Claire Matthews - Increasing Women’s Economic Power
Dr Claire Matthews is Massey University's Director of Financial Planning. She is also on the board of Massey/Westpac's joint initiative, the Fin-Ed Education & Research Centre.
Women make up more than half New Zealand’s population, but hold less than half its wealth. While social changes in recent generations mean that most women now earn their own money, there’s still some way to go before they achieve the same financial outcomes as men.
On average, women earn less than men in all industries. If the existing gap in median weekly earnings between men and women was halved, by raising women’s income, it would give women additional economic power of $200million each week or nearly $12billion per year. A related problem for women, is that they are more likely to take time out of the workforce to care for children and/or elderly parents. The lower income and the time out of the workforce combine to reduce women’s economic power.
In addition, women live longer on average and therefore need greater levels of funding to achieve the same level of retirement income. A range of initiatives are possible to address these issues, but there is one in particular that I believe is key to increasing women’s economic power: improving their financial literacy.
The Financial Knowledge and Behaviour Survey, published three times since 2005 by the Commission for Financial Literacy and Retirement Income, has consistently shown that women’s financial knowledge is less than that of men, although it has improved. That survey also shows that women are less likely to make use of the Commission’s resource material. My own research has shown that women tend to be more conservative with their investment decisions, which is likely to exacerbate the financial issues they face, particularly around retirement planning.
Financial literacy is important because it provides people with choices, while it also contributes to the efficiency and prosperity of the national economy, as the Commission notes on their website. Financial literacy enables better financial decisions, and economic power depends upon making good financial decisions.
Higher levels of financial literacy would give women greater knowledge, enabling them to better assess the choices they face, including looking beyond the immediate outcomes to the longer-term implications. It would mean giving women the ability to better manage their finances, from simply making appropriate choices about the day-to-day bank products they use, through to the more complex choices around KiwiSaver and similar investments.
Greater financial literacy would enable women to get better value from the money they do have, but it also has the potential to assist them to increase the amount of money they actually have available in the short-term and in the long-term. Put simply, it is the key to fully harnessing women’s financial potential and improving their overall economic power.