Wealth and Gender


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A significant issue

Gender equality in income is an important and widely debated issue. Gender and wealth distribution receives much less attention, but is arguably just as significant an issue. In the future, with the rise of more and more female entrepreneurs and executives, the gender aspect of wealth generation will grow in importance.

Historically, because of the many restrictions placed on their ability to work and access capital, women had two main routes to wealth – especially great wealth – inheritance and marriage. In most countries, men still have higher incomes than women on average, and are more likely to be active in business. Female life expectancy is everywhere greater than that of men, so they remain more likely to acquire wealth through inheritance.

Female share of wealth is growing

Against this backdrop, some of the evidence is pleasantly surprising. Data for the United States and the United Kingdom suggests that, in both countries, the share of wealth held by women rose from the 1920s onwards until the female share was close to one-half by the 1960s. More prevalent joint ownership of marital assets and changes in the division of wealth within the family for tax purposes are two reasons offered for the upward movement.

In the period since 1970, gender differences in earnings and savings seem to have eroded further in many developed countries. Joint ownership within marriage has become more common, and legal changes have strengthened the property rights of married women. All of these factors tend to reduce the wealth gap between men and women. It is therefore surprising that the share of women among the very wealthy in the USA seems to have peaked in the late 1960s and then declined to about one third in the late 1990s. It has been suggested that this reflects a reduction in the importance of inherited wealth, as waves of entrepreneurship, deregulation and technological change since 1970 have led to a rise in wealth mobility.
Data from Forbes magazine support this hypothesis. Forbes provides a list of the 400 richest people in the USA each year, and also indicates the source of their wealth. There has been a decline in the number of women in this ultra-select group from a peak of 89 in 1986 to just 41 in 2009. But, importantly, there has been an increase in the number of women whose source of wealth is not reported as inheritance – from just eight in 1982 to 31 in 2009.

What drives gender differences in wealth?

Two core determinants of the gender division of wealth are the marital property regime, and inheritance laws and practices. These differ radically across countries and over time, and are influenced by culture, religion and history. In the past, the property rights of married women were widely restricted, for example in Anglo-Saxon countries, which did not recognize wives as legal persons.

Nowadays the interaction of custom, religion and law leads to complex property rights in many countries, particularly with respect to land. In some parts of sub-Saharan Africa, for example, wives own the crops they raise, but not the land on which they are grown. The right to sell the land may lie with their husbands. In other instances, ownership may only change hands through inheritance.

The gender division of wealth is also affected by customs regarding the division of estates. For example, the historical practice in much of Europe of leaving the bulk of large estates to the eldest son tended to concentrate wealth in the hands of wealthy males (France has been the exception here, where wealth is divided equally between siblings). In English-speaking countries, people remain free to divide estates as they wish, within certain bounds, though equal division among offspring regardless of sex is the most common pattern. Under Islamic law, daughters always had the right to inherit, although their share was half that of sons. Thus, through much of history, daughters in the Muslim world had stronger formal rights of inheritance than in the West.

In many Asian and African countries, much wealth passes to the younger generation on marriage. In contrast, it is customary in the West for most of a family’s wealth to remain in the parents’ hands, with the bulk going to the surviving spouse on the death of the first parent. Since the husband dies first in about two thirds of marriages, this creates an important source of women’s wealth. As a result of these practices, Western countries have large populations of older women with significant wealth.

Tax systems play a role, first by reducing the amount received from bequests, which tends to reduce the share of wealth held by women. In contrast, tax exemptions for inter-spousal bequests tend to favor women as the surviving spouses, as does progressive taxation of inheritances, which creates an incentive for more equal division of estates.

A final institution whose gender importance needs to be recognized is pensions. Broadly speaking, both private and public pension wealth reflect lifetime earnings, which continue to be higher for men. As a consequence, the average pension wealth of women is one-third to one-half smaller than that of men. This source of inequality is compensated to some degree by survivors’ pension rights and by the inclusion of pension assets in divorce settlements.

Data limitations make it difficult to assess the precise impact of these factors on gender differences in wealth holdings. Household surveys typically record the assets of households rather than individuals, and “rich lists” tend to report family wealth under the name of the husband, although beneficial ownership may be different, as divorce courts frequently confirm. Special-purpose surveys of asset holding within the family are not very informative on the whole. This leaves estate taxes as the best source of information on the gender division of non-pension wealth in developed countries.

US female net worth is 98% of that of males

The most recent US data derived from estate taxes refer to adults with gross assets above USD 1.5 million. Women form 43% of this high asset group and their average net worth is 98% of that of the men in the group. However, there are important variations by age and size of wealth. The female fraction rises quite strongly with age, from 38% of those aged less than 50 to 55% for those aged over 85. And while there are approximately equal numbers of men and women in the wealth range of USD 1.5–5 million, the female fraction drops above that point, falling to 38% above USD 20 million, possibly reflecting the greater importance of “self-made” wealth versus inherited wealth in the highest wealth ranges in the USA.

The corresponding UK data yields some information on the gender breakdown at all levels of wealth, but excludes property held jointly by married couples. The female fraction in the high wealth group rises more sharply with age than in the USA – perhaps reflecting greater importance of inheritances. However, the relationship with the level of wealth is not monotonic. The female fraction rises with wealth, peaking at 53% in the GBP 150,000–200,000 range, before dropping to 43% in the GBP 500,000 to GBP 1 million range and to 35% above that level.

Do women hold riskier portfolios?

There is very little reliable information on gender differences in the composition of asset portfolios. The limited data that exist for the USA and the UK suggests that women tend to be more risk averse, when other factors like age are held constant. However the evidence is not conclusive. Data for wealthy individuals in the USA show that more women hold publicly traded stock than men (81% versus 74%), and that stocks form 24% of their total assets compared to 18% for men. Women also participate at a high rate in “other real estate” (55% versus 57% for men), which is relatively risky. The fact that women are less likely to be active in business shows up in the lower incidence of closely held stock (18% versus 30% for men) and non-corporate business assets (18% versus 28%).

For the UK population as a whole, women hold more of their wealth in houses and cash, while men have a greater share of all other types of assets. For those with wealth above GBP 1 million, women are more likely to hold securities than men (echoing the situation in the USA), slightly less likely to own houses, and a little more inclined to own “other buildings and land.”

Overall, data from the USA and UK show that wealthy women are on average older than wealthy men and more likely to have gained their assets through inheritance. Their portfolios are more in stocks and bonds than those of men, who are more likely to be actively involved in business.

Gender differences in wealth have tended to decline over time due to greater equality in property rights for married people, increased incidence of joint ownership of property within marriage, and tax incentives. Until about 1970, this led to a decline in the gender gap between men and women, but the gap has widened since the late 1960s in the USA, and large gender differences in pension wealth are observed in many countries.



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