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March 15, 2012

Why Women Pay More

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How do manufacturers and retailers get away with it? We let them by not asking enough questions, doing enough research, or challenging vendors who give us a raw deal. In 2006, the Consumer Federation of America reported that women were 32 percent more likely than men to get saddled with costly, high-interest subprime loans — even in cases where their credit ratings and credit histories were better than the men's. That translated into paying thousands more in interest over the life of the loan. Public advocates were quick to point to discrimination as the reason, but economists had another theory: Women tend to rely on word-of-mouth recommendations when choosing a lender rather than shopping around for the lowest rate the way men do. We also find negotiating anathema, which means that the markdowns salespeople tend to give customers who haggle — say, in an appliance showroom — typically go to men. "The idea of just giving a discount to those who ask for one puts women at a strong disadvantage since they are less inclined to ask," says Yale Law School professor Ian Ayres.

But even if you're prepared to bargain, the odds are still stacked against you. Twenty years ago, Ayres published a landmark study proving that women got hosed at car dealerships. (The study has since been twice updated, with similar results.) On average, women were offered list prices $200 higher than prices quoted to white men. (Black women fared even worse — they were quoted prices $400 higher.) Ayres argued that women who pay inflated prices are so lucrative to dealerships, and account for such a huge chunk of commissions, that dealers are willing to let savvier customers go just to court these customers. Let's say you're the rare female buyer who actually does her homework. You walk onto the car lot confident and informed, asking all the right questions. The salesman will probably still offer you a lousy deal. "That's the perversity of it: He may be willing to sacrifice your sale in order to charge higher prices to all women, just to make sure he doesn't miss any home runs," explains Ayres. "It's a search for suckers."

The health-insurance market is also rigged against women — even celery-chomping, treadmill-loving paragons of health. An estimated 95 percent of insurers practice "gender rating," resulting in hundreds of dollars in higher costs for women, according to the National Women's Law Center. For example, a fit 25-year-old woman looking to buy an individual plan can be charged up to 45 percent more than a 25-year-old man, even when her policy excludes maternity care. More infuriating: Women who don't smoke often pay higher premiums than men who do.

When it comes to group plans — the kind your company usually provides — it is illegal for an employer to set different prices for male and female employees. But if your firm employs more women than men, insurers can subvert that law by jacking up everyone's premiums. "It's a standard industry practice going back decades," says Robert Zirkelbach, spokesman for America's Health Insurance Plan, an industry trade group, of higher premiums charged to women. He says women "tend to have more health-care costs than men" and see more doctors than men of the same age. But wouldn't a healthy woman who sees her doctor regularly be cheaper to cover in the long run than a smoker who avoids the doctor for years? "That is a hypothetical I couldn't begin to weigh in on," says Zirkelbach.

There are hopeful signs that women are leveling the pricing field, albeit slowly: Thanks to user-generated rating sites like Yelp, it's never been easier to call out businesses that aren't playing by the rules. President Obama's health-care bill, slated to take effect in 2014 (presuming it survives withering challenges by Republicans), will outlaw discrimination in individual health insurance policies. And because this is an election year (435 seats in the House and 33 seats in the Senate are up for grabs), there's never been a better time to share your outrage with — and dangle your vote at — your elected officials.

Or you can do what Janet Floyd did. After she was denied the laundering deal because her "blouses" didn't qualify as shirts, she swore off the cleaners altogether, washing and ironing them herself. "I haven't dry-cleaned a shirt since 2009," she says proudly.

Marie Claire has posted e-mail addresses for every member of Congress and governor in the country at marieclaire.com/womenpaymore. Drop yours a line demanding a federal law outlawing gender pricing.



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