Europe: Global Gender Wealth Equity Index

Family support

The lack of family support to care for a child has a large impact on women’s capacity to build retirement wealth in Europe. The pandemic has exacerbated this, with women shouldering the majority of unpaid care. According to the ILO, more than 2 million mothers globally left the labor force over the course of 2020¹, partly to assume primary caregiving roles.

Women are more likely to take career breaks or reduce their working hours due to care responsibilities. In the European Union:

• About 33% of women have taken a career break of at least six months for childcare reasons compared with just over 1% for men²
• About 30% of women work part-time compared to about 8% of men³. Primarily, women stated caring for children and other relatives as a reason for choosing part-time employment.

These factors are associated with reduced earnings and slower career progression for women which contribute strongly to the gender pay gap, and thus, disproportionately affect their capacity to save.

The lack of early childhood education and accessible care services can compel women to resort to long-term family leave, employment in part-time work or even cause them to leave the labor market.

For example, in the U.K., the lack of affordable and accessible childcare and disproportionate share of unpaid care work that women assume add to the challenges of generating equitable retirement wealth. Also, in the U.K., there is shared parental leave, but this is not well utilized by men, with women assuming more part-time employment or leaving the workforce for a period to care for a child, which in turn affects their pay and career progression.

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 women are the ones assuming part-time employment or leaving the workforce for childcare.

Career

In general, as in other regions, the gender-based wealth disparity is largely a result of gender pay gaps and delayed career trajectories which have been aggravated by women’s responsibilities outside of the workforce (e.g., childcare and eldercare). Although the principle of equal pay for work of equal value has been embedded into the EU law, progress on narrowing the gender pay gap has been and continues to be slow – the gap remains 13% in 2020⁵.

Europe has been at the forefront of legislating gender pay equalization. In March 2021, the European Commission proposed a directive targeting more pay transparency, as well as improved pay gap disclosures and better enforcement of existing legislation around equal pay, requiring employers to remedy discrepancies not justified by objective, gender neutral factors. Aligned with this, there has been a proliferation of measures in countries within the region which are intended to reduce the gender pay gap and in part, 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 2021⁶, and France now requires a 30% diversity in leadership positions metric by 2027, increasing to 40% by 2030 (applicable to companies with over 1,000 employees)⁷.

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 inequity is greatest for women in senior expert and leadership positions as they face the compounded effect of delayed pay and career progression.

Life events

Generally, 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 are faced with higher expenses impacting their savings.

Financial

Financial literacy has a significant impact on the wealth accumulation at retirement. Over the years, we see a substantial part of the risk and responsibility for an adequate standard of living after retirement has shifted from the governments and employers to individuals. Employer-provided defined benefit plans guaranteeing a given income after retirement have largely been replaced by defined contribution plans where pension income depends on investment returns with individuals required to make their own investment choices. The lower level of financial literacy and lower risk tolerance of women compared to men results in further gaps in wealth coming from retirement and other savings between men and women.

Women’s financial literacy is lower in Italy and Poland, and because defined contribution plans are either mandated or common practice in these countries, women’s retirement income is disproportionately impacted.

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, aside from differences in financial literacy and risk tolerance, and their resultant impact on investment returns, include differences in pay and structural aspects of the retirement systems.