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Penalised for caring?

Updated Friday, 25th November 2005

Women are better off today in many ways. But there are still women who are penalised for choosing to care for others.

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Pregnant? You’re fired! touches on a sore point for many women – the trade off between having money and having children.

Not only may getting pregnant lose you your job immediately; leaving work to have one or more babies costs – and costs a lot. It’s not just the obvious things like nappies, child care, or even school or university fees. It’s the opportunity cost of not working and the consequences that has for your pension – the income you would have got if you hadn’t taken on a maternal or caring role.

"One in two women over retirement age are not entitled to the full state pension"

An Open University course starting in 2006, called You and Your Money, has a whole chapter devoted to ‘Sharing and caring’ and highlights the costs of having a family in fairly stark terms. Recent research has identified a longer term problem, though. One in two women over retirement age are not entitled to the full state pension – compared with only one in ten men - because they devoted themselves to caring and not to earning money. The poorest pensioners in the UK are women over the age of 80.

And younger women are building up a problem for the future. In 2003, 29% of all single women had no savings at all and nearly two thirds of single parent households (the vast majority women) were in the same position (according to the Department for Work and Pensions).

But it’s not all doom and gloom. Times are changing and more and more women work. Girls do better now at school and at university, and end up with higher skills and so higher pay. Higher income leads to higher savings and greater wealth. In the US, in 2004, women represented over 40% of all individuals with over $500,000 in assets. In the UK it is predicted that women will own 60% of the nation’s wealth by 2025. Part of this change can be explained by the growing rates of women’s employment, of education and of participation in the higher paid professions. But another key factor is women’s greater longevity - living longer than men means they are likely to do better in terms of inheritance.

What will women do with this increasing wealth? Will they save more or less than men? Are they more risk averse than men? Popular opinion says that women have more of a ‘nesting instinct’ and are prepared to take less risks in investing than men. This has potential consequences for retirement. Lower risk assets earn lower returns – on average. After 20 years, say, a retirement fund invested in a building society account will have much less than if it had been invested in company shares. A smaller retirement fund means a smaller pension.

So far, little research has been done in this area except in the US where women do seem to invest in less risky assets than men and single women more so than married women. But recent research on women and money in the UK in the nineteenth and early twentieth centuries has come up with a slightly different picture. There is evidence that if women do have money, they like to speculate with it. Wealthy women from the North and South of England speculated in the shares of the South Sea Company in the 1720s, some of them making tidy sums in the process. Wealthy female clients of Barings Bank in the 1820s and 1830s speculated in Spanish and Chilean bonds. In the early 20th century, women aristocrats – the celebrities of their day - were criticised for setting a bad example to the masses as they gambled with their housekeeping money.

There is also evidence that middle class women knew more about investment than they do today. In the nineteenth century, women only worked if they had to and many ‘genteel women’ lived in salubrious places such as Bath or Leamington Spa and relied on their investment earnings. For these women – and there were a lot of so-called ‘surplus women’ with a very small chance of getting married – the returns they got on investment were crucial. Advice was plentiful – from newspapers, magazines, text books and friends and advisers. But the risks were much greater than today. Companies starting up had only a one in three chance of lasting more than five years. And company prospectuses were not regulated, and more economical with the truth than they are today.

"There are still women penalised for choosing to care for others"

Of course, there were also many women who worked but had no savings and no prospect of a decent pension. In principle, today’s women are better off in many ways. They have the option to work and hope to save for their old age. They have had a better education, have better work prospects, and should have access to good advice. But, as this programme shows, there are still women penalised for choosing to care for others. As in the nineteenth century, there are disturbing discrepancies between women who have very little, both in terms of income and savings, and women who are comfortably off.

Further reading

  • The price of parenthood – having children brings many changes
  • '"The widow, the clergyman and the reckless": women investors in England, 1830 to 1914’ by J Rutterford and J Maltby, in Feminist Economics, vol 12
  • ‘The Gender Asset Gap: What Do We Know and Why Does It Matter?’ by C D Deere and C Doss, in Feminist Economics, Special Issue on Women and Wealth 
  • 'Why do Women Invest Differently than Men?' by V L Bajtelsmit. and A Bernasek, in Financial Counseling and Planning no. 7
  • ‘Who’s Better at playing the Markets Game?’ by N MacEarlen, in The Observer (20 June 04) 



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