Bank of America Report Highlights Women's Growing Economic Influence

We are about to witness a stark shift in who holds economic power. A recent Report, from Bank of America sheds light on how women's increasing financial power is reshaping economies and industries.

The Pay Gap

In a capitalist society, spending choices are a powerful expression, purchases signal our values and shape markets. As demand drives supply, the products and services that attract the most consumer interest continue to thrive. Consequently, those with the greatest purchasing power, in theory, wield the most influence over the economy.

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. 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 Wealth Gap

Traditionally and today, men hold a significantly higher percentage of global wealth. In the UK, men have, on average, £92,762 more in total wealth than women, reflecting a 35% wealth gap. While this gap is minimal among individuals aged 25 to 34, it widens with age, reaching 28% for those aged 35 to 44 and expanding to 42% by age 64.

A similar disparity exists in the United States, where women own just 32 cents for every dollar owned by men. This gap is even more pronounced for women of color, Black and Latina women own only one penny for every dollar owned by white men. 

Financial inequality extends into retirement and in the UK, state pensions are among the lowest in the OECD. Women face significant disparities in pension wealth. Women aged 65-74 have a median private pension wealth of just £17,300, compared to £164,700 for men. Across the population, the gap remains stark, with women’s median pension wealth at only £4,300—less than a quarter of men’s £19,800. One key factor contributing to this disparity is that auto-enrolled pension schemes fail to account for unpaid caregiving periods, disproportionately affecting women and limiting their long-term financial security.

Bank of America Reports 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.

According to academic research, 

“As younger generations inherit wealth, they may increase their spending on goods and services, boosting economic growth. This could lead to increased demand for luxury goods, travel, and other discretionary spending. Younger generations may have different investment preferences than their predecessors. They may be more interested in sustainable and impact investing, focusing on companies with strong environmental, social, and governance (ESG) practices."

Wealth Management implications

According to research from Mckinsey  & Company women approach wealth management differently than men. They are more likely to seek professional advice, yet less confident in their financial decision-making. Female investors tend to be more risk-averse, focusing on capital preservation and long-term life goals rather than high-risk, high-reward investment strategies .Retirement planning is a key financial concern, with women being 10 percentage points more likely than men to worry about outliving their savings, highlighting their cautious and long-term approach to financial security.

However, recent research suggests that women's financial behavior differences may not necessarily stem from a lack of confidence. Find an analysis here. 

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.

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