Bank of America Reports Women's Growing Economic Influence

A recent Report, from Bank of America sheds light on how women's increasing financial power is reshaping economies and industries while underscoring the persistent financial disparities they continue to face.

Firstly, it is important to understand what the wealth inequality problem is and why it matters.

Women still get paid less than men. Despite growing awareness and corporate pledges to address wage inequality, the gender pay gap remains unchanged at 9.4% over the past five years.

Women continue to earn less than men, with the gender pay gap remaining stagnant at 9.4% over the past five years. Career breaks for family caregiving, often referred to as the "motherhood penalty" and "good daughter penalty", further hinder women's earning potential, career progression, and pension savings.

Research indicates that closing gender employment and pay gaps could generate significant economic benefits. One study from the OECD suggests that increasing women's workforce participation and leadership roles in these countries could add $7 trillion to the global economy. A separate study by McKinsey & Company found that achieving full gender parity in employment and pay could boost global GDP per capita by up to 20%.

The Gender Gap in Retirement and Pensions

Financial inequality extends into retirement, as women tend to accumulate significantly less pension wealth than men. In the UK, state pensions are among the lowest in the OECD, and women are particularly disadvantaged due to lower lifetime earnings and career breaks.

Key findings on pension inequality include:

• Women aged 65-74 have a median private pension wealth of only £17,300, compared to £164,700 for men.
• Across the population, women's median pension wealth is just £4,300—less than a quarter of men's £19,800.
• Auto-enrolled pension schemes fail to account for unpaid caregiving periods, further disadvantageing women.

Progress in Workforce Participation and Earnings

Encouragingly, gender gaps in labor force participation and employment are narrowing. According to Bank of America's internal data, the difference in median annual income growth between men and women has fallen from 6.5% in 2022 to approximately 4% at the end of 2024. This shift suggests that, while wage disparities persist, women's earnings are rising at a faster rate than before.

However, women remain significantly underrepresented in the workforce, particularly in lower-income countries. Since 2010, the employment rate for working-age women has been, on average, 14 percentage points lower than for men in high-income countries and 27 percentage points lower in low-income nations. These gaps highlight structural barriers such as workplace discrimination, unpaid caregiving responsibilities, and limited access to senior positions.

The "Great Wealth Transfer" and Women's Growing Economic Influence

The financial landscape is poised for a significant transformation, driven by the "Great Wealth Transfer." An estimated $124 trillion in U.S. wealth is expected to be transferred through 2048, a sum exceeding the total global GDP for 2023. Of this, $54 trillion will go to surviving spouses, 95% of whom are women, while an additional $47 trillion is expected to be inherited by younger generations of women. Half of all US wealth is held by Baby Boomers and these inheritances are already being passed down.

By 2030, women are projected to control two-thirds of all private wealth in the U.S., positioning them as key economic drivers.

This shift represents the most significant wealth transfer by gender in history. By 2030, women are projected to control two-thirds of all private wealth in the U.S., positioning them as key economic drivers. Their increasing financial power is expected to influence industries such as healthcare, travel, and professional sports, altering market dynamics and consumer trends.

Wealth Management implications

According to research from Mckinsey and Company, women approach wealth management differently than men. For instance they are more likely to seek professional advice, yet less confident in their financial decision-making. Female investors tend to me more risk-averse, focusing on capital preservation and long-term life goals rather than high-risk, high-reward investment strategies.

Key insights Include:

• Women are more likely to seek a financial adviser and pay a premium for in-person advice.
• Only 25% of affluent women feel confident making investment decisions alone, 15 percentage points lower than men.
• Women prefer passive investment strategies and favor lower-cost exchange-traded funds over actively managed mutual funds.
• Retirement planning is a key financial focus, with women being 10 percentage points more likely than men to worry about outliving their savings.

A Call for Systemic Change

As McKinsey conclude, "To attract and retain female customers and capture some of the trillions up for grabs, wealth-management firms must diversify their offerings and commit to a more systematic approach."

While progress is being made, wealth inequality remains a pressing issue that requires systemic solutions. Addressing gender disparities in pay, career advancement, and retirement savings will not only benefit women but also lead to broader economic growth and stability. As wealth shifts into the hands of women, their financial decisions will shape industries, influence policies, and potentially close the economic gender gap but only if systemic barriers are dismantled along the way. The evolving financial landscape presents significant opportunities for startups and wealth managers to better understand these trends and tailor their services to meet the needs of this growing economic powerhouse.