What to do about women's retirement income gap

The gap starts during your working years

While it has narrowed in the last few decades, the gender pay gap remains alive and well in Canada. Based on Statistics Canada analysis from the 2016 Census, women working full-time earn an average 78.6 cents for every dollar men make.

Part of that is due to the fact that women are more likely to work part-time or in minimum wage jobs, often while caring for children or elderly family members, says Sarah Kaplan, a distinguished professor and director of the Institute for Gender and the Economy at Rotman School of Management, University of Toronto.

As of 2016, women accounted for 59% of the minimum wage workforce, according to a study from Oxfam Canada. And one third of those women earned less than $15 an hour in 2015, based on a labour force survey from the federal government.

“That has a compounding effect,” says Kaplan. “After retirement, a much greater proportion of women than men are in poverty.”

Last year’s annual report from Mercer CFA Institute Global Pension Index shows that Canada’s pension gap is 22% — which means women are retiring with only about 80% of what their male counterparts have to carry them through retirement.

And although most Canadian seniors can count on their Canada Pension Plan (CPP) and Old-Age Security (OAS) benefits, they’re meant to supplement your retirement savings, not replace it.

Coupled with their average longer lifespans, that means women must work an extra two years to have enough saved for retirement.

Kaplan adds part of the issue is that when women slow down during their childbearing years, it’s nearly impossible to catch up again once their kids are grown.

That’s become even more concerning in the COVID pandemic, which the Mercer researchers say saw many women reduce their hours or leave the workplace entirely to care for their families.

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Women are aware

Even before the pandemic, Canadian women were worrying about how they’ll afford to retire one day. A 2019 HSBC study found that 44% of Canadian women were concerned about how they’ll pay for food and other basic necessities in retirement, while 50% were concerned about paying for medical bills.

And 51% of women who were working age said they either didn’t know how much they were saving for retirement or hadn’t started yet — compared to 38% of working men.

However, one positive note Mercer researchers made was that although women have less money to work with, their investments tend to offer slightly better returns than male participants.

They attributed that to the fact that women tend towards diversified options in their workplace retirement benefit programs, regardless of their age, reflecting perhaps a more conservative and cautious investing approach.

Still, Mercer’s analysis concludes that employers must do what they can to remove structural barriers. And the best time to address the pay gap in retirement is while women are still working.

Closing the gap

While there are a number of ways to deal with the pay gap, Lara Zink, the CEO of Women in Capital Markets, a networking organization that conducts research and advocates for equality in finance, says companies need to focus on retention and culture.

Women often struggle when transitioning back to work from maternity leave. And Zink says employers who don’t offer flexibility and understanding to their employees who are parents will find themselves at a disadvantage.

“Losing your best people because you're not paying attention to your culture and your retention strategies, many times means losing your reliable winners, your innovators and your most effective problem solvers,” says Zink.

Kaplan adds it’s an issue that needs to be returned to regularly so inequality doesn’t creep back in, offering the example of Salesforce.com, a U.S. tech company that conducts annual pay audits to ensure all its employees are being paid fairly.

And especially in the context of the pandemic, with people restless and already overburdened, Gunraj says it’s just common sense for leaders and managers to invest in the issue.

“Addressing the policy and practice issues, addressing the crunch that caregivers are feeling … those are the kinds of things that leaders have the power to do,” says Gunraj.