently ranges between 4.75% and 5%.

Because of this, some fear that the process of economic slowdown will have an undue impact on women, especially women of color.

“If the FOMC hikes interest rates too high to accelerate its 2% inflation target, it would hurt worker demand and hurt those who already face greater labor market barriers — namely, workers of color,” Madowitz noted.

Hegewisch also pointed out that higher rates could lead to higher unemployment, which would disproportionately hurt women.

“Unemployment is always higher among black women and men than others,” Hegewisch noted. “Unemployment is twice as high for black women as for white women and almost as high for Latinos. And so it goes when it doubles [up] at a much higher rate for black women than for white women.”

One solution that could ease inflationary pressures on gender parity is for companies to invest more in the well-being of their employees, Bank of America’s Gosai said. She cited improved reproductive health services, subsidized childcare and flexible work arrangements as ways companies can offset the pressure of higher costs on women.

what can be done

Passing broader social infrastructure legislation could also be a critical step in repairing some of the damage high prices have done to women’s economic health and opportunities. Madowitz said that measures like President Joe Biden’s failed Build Back Better Act could not only improve women’s economic prospects but also prevent inflation from reaching such high levels in the future.

“These investments in childcare, elder care and health care, public education and income support programs would counteract ever-rising prices by increasing the labor supply and women’s incomes, and would help alleviate much of the pressure that keeps women out of the labor market and restricts them their upward mobility,” said Madowitz.

Rising prices are part of the economic obstacles women face – meaning that even after inflation cools down, further initiatives need to be taken to ensure equal opportunities.

“This is a problem that runs deep. It’s a bigger problem and it touches so many different sectors and so many different regions. That it’s not something that will simply be eradicated by inflation,” Gosai said. “Women make 82 cents for every dollar a man makes. That doesn’t change [even] if inflation falls tomorrow. It’s something that takes a long time to fix. … It is a doom-loop.

“They need more women who are financially independent and empowered to educate themselves, enter the workforce and have those opportunities so that they have equal rights and can compete on an equal footing.”

— CNBC’s Gabe Cortes contributed to the coverage

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