The Ultimate Guide to Credit Cards
Tuesday, July 23, 2024

How Does the Wage Gap Affect Women’s Ability to Make Major Life Purchases?

Gender Wage Gap Affect On Life Purchases
Jon McDonald

Written by: Jon McDonald

Jon McDonald
Jon McDonald

Jon McDonald brings more than 15 years of journalism expertise to CardRates.com. Informing financial consumers about emerging trends and companies making an impact in the industry, Jon is most knowledgeable in the areas of budgeting, credit card rewards, and responsible credit use; he strives to bring that experience to readers worldwide. Jon has a passion for writing and editing, and his articles have appeared in publications produced by The New York Times.

See full bio »

Edited by: Ashley Fricker

Ashley Fricker
Ashley Fricker

Ashley Fricker has more than a decade of experience as a finance contributor and editor, and has specialized in the credit card industry since 2015. Her credit card commentary is featured on national media outlets that include CNBC, MarketWatch, Investopedia, and Reader's Digest, among many others. She has worked closely with the world’s largest banks and financial institutions, up-and-coming fintech companies, and press and news outlets to curate comprehensive content and media. Ashley holds a bachelor's degree in multimedia journalism from Florida Atlantic University.

See full bio »

Reviewed by: Andrew Allen

Andrew Allen
Andrew Allen

For nearly 20 years, Andrew has worked for financial institutions ranging from regional investment organizations to some of the largest banks in the world. At Wells Fargo, Andrew was a Consultant within the Insight and Innovation division. A graduate of the University of Georgia’s Terry College of Business, Andrew’s goal has been promoting personal financial wellness and solid money decisions.

See full bio »
Advertiser Disclosure

Research shows that the gender pay gap hasn’t changed much over the last two decades. According to national averages, women earn around 82% of what men earn. 

This disparity has tangible consequences. The ability to make significant life purchases — a home, a car, or a college education — is a practical barometer for measuring the real-world effects of income inequality.

“On the surface these statistics can feel alarming. Is the income deck stacked against women? Legally, no. The Equal Pay Act of 1963 specifies that employers are prohibited from paying workers different incomes based on sex and other factors, such as race and ethnicity,” said CardRates.com Finance Expert Erica Sandberg.

“However, this doesn’t mean that there aren’t earning disparities between the sexes,” Sandberg continued. “There are, and for a number of reasons. For example, many women stop working or drop down to part-time employment when they’re pregnant or are taking care of growing children. Both scenarios can put women at a financial disadvantage. Additionally, some men take on higher-paying jobs in more lucrative industries.” 

We investigated the true impacts of the wage gap by analyzing median earnings by gender and comparing them to the cost of major life purchases. Whether it’s saving for a down payment on a home, purchasing a reliable vehicle, or investing in higher education, the delay in achieving these milestones impacts women’s economic stability and their ability to plan, grow, and thrive in their personal and professional lives.

Dive in to understand the full extent of the wage gap’s impact on women’s major life purchases.

How Men Outpace Women in Major Life Purchases

The disparity in earnings between men and women translates into real-world delays, affecting how quickly they can afford life’s major milestones.

When it comes to what is often one of life’s biggest purchases, owning a home, the financial journey could be longer for women. On average, a woman needs one year and three months longer than her male counterpart to save for a 20% down payment on a home. While it takes five years and nine months for the average man to save for a 20% down payment on a home, it would take seven years for the average woman.

A chart showing how long it takes men and women to afford major life purchases

Similarly, women find themselves needing an additional one month and 12 days to afford a 20% down payment on a used car compared to men. The average person could save for a car down payment in six months and 14 days on a man’s income, but it would take eight months and 26 days on a woman’s income.

To cover the average in-state tuition and fees for one academic year at a public four-year university, the average woman must work two months and two days longer than men. The gap widens further when considering out-of-state tuition. Women need an additional six months and two days compared to men to afford one year of out-of-state tuition and fees at a public four-year university.

Men Can Make Major Life Purchases 17.8% Faster Than Women

On average, men can make major life purchases — such as homes, cars, and college tuition — 17.8% faster than women, but of course, that can vary greatly depending on geographic location. This disparity can be influenced by regional variations in income levels, cost of living, and housing markets. 

In some areas, higher wages or lower housing costs may narrow the gap, while in others, the difference in earnings between men and women can be more pronounced, exacerbating the disparity in purchasing power.

A U.S. heatmap highlighting the percentage at which men can make major life purchases faster than women in each state

Utah currently has the largest discrepancy between men’s and women’s ability to afford major life purchases, with the gap widening to a staggering 39.2% — the largest among all states. Here’s a snapshot of how that impacts saving timelines on a woman’s wage in Utah (compared to a man’s): 

  • Home down payment – an extra ​​six years and four months
  • Car down payment – an extra five months and 27 days
  • Annual in-state tuition – an extra seven months and 14 days
  • Annual out-of-state tuition – an extra year, 11 months, and 12 days

Louisiana, Idaho, and Alabama also display significant disparities, with gaps of 35.6%, 35.1% and 32.9%, respectively. 

Conversely, Vermont showcases the smallest, but still significant, gap at 17.0%. This reduces the difference in how long it takes women to save for key milestones in Vermont to: 

  • Home down payment – an extra year and seven months
  • Car down payment – an extra two months and 16 days
  • Annual in-state tuition – an extra four months and 13 days
  • Annual out-of-state tuition – an extra 11 months and 22 days 

Other states with comparable margins include New Mexico (17.3%), Nevada (18.9%), and Delaware (19.1%), rounding out the states with the smallest relative gaps overall.

A Closer Look at the Gender Pay Gap, State by State

Utah, Louisiana, Idaho, and Alabama lead in gender pay disparity. In Utah, women earn just 60.8% of what men make, with a median annual income of $33,167 compared to $54,516 for men. Louisiana follows closely, where women earn 64.5% of men’s earnings. This pattern is consistent in Idaho and Alabama, where women’s earnings are 64.9% and 67.1% of men’s, respectively.

On the other end of the spectrum, states like Vermont, New Mexico, and Nevada have the smallest gender pay gaps. In Vermont, women earn 83% of what men earn, while in New Mexico and Nevada, women earn 82.7% and 81.1%, respectively.

Closing Thoughts

Understanding the impact of the gender wage gap on major life purchases highlights the financial challenges many women face. By recognizing these disparities, we can better advocate for equitable wages and smarter financial planning.

“When women earn less than their male counterparts they have less cash available for spending and saving. It impacts everything from homeownership goals to consumer choices to educational opportunities,” Sandberg said. “As an individual, whether male or female, it is important to make financial decisions that will enhance your life. Look into occupations that pay enough to support your wants and needs. Prepare for upcoming events, too. If you do want to stay home with the kids, save as much as possible first.”  

For deeper insights into managing your finances and making savvy credit decisions, check out our credit card guides. With expert advice and a wealth of resources, CardRates helps you navigate the complexities of personal finance and reach your financial goals.

Methodology 

Using data from the U.S. Census Bureau, we first examined the median annual earnings of men and women to find the gender pay gap in each state. Then, we compared average income to the cost of key life purchases, including a down payment on a home, a car, and college tuition. 

We collected the median home price in each state from Redfin and the median used car price in each state from iSeeCars and calculated the cost of a 20% down payment for each. We also analyzed the average cost of one year of tuition at a public university (both in-state and out-of-state) according to CollegeBoard. We estimated the time required for each gender to save for a 20% down payment for each major purchase by assuming individuals save 20% of their annual income. Finally, we found the gender disparity in time required to afford these purchases, both by state and nationally.

Advertiser Disclosure

CardRates.com is a free online resource that offers valuable content and comparison services to users. To keep this resource 100% free, we receive compensation for referrals for many of the offers listed on the site. Along with key review factors, this compensation may impact how and where products appear across CardRates.com (including, for example, the order in which they appear). CardRates.com does not include the entire universe of available offers. Editorial opinions expressed on the site are strictly our own and are not provided, endorsed, or approved by advertisers.