The impact of a sustained gender wage gap on the Australian economy is a report of research conducted by the National Centre for Social and Economic Modelling of the University of Canberra.
The research was commissioned for the Australian Government by the Office for Women.
The research had two main aims:
- to look at the determinants of the gender pay gap
- to quantify the costs of gender pay gap to the economy
Determinants of the gender pay gap
NATSEM found these key reasons for the gender pay gap:
- being a woman (60%)
- industrial segregation (25%)
- labour force history (7%)
- under-representation of women with qualifications (5%)
- under-representation of women in large firms (3%)
NATSEM found that being a woman was the single largest reason for the pay gap (60%). This is consistent with results for other Australian studies which highlight the considerable impact that being a woman has on wages.
Other differences between men and women such as women’s choices of careers, jobs and work hours, consideration of caring responsibilities, women’s work motivations, bargaining power and appetite for risk, as well as discrimination against women that occurs in the workplace, all impact heavily on the gender pay gap.
Costs of the gender pay gap to the economy
NATSEM estimates that the 17 per cent pay gap between men and women workers costs the Australian economy $93 billion each year. This equates to 8.5% of GDP.
The gap impacts negatively on women’s labour force participation. That is, women earning less than men acts as a disincentive for women to enter paid work or to work more hours.
NATSEM estimates that the Australian economy would grow by 0.5% of GDP - $5.5 billion or $260 per person - if the gender wage gap was reduced by only one per cent.
NATSEM found that removing the effects of being a woman from the wage gap would increase the average wage of an Australian woman by $1.87 per hour or $3,394 annually. If this element alone were eliminated, ignoring all the other complicated reasons for the wage gap, NATSEM suggests that Australia could add $56 billion or 5.1 per cent to total annual GDP.
This research supports the conclusion that the gender pay gap creates work disincentives for women: women have a reduced incentive to work or work more because they earn less than men.
The research finds that there are significant economic benefits to addressing the wage gap.
Few studies have sought to detail the impact of the gender wage gap on economic growth. This report is a valuable addition to the evidence-base on pay inequity.
The Government has already taken important and significant steps to improve pay equity for women, including:
- Changes to the Fair Work Act to include the right to equal pay for work of equal or comparable value. This is a more generous test allowing comparisons between comparable categories of work where the female-dominated category may have been historically under-valued.
- A new right for parents to request flexible working arrangements, such as changes in hours of work, changes to the pattern of work or changes in the location of work will help parents with the juggle between work and family. And new parents also have a new option to request to extend parental leave by a further 12 months;
- A special bargaining stream for the low paid that will benefit many women in low paid sectors, such as cleaning, childcare and the community sector.
- New protections from discrimination in the workplace on the grounds of pregnancy, sex and now for the first time, caring responsibilities
- a process to progress a pay equity test case under the new provisions in the Fair Work Act for the social and community services sector. This case was lodged by the ASU on 11 March 2010.
The most important step is the historic introduction of Australia’s first Paid Parental Leave scheme.
The Government will soon introduce legislation so that from 1 January 2011, eligible employees will receive up to 18 weeks of taxable payments paid at the level of the National Minimum Wage.
The Paid Parental Leave scheme will support stronger families and give children the best start in life. It will foster increased workforce participation by helping women maintain their careers.
The government is also considering these issues further through its review of the Equal Opportunity for Women in the Workplace Act 1999 which will be announced later this year.
The work of the Equal Pay Alliance, with strong support from the ACTU, is very welcome. Action from all sectors of the community, including business, unions and government, is needed to improve pay equity.