By Katelyn E. Murray, CFP
Since the 1980s, unemployment rates have trended higher amongst men than women during a recession. In previous periods of economic downturn, this made sense. Male-dominated industries like construction and finance were the sectors most heavily impacted by a recession, when trade and industrial activity declines.
But with the onset of COVID-19, we’ve seen a shift in which workforces are most impacted by economic instability. In just a one-month period between March and April 2020, the unemployment rate among women more than quadrupled from 4.4% to a staggering 16.1%, reflecting a 2.5% higher rate of unemployment among women than men. In September, four times as many women as men dropped out of the labor force—roughly 865,000 women compared to 216,000 men. This prompted news outlets to begin referring to this past year’s economic downturn as a “she-cession.”
As we’ve all learned over the past year and a half, viruses don’t discriminate. So why does it seem as though COVID-19 had an inordinate impact on women in the workforce?
Upon examination of some of the industries that have been hardest hit by the pandemic, a trend emerges. Several women-dominated fields, including hospitality, leisure, and food service, were among those most heavily impacted. Roughly 40% of all employed women—approximately 510 million women globally—were employed in hard-hit sectors, compared to only 36.6% of employed men. Moreover, when schools, nurseries, and daycares shut down, parents scrambled to cover increased childcare demands. For many families, the need for full-time childcare meant that working mothers had to adjust their professional roles to accommodate. In July 2020, a Washington Post article pointed out that “one out of four women who reported becoming unemployed during the pandemic said it was because of a lack of childcare—twice the rate among men.”
While the federal government has offered several short-term assistance options intended to provide aid to those affected by the pandemic, the disproportionate number of women stepping away from the workforce carries significant long-term and compounding economic consequences. A 2018 study carried out by The Institute for Women’s Policy Research found that women who took just one year out of the workforce had annual earnings that were 39% lower than those of women who did not. And it’s not just women who leave the workforce entirely who are at risk—those who reduce hours may also experience short or long-term economic instability. Part-time work tends not to offer the same wages and benefits as full-time work, with part-time employees being much less likely to have access to paid time off, healthcare benefits, and other employer-sponsored benefits.
The swift decline in women’s employment and labor participation rates threatens not only women’s current and future earnings, but also their retirement security. Employer-sponsored retirement plans such as 401(k)s and 403(b)s, are typically only provided for full-time workers with one year of service. Taking time out of the workforce significantly reduces women’s ability to qualify for and contribute to these powerful retirement savings vehicles. Additionally, because Social Security benefits are based on lifetime earnings and the Social Security Administration calculates the average indexed monthly earnings during the 35 years in which the worker earned the most, if a woman takes time out of the workforce or reduces work hours and receives lower pay, it affects her Social Security benefits. If she has fewer than 35 years of earnings due to years spent displaced from work, then years of zero earnings are included among the 35 averaged years, effectively lowering her lifetime average earnings and her benefit payout in retirement.
The COVID-19 pandemic has clearly presented significant and potentially long-term economic challenges to the nation at-large on a macro level and to individual families on a micro level. These are challenges that should be appropriately identified and confronted with the help of a trusted professional. If you’ve experienced financial strain due to the long-lasting effects of COVID-19, consider reaching out to a professional for help getting things back on track in such a turbulent time.
About the Author: Katelyn E. Murray, CFP®
Katelyn E. Murray, CFP® is a fee-only, fiduciary financial planner and behavioral coach with nearly a decade of experience helping clients define their own vision of success and build a reliable path to reach it. Katelyn uses her background in financial psychology and behavioral finance to cultivate an integrated financial planning approach, in which behavioral coaching elements are integrated with traditional planning and wealth management expertise. As a public speaker, she has appeared as a guest on The W Pulse podcast and has been invited to speak at a number of industry conferences nationwide, including Advisor Group’s ConnectED conference and The W Forum.