Credit risk

Interest rate hikes increase credit risk of being a woman, says expert

Pipeline Equity CEO Katica Roy joins Yahoo Finance Live to explain how Fed interest rate hikes disproportionately impact women.

Video transcript

SEANA SMITH: The latest employment figures are out and they show a huge disparity between men and women in the labor force. 10 million more men than women are employed and 17 million fewer women in the labor force than men in general. We want to bring in Pipeline Equity CEO Katica Roy, who is now joining us in the studio.

Katica, it’s great to have you here in the studio for the first time in a while. 390,000 women, however, in this report we just released this morning leaving the labor force last month. And you and I have talked many times about women staying out of the workforce. Now we have even more women leaving. Why do you think this is?

Katica Roy: Well, there’s probably… there’s two reasons… there’s two reasons. The first is that as we see fewer jobs, women tend to be the last hired and the first fired. It is certainly part of what is happening. The other element is digital acceleration. So the jobs that existed at the start of the pandemic don’t exist – not necessarily right now. So we really need to train women for the jobs that are available.

RACHELLE AKUFFO: So, Katica, how do we get women into the jobs that are now available? How do we somehow connect these dots?

Katica Roy: Yeah, there are really two rooms. One is this fair jurisdiction, which has two purposes. One of them is to ensure that women have access to skills opportunities. So, for example, in the infrastructure bill, 100% of those jobs require skills. So it’s an opportunity. But the other is actually making sure that women have an equal opportunity to apply those skills because we know, for example, in STEM, that half of all women will actually leave in the course of First 10 years in STEM.

SEANA SMITH: And Katica, right now we are in a period of high inflation. The Fed has become very aggressive. You dig in and tell us that rate hikes actually affect women more than men. How?

Katica Roy: Well, there are two rooms. So we know, for example, that the rate of inflation for goods and services for women is twice that for goods and services for men. But the other thing is that when the Fed raises rates, it’s actually a higher credit risk to be a woman. So we get higher rates for mortgages and car loans.

SEANA SMITH: So right now, while we hear that the Fed is going to continue to stay very hawkish, potentially weakening the economy, right now we have 1 and 1/2 million women who still haven’t returned to the workforce . What do you think that number will look like in six to eight months?

Katica Roy: That’s an excellent question. I do not really know. But what I do know is that it will probably get worse before it gets better. And one of the really unfortunate things about what the Fed does is that it actually hurts women. If we got those 1.5 million women back into the workforce, we could actually close the gap between the number of jobs open and the number of people looking for work by almost 35%. It would cool the economy so we don’t have to keep raising rates.

RACHELLE AKUFFO: And Katica, you talked about the Fed considering women when looking at this picture of full employment. What do you think they’re missing from the picture right now?

Katica Roy: They don’t look at it through an intersectional lens of gender equity. So they don’t look at it from the perspective of gender, race and ethnicity. So, for example, we talked about the one and a half million women who are missing from the labor force.

If you look at this through intersectional gender equity, so specifically for black women and Latinas, black women are currently at over 8% unemployment since the start of the pandemic. And Latinas are just over 6%. They have therefore not reached full employment. If we put policies in place to increase their employment and labor force participation, we will chill the economy.

SEANA SMITH: And Katica, when you look at the breakdown of minimum wage workers between men and women, how does that compare? And I guess, how does that compare to what we saw before the pandemic?

Katica Roy: Well, women make up the majority of all minimum wage workers in the United States. It’s about 56%. The real – one of the real concerns is that this year the pay gap has actually widened for almost all women. So it’s $0.05 to $0.11. This is in addition to inflation-adjusted wages. In fact, we earn less. And so women not only have less money going into their wallets, they actually have more money coming out of them.

RACHELLE AKUFFO: So Katica, for some of these companies looking at this and thinking, what’s the business value of hiring more women, does that affect their bottom line or how does that affect the economy, what do you — how do you convince them that it’s not only nice to have, but also a smart business?

Katica Roy: Well, that’s… Pipeline started with research. We conducted a study of 4,000 companies in 29 countries. And what we’ve found is that for every 10% increase in intersectional gender equity, there’s a 1-2% increase in income. Here’s what’s interesting about it. As we look at the downturn in the economy, the return on an equity investment during a downturn is actually double. So right now, companies should redouble their efforts to ensure equity in their workforce, not just hiring and not just paying, but things like performance potential and development.

SEANA SMITH: Very important message for everyone involved, especially for companies that are hiring right now. Katica Roy, nice to have you. Thank you so much for joining us in the studio.

Katica Roy: Thank you for hosting me.