Inequalities in wealth accumulation exist in Europe, with women expected to accumulate less wealth at the end of their working careers than men. This is known as the gender wealth gap.
In Europe, the average wealth share index for the 14 countries we looked at is 0.77. The indices in the region range from 0.70 for the Netherlands to 0.86 for Spain, a range of 16 basis points. Eleven of the 14 countries have an average wealth share index of at least 0.74, the world average.
Our findings are grouped into the following categories:
- Family support: including childcare and elderly care
- Profession: pay and career progression
- Life Events: including divorce and widowhood
- Financial: savings vehicles, and differences in financial literacy and risk tolerance.
Family support
The lack of family support to care for a child has a major impact on women’s ability to build retirement wealth in Europe. The pandemic has made this worse, with women bearing the brunt of unpaid care. According to the ILO, more than 2 million mothers worldwide left the labor force in the course of 20201partly to assume primary caregiving roles.
Women are more likely to take career breaks or reduce their working hours due to caring responsibilities. In the European Union:
- Around 33% of women took a career break of at least six months for childcare reasons compared to just over 1% for men2
- About 30% of women work part-time compared to about 8% of men3. Women mainly cited caring for children and other family members as a reason for choosing part-time work.
These factors are associated with reduced earnings and slower career progression for women that contribute strongly to the gender pay gap, thus disproportionately affecting their ability to save.
The lack of early childhood education and accessible care services can force women to take long-term family leave, part-time work or even leave the labor market.
For example, in the UK, the lack of affordable and accessible childcare and a disproportionate share of unpaid care work undertaken by women contribute to the challenges of generating equitable retirement wealth. Also in the UK, there is shared parental leave, but it is not well taken up by men, with women taking on more part-time work or leaving the workforce for a period to care for a child, which in turn affects their pay and career. progression.
Society has become open to various models to close the gap, but the outcome is still that it is women who accept part-time work or leave the workforce for childcare.
In Germany, parental leave is quite flexible, allowing parents of a newborn child up to three years of parental leave. However, the average period of parental leave in 2020 was 14.5 months for women and 3.7 months for men4. Society has become open to various models to close the gap, but the outcome is still that it is women who accept part-time work or leave the workforce for childcare.
Profession
Overall, as in other regions, gender-based wealth inequality is largely the result of gender wage gaps and delayed career trajectories exacerbated by women’s responsibilities outside the workforce (eg childcare and elder care). Although the principle of equal pay for work of equal value is enshrined in EU law, progress in closing the gender pay gap has been and is slow – the gap remains 13% in 20205.
Europe has been at the forefront of gender pay equality legislation. In March 2021, the European Commission proposed a directive targeting more pay transparency, as well as improved disclosure of pay gaps and better enforcement of existing equal pay legislation, requiring employers to correct discrepancies not justified by objective, gender-neutral factors. In line with this, there has been an increase in measures in countries within the region intended to reduce the gender wage gap and partly, by association, the gender wealth gap. Most European countries in our analysis now require employers to proactively address the topic of pay equality. Most recently, Ireland introduced a gender pay gap law in 20216and France now requires a 30% diversity in leadership positions by 2027, increasing to 40% by 2030 (applies to companies with more than 1,000 employees)7.
There has been a proliferation of measures in Europe intended to reduce the gender pay gap and, by association, the gender wealth gap.
Women in senior positions have the largest gaps in accumulated wealth. In the region, for frontline operational roles, the gender wealth gap averages 11%; for professional and technical type roles the gap averages 25%; and for senior expert and leadership it grows further to an average of 34%. Wealth inequality is greatest for women in senior expert and leadership positions as they face the compounding effect of delayed pay and career progression.
Life events
Overall, our modeling illustrated that divorce and widowhood have little impact on the Wealth Equity Index for all countries in the region, as both men and women face higher expenses that affect their savings.
Financial
Financial literacy has a significant impact on the accumulation of wealth in retirement. Over the years, we have seen a substantial share of the risk and responsibility for an adequate standard of living after retirement shift from governments and employers to individuals. Employer-provided defined benefit plans that guarantee a given income after retirement have largely been replaced by defined contribution plans where pension income depends on investment returns with individuals having to make their own investment choices. The lower level of financial literacy and lower risk tolerance of women compared to men leads to further gaps in wealth from retirement and other savings between men and women.
Financial literacy has a significant impact on the accumulation of wealth in retirement.
Women’s financial literacy is lower in Italy and Poland, and because defined contribution plans are either mandatory or common practice in these countries, women’s retirement incomes are disproportionately affected.
For all countries in the European region, women accumulate less wealth through state, mandatory and employer-sponsored retirement benefits than men. Other contributing factors to this difference, apart from differences in financial literacy and risk tolerance, and their consequent impact on investment returns, include differences in pay and structural aspects of the retirement systems.
For all countries in the European region, women accumulate less wealth through state, mandatory and employer-sponsored retirement benefits than men.
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