Gender inequality and finance: Are women more likely to suffer with debt?

Debt is a really stressful experience, often with a lot of uncertainty attached. Some people don’t even realise they’re in debt, for instance if a partner has borrowed in their name without discussion (this is financial abuse), or debt has been passed on to a debt collection company like Robinson Way or Link Financial in the UK.

The question of whether men or women suffer more with debt sheds light on the gender inequalities in society, and how they increase the risk of low pay, unpaid labour and financial abuse.

This is a brief look at the gender disparities where debt is concerned. and how those struggling with debt or financial abuse can get help.

Are women or men more likely to struggle with debt?

Women are more likely than men to struggle with debt, with women making up 55% of over-indebted people in the UK, and being 14% more likely than men to go insolvent, according to research by Money Advice Service and the government.

The reasons that women are more likely than men to struggle with debt include the fact that women are routinely paid less than men, that women are more likely to be in low-paid jobs, and that women are more likely to leave work or go part time to take on caring responsibilities.

Why are women more likely than men to struggle with debt?

There are many reasons that women are more likely than men to struggle with debt, but most of them are rooted in the centuries-long financial and social inequality of women, which still affects society today. As well as having more debt, women are also likely to take longer to pay off debt once they accrue it, as on average they earn less than men. According to research by the British Household Panel Survey, female graduates will endure 16 years of student debt, as opposed to the 11 years for their male counterparts. The longer debt accumulates interest, the longer it sticks around, causing further negative effects on women’s income in the long run.

Gender pay gap

More women are performing paid work (as opposed to the often invisible, unpaid labour that they also perform at home, which actually contributes £140 billion annually to the economy), but the pay disparity between men and women is significant.

The gender pay gap refers to the fact that women are paid less than men across the country. Women earned 17% less than men in 2019, and 15.5% less than men in 2020. According to Save the Student, female graduates can anticipate a starting salary of £2140 less than male graduates. Shockingly, there’s even a date to mark when women will effectively start working for free (called Equal Pay Day) for the rest of the year (it was 20th of November in 2020). For every £100 a man earns, a woman earns £82.70.

The effect of receiving less in wages is inevitably greater financial instability, and the potential of spiralling debt. The Young Women’s Trust found that 37% of young women struggle to make money last until the end of the month, as opposed to 29% of young men. The YWT points to direct links between pay inequality (as well as unaffordable childcare, that makes it much more difficult for women to get into paid work and actually financially benefit) and debt.

More likely to take on caring responsibilities

As well as the fact that female employees are paid less than men, they are much more likely to leave work, or reduce their hours to part-time, in order to take on caring responsibilities, for example, for children or elderly relatives. This affects their earning capacity, and makes them more likely to fall into debt.

Women are nearly three times more likely to take time off work to care for children, according to research by AIG Life. 74% of them are main carers for children, compared to 26% of men. As well as this, just 33% of women who leave the workplace for caring responsibilities expect to return to full-time work, compared with 59% of men.

Female family members are also more likely to be “sandwich carers”, providing unpaid care for both children and elderly or disabled adult relatives and loved ones. 68% of sandwich carers are women, according to research by Age UK, and, given that one in five employees over the age of 45 will have to stop work early to care for adult family members (research by Aviva), the consequence of women falling into financial debt and distress as a result of losing income, is much more likely.

Extortionate childcare costs (parents now pay an average of more than £6800 a year for a part-time nursery place, according to Money Advice Service) also affect women’s return to work. NCT found that more than twice as many mothers than fathers decided that returning to work wasn’t financially worthwhile, which is a huge indictment of the financial toll that unequal childcare responsibilities and lower pay takes on women. This is especially true of single mothers, who are much more likely to care primarily for their children while surviving on a single income, affecting their ability to return to work and therefore the likelihood that they will stay out of debt.

The irony is that unpaid labour, largely performed by women, contributes hugely to the economy, although it often goes unrecognised. In 2016, the total value of the UK’s unpaid household service work was estimated at £1.24 trillion. Unpaid domestic work made up 63.1% of GPD. Yet, each year a mother is out of work, her future earning potential falls by 4% according to the Fawcett Society. The result of women’s unpaid labour adding hugely to the economy, but they themselves being paid less – or nothing – due to being pushed out of paid work, is, again, that they will experience greater financial insecurity, and struggle more with debt than men.

More likely to work lower paid jobs, in lower paid sectors

A big reason that women are more likely than men to struggle with debt, is that, as well as being paid less, they are more likely to work lower-paid jobs. According to the Office for National Statistics (ONS), women are much more likely to work in low-paid sectors such as care and leisure, as well as administrative and secretarial jobs. Even in female-dominated sectors like these, women will earn 9% less per hour, on average, than males working the same jobs.

Why are these essential occupations, such as care work (which is vital to the functioning of society, as it involves caring for society’s most vulnerable) so ill-paid and undervalued? One reason could be underpaid sectors such as teaching, childminding, and nursing, for example, are those that are traditionally considered “feminine” and more likely to be performed by women, and therefore devalued by a society in which women were only allowed to open a bank account in their own name in 1975. Another, is that many of these sectors involve work that has historically been unpaid and invisible (for example, women have been caring for children unpaid for centuries), and so are not considered to have the same formality and importance to society as, say, a job in a bank.

While it may be tempting to frame the decision of some women to work in lower paid sectors as a choice, it is inevitably tied to the other issues mentioned above, such as the tendency to work fewer hours due to caring responsibilities that they disproportionately take on. According to research by the UK government, lower-paid sectors such as retail and hospitality are more likely to have staff on zero-hour contracts, which are, in theory, more flexible for people who need to fit work around caring responsibilities, yet also make workers £1000 worse off per year than employees, according to Resolution Foundation. All this leads to greater financial precariousness and increased likelihood of debt for women.

More likely to be lone parents

Single parents face unique financial challenges in the UK, particularly if they don’t have financial support from their former partner. Surviving on a single income makes already-expensive childcare unaffordable, which in turn makes it harder for single parents to return to work, increasing their chances of debt. 90% of single parents in the UK are women, and a lack of childcare support, plus managing expenses alone, makes it much more likely that they’ll fall into debt to make ends meet.

According to The Debt Advisor, more than a third of single mothers are in debt because of a lack of support from their former partners. 39% of single mothers have to take out loans or rely on credit cards to supplement their lack of income, according to research by Slater & Gordon.

During the Covid-19 pandemic there has been an increase of fathers not paying child maintenance: many have simply stopped paying, or are unable to pay. While it is totally understandable that a drop in income or loss off a job would affect the ability to afford child maintenance, this will have a serious effect on single mothers, many of whom may have relied on these payments to pay for essentials such as food and electricity. This is aside from the fact that the responsibility for a child lies with both parents, regardless of their relationship. As single mothers already face greater financial challenges, such as restricted access to work, the loss of child maintenance payments could easily push them into problem debt.

Older women, divorce and debt

On average, women are more exposed to financial instability than men, because of the gender pay gap and the fact that unpaid labour affects their employment prospects. This is especially true for older women, who have accrued a lifetime of financial inequality.

Researchers at the University of Manchester found that separated or divorced mothers aged 55 and above were much more likely to have financial problems than fathers of the same age. Again, the fact that 90% of single parents are women, and single parents face unique financial barriers, contributes to the fact that older, divorced mothers are 44% more likely than married mothers to keep up with bills and credit repayments.

Gender stereotypes in relationships and financial abuse also increase the risk of debt for divorced or separated older women. Dina Hummelsheim-Doss writes that many women who are divorced or separated have endured decades of their husbands controlling the money in the home (and may continue to do so after the separation or divorce). This means that women are less likely to have financial literacy, and the funds to avoid debt.

Financial abuse of women

Financial abuse is a huge risk factor for debt, but it’s often not recognised in the same way as physical and verbal abuse in intimate relationships. In the UK, 7.9% of women are victims of domestic abuse, compared with 4.2% male.

Financial abuse is an aspect of coercive control, which was criminalised as a form of abuse in 2015. It is the act of controlling, limiting or abusing a person’s access to money, financial resources, and even work and education. This definition covers a whole spectrum of financially abusive behaviours, including taking control of a partner’s bank account, racking up debts in their name, and refusing them access to money to buy essentials, for example, food or sanitary products. A report by Women’s Aid on domestic abuse victims found that 43.1% of respondents were in debt as a result of the abuse, and over a quarter were so worried about the debt that they regularly lost sleep.

Women who have suffered financial abuse are likely to have suffered other forms of domestic abuse in the relationship. Not only does someone literally restricting their money affect their financial health, but the trauma of suffering abuse is likely to impact their ability to work and their long-term earning prospects (56.1% of respondents to Women Aid’s research said that this was the case for them), which makes them even more vulnerable to debt. The effects of financial abuse on a victim’s finances are multi-faceted: an abuser might force a commitment to debts and restrict access to money, so that if the victim escapes the relationship, they are at a financial disadvantage and have to find a way to rebuild their lives.

Fleeing domestic abuse is often a very difficult and brave step for women to take, and can often leave them without their homes and other valuable assets. Nine women interviewed in a study by Women’s Aid found themselves homeless as a result of leaving abusive relationships.

It is financial abuse if a partner

• Doesn’t allow employment at work or enrolment at college/university

• Prevents attendance at work or college/university.

• Forces an explanation for every penny spent

• Refuses access to funds, for example, a bank account

• Insists on controlling the money in the home

• Tracks spending by checking receipts or bank statements

• Withholds bank account log-in details, PIN numbers or bank cards

• Forces the use of credit or loans, or takes out debt in their partner’s name

• Forces their partner to commit fraud, or steal

• Steals money their partner and/or spends it money without their permission

• Spends whatever they want, but gets angry or controlling if money is spent elsewhere

• Forces their partner to put all bills and loans in their name

• Requires permission to spend anything (on children or not)

• Starts intentionally unaffordable legal battles

• Deliberately withholds child maintenance payments

• Spends money for bills on other things

• Makes significant financial decisions that will impact their partner or family, for example, buying a new home, car or taking out a big loan, without discussion

For anyone experiencing abuse in a relationship, financial or otherwise, here is a list of places to get support. If there is an immediate danger, it’s best to call the police on 999, and press 55 to let them know the caller is in danger but unable to talk.

Help is available.

• National Domestic Abuse Helpline
  Call 0808 2000 247, 24 hours a day, for advice and support. They can refer callers to emergency accommodation.

• Women’s Aid
  Email helpline@womensaid.org.uk, or contact a local domestic abuse service using their Domestic Abuse Directory .

• Rights of Women
  Confidential, legal advice on domestic and sexual abuse.

Refuge’s handbook My Money, My Life, is a fantastic financial guide, specifically designed for victims of domestic abuse and violence.

Which gender has the most credit card debt?

In the United States, women owe more on credit card bills than men, according to a study by Nitro. Here, women are also disadvantaged by a gender pay gap, which makes it harder to repay debts like credit card debts, meaning they’re more likely to struggle with them for longer. Nitro’s study showed that 70% of female respondents owed money on credit cards, as opposed to 59.6% of male respondents. According to a study by Compare Cards, 26% of female credit card holders say they are not at all confident in being able to repay their credit card bills in full, as opposed to 14% of men.

In the United Kingdom, men owed £300 more on credit cards than women in 2020, according to a survey by Credit Fix. However, women are more likely to struggle to pay off debt than men, and take longer to pay it off. Women are also more likely to take out credit to pay for everyday necessities such as food and clothing, rather than luxuries.

Five steps to deal with credit card debt

Credit card debt can feel really insurmountable at times. The good news is, there is a lot of help out there, and it really is possible to become debt-free. Here are five steps that can be take to gain control of credit card debt.

1. Make a budget

A budget can help get spending under control, and highlight what can be saved to pay off credit card debt faster. Most people have a vague idea of what they earn and their expenses, but a proper budget can pinpoint exactly where money is being lost unintentionally.

A great way to budget is the three accounts system, recommended by Christians Against Poverty, which helps spenders separate their money into three accounts, and keeps them from accidentally overspending. One account is for standing orders and direct debits, for example, mortgages or rent, household bills and debt repayments, one is for weekly spending and one is for saving.

For anyone to make a good budget using the three accounts system, it’s a good idea to first sit down and work out their exact income (that is, their monthly salary or benefits), and how much their essential direct debits and standing orders amount to each month. They should put the money they need for those in the first account. Next, they should work out much is needed for essential spends, such as the weekly food shop, and place that amount in the second account. Whatever is left over can be saved in the third account, and put towards clearing credit card debt faster. It’s also useful to do things like compare energy providers on Uswitch.com to see if cheaper deals are available, or change to a pay-as-you-go contract (which can be cheaper and involves less commitment) at the end of a phone contract.

2. Debt consolidation

Debt consolidation may be a good option to consider for those currently dealing with a lot of high-interest credit card debt. Debt consolidation involves taking out a single loan with better terms to pay off a range of debts, leaving the holder with just one, manageable payment per month and less interest to pay.

Debt consolidation does have its pros and cons, and it’s definitely worth looking at each of these before deciding if it’s the best way forward. While debt consolidation should enable a better deal in terms of interest, it will usually have to be paid off over a longer period of time, which could mean paying more in the long run. Debt consolidation doesn’t solve debt, it just moves it around in a way that hopefully makes it more manageable. It is not a good idea to consider debt consolidation where there is already bad credit, as applicants are unlikely to get the low interest loan that would make consolidating existing debt worth it.

For people dealing with a lot of credit card debt, a good option is to obtain a 0% balance transfer credit card (which involves a 0% interest period) and use that to pay off high-interest debts. This helps borrowers pay less interest and hopefully pay off debts more easily. However, it’s essential to make sure that it’s possible to pay off the existing credit card debts within the interest free period, as interest is likely to spike quickly after this.

3. Debt snowball method

Struggling with debt is a psychological issue, and when one feels it’s impossible to get out of debt, it seems pointless to try and do so –one might as well take out more credit cards. But actually, it is very possible to make a dent in any credit card debt, and eventually clear it for good. The debt snowball method is a great way to keep up motivation for paying off debt: the user focuses on paying off the smallest debt first, while making the minimum payments on all their other loans. This way they get the rush of paying off a debt faster – once the balance on the smallest debt is paid, they get that endorphin rush of achievement and move onto the next smallest. Alternatively, they can try the debt avalanche method, which is when debt with the highest interest is cleared first, saving further money.

4. Contact a debt charity for support

It’s a good idea to get free, expert advice on debt before taking any formal action. Charities like StepChange, National Debtline and Christians Against Poverty can provide excellent support and advice for those struggling with debt, from how to contact creditors to putting a plan in place to get rid of debt for good.

Charities like these often offer free debt management plans, which can help clients who are really struggling. They can negotiate a debt management plan with creditors, communicate with creditors on behalf of clients, and potentially get creditors to freeze interest and charges on the debt, so that it’s possible to repay it without worrying about rising interest charges. Possible avenues for help include:

• StepChange on 0800 138 1111

• National Debtline on 0808 808 4000

• Christians Against Poverty on 0800 328 0006 or 01274 760720

5. Solutions to write off debt

Unfortunately, it is sometimes impossible to take control of debt simply with lifestyle changes. The UK has a number of insolvency solutions for those truly unable to pay their debts, which will eventually write them off. However, these solutions will have a significant impact on customers’ credit ratings and lifestyles, so it’s worth considering whether they are the best course of action. Options include:

• Individual Voluntary Arrangement
  An Individual Voluntary Arrangement (IVA) is a government approved debt scheme, which helps those who can’t repay their debts. With an IVA, the borrower backs a small percentage of their total debt, and gets the rest of it written off. At the end of the IVA (which runs for 5-6 years), the rest of the debt is cleared, no matter how much is still owed. Borrowers make small, monthly payments towards their debt, based on what they can afford. They’ll get an Insolvency Practitioner (IP) who will look at their expenses and decide a reasonable amount for the monthly repayment, based on what’s affordable. While an IVA does affect the user’s credit score for its duration (5-6 years), once it is discharged (ended), the credit score will start to improve. IVA Advice offers free, qualified advice on getting an IVA.

• Debt Relief Order (DRO)
  If less than £20,000 is owed in total and the borrower has less than £50 disposable income, they could get a Debt Relief Order. This is a legal process which will gives protection from creditors, and writes off debt after one year. However, borrowers have to own extremely little to qualify for a DRO, which means that very few people can get one. For example, one can’t get a DRO if they’re a homeowner.

As we’ve discovered in this article, women are more likely than men to struggle with debt, and this points to the fact that women still face financial inequality, despite work over the decades to improve this. The expectation, no matter how unconscious, that women will perform childcare, unpaid labour, and caring responsibilities at the expense of their financial advancement, still runs through society in a way which blights women’s finances and exposes them to debt.

The editorial unit

The material contained in this article is of the nature of general comment only. The financial information is not advice and should not be treated as such.