About

Wage disparity extends beyond monthly paychecks. It compounds over time to create significant deficits in lifetime wealth. This tool quantifies the immediate percentage gap and projects the long-term financial impact including lost investment returns. It determines the specific calendar date where compensation effectively ceases relative to a higher earner. Accurate assessment requires analyzing both base salary and the compounding opportunity cost of lost capital.

Understanding the Opportunity Cost is critical. A salary deficit of $5,000 invested annually at 7% results in a loss far greater than the sum of the missing wages. This calculator uses standard financial formulas to reveal the true magnitude of the pay gap over a specified career span.

Formulas

The Pay Gap Percentage is calculated by comparing the lower salary (S_B) to the benchmark salary (S_A):

Gap = (

1 − S_BS_A

) × 100

To determine the total wealth loss, we calculate the Future Value (FV) of an annuity due. This assumes the annual difference (D) is invested at an annual return rate (r) over (n) years:

FV = D × (

1 + r

)ⁿ − 1r

The "Free Labor Date" represents the day in the year when the lower earner stops accumulating value relative to the higher earner. It is derived from the ratio of salaries applied to the calendar year:

Day = 365 × S_BS_A

Reference Data

Annual Gap	Timeframe	Direct Wage Loss	Lost Investment Potential (7%)	Total Wealth Gap
$1,000	10 Years	$10,000	$3,816	$13,816
$1,000	20 Years	$20,000	$20,995	$40,995
$1,000	30 Years	$30,000	$64,463	$94,463
$5,000	10 Years	$50,000	$19,082	$69,082
$5,000	20 Years	$100,000	$104,977	$204,977
$5,000	30 Years	$150,000	$322,316	$472,316
$10,000	10 Years	$100,000	$38,164	$138,164
$10,000	20 Years	$200,000	$209,955	$409,955
$10,000	30 Years	$300,000	$644,632	$944,632
$20,000	20 Years	$400,000	$419,910	$819,910
$20,000	30 Years	$600,000	$1,289,265	$1,889,265
$50,000	25 Years	$1,250,000	$1,912,448	$3,162,448

Frequently Asked Questions

The Free Labor Date is a symbolic representation of the pay gap. If Person A earns $100,000 and Person B earns $80,000, Person B effectively stops getting paid relative to Person A after completing 80% of the year. Any work performed after this date is statistically unpaid compared to the higher earner's rate.

Money has time value. When you are underpaid, you lose not only the cash in hand but also the ability to invest that cash. Over 20 or 30 years, the compound interest on that missing money often exceeds the direct wage loss itself.

No. This tool calculates the Gross Pay Gap. Tax brackets vary significantly by region and marital status. However, the pre-tax gap is the standard metric used for salary negotiations and labor statistics.

If the "Comparison Salary" is higher than the "Benchmark Salary", the gap will be negative. This indicates that the second person earns more than the first. The tool will simply display the surplus rather than a deficit.

The 7% figure is a standard historical average for inflation-adjusted stock market returns (e.g., S&P 500) over long periods. While past performance does not guarantee future results, it is a widely accepted baseline for long-term financial modeling.