This study has examined the gender wage gap in Australia from a number of perspectives, and one of its key contributions has been to estimate the dollar impact of the gender wage gap on Australia’s economic performance.
The major findings of this report can be summarised as follows:
- The gender wage gap in Australia has persisted over the past twenty years. The size of the gap depends on the data being used to measure the ratio of female to male wages, but our analysis of the ABS Average Weekly Earnings Survey shows a wage gap of 17 per cent in 2009. Over the period 1989 to 2009 the size of the wage gap has remained fairly constant, fluctuating slightly between 15 and 17 percent.
- Previous research on the wage gap in Australia has been quite extensive, but drawing firm conclusions about the key determinants of the wage gap in Australia from the literature is difficult due to the range of findings, and the wide variation in samples, methods and focus in earlier studies.
- It is clear from previous studies that a large proportion of the wage gap in Australia cannot be explained simply by the differing characteristics or endowments of men and women. In most studies, a very large majority of the wage gap is due to differences between the wages of men and women that cannot be explained by the sorts of variables which are included in gender wage gap models. These unexplained differences in wages may be due to direct discrimination, or to other unmeasured differences between men and women
- In order to quantify the contribution of particular variables to the wage gap in Australia, as well as provide policy relevance, we use a simulation methodology developed by Olsen and Walby. This approach moves the average characteristics of women to those of men, and quantifies how much the wage gap would be reduced and how much women’s wages would improve if this were to occur. This process is undertaken for variables considered to have relevance to policy and gender wage differentials, and all other variables are treated as controls.
- Using this simulation methodology we find that the key determinants of the gender wage gap in Australia include industrial segregation (25 per cent), labour force history (seven per cent), under-representation of women with vocational qualifications (five per cent) and under-representation of women in large firms (three per cent). However, being a woman accounts for a very large 60 per cent of the wage gap. This finding is in line with other literature and represents that part of the wage gap which is due to discrimination or other differences between men and women not captured by differences in their measured characteristics.
- We find that the gender wage gap has a substantial effect on Australia’s economic performance. If the wage gap were closed entirely (that is, if women earned the same as men) we estimate that GDP would grow by around $93 billion. Much of this effect on economic growth is brought about through the channel of hours of work, with a narrowing of the gender wage gap leading to significantly more hours of work, and thus to greater economic growth. As mentioned above, a woman’s ability to work more hours is determined by a number of factors including the availability of appropriate and affordable child care. Further, increased hours of work for women has other implications, including the ever increasing struggle to balance work and ‘life’, and the division of household labour and care arrangements between men and women.
- Using our decomposition findings, we can also tentatively estimate the effect of each key determinant of the gender wage gap at a macro level. In particular, removing the negative effects associated with being a woman (direct discrimination and unobserved characteristics), might see an improvement in GDP of around $56 billion per year.
It is important to note that these findings do have limitations. Both the microeconomic and macroeconomic modelling included in this report incorporate a range of assumptions, and have various limitations in relation to data availability (discussed in the appendices). Both areas of modelling are the subject of vigorous debate about the strengths of a range of methodological approaches. While our work is strongly informed by best practice, and has been subjected to rigorous quality assurance procedures, it should be noted that the use of different data and alternative methodological approaches could potentially produce different results.
The findings in this research report are of particular relevance to policy makers. There are several areas highlighted where policy may contribute meaningfully in helping to reduce the gender wage gap in Australia, and in turn enhance economic performance and national well-being. Additional research that focuses on the contribution of each industry separately to the gender wage gap would also help inform and direct policy efficiently.