In 2019, (Un)Equal Pay Day will be on 28 August. This date is calculated by the Workplace Gender Equality Agency (WGEA) to mark the 59 additional days from the end of the previous financial year that women, on average, must work to earn the same amount that men earned in that year, for the same full-time work week.
What is the ‘gender pay gap’?
The ‘gender pay gap’ is the difference in average earnings between men and women, on a full-time equivalent basis (so as to take account of differences in work hours). It reflects differences in pay per hour of work due to factors including: occupation and industry composition; work hours; work experience; workplace hierarchies; seniority; and discrimination. The persistence of a gender pay gap is irrefutable; it is evident in all income and earnings data for Australia and in other comparable countries.
The latest ABS data on national average weekly earnings for ordinary full-time work hours indicates that men earn 14% more than women as of May 2019, a difference of $241.50 per week. On average, women working full-time earned $1484.80 while men working full-time earned $1726.30 in May 2019.
On a total earnings basis for full-time work, the gap between men and women in Australia is even larger, because men earn more than women in additional income from bonuses, dividends and overtime payments. The WGEA calculates that the full-time total remuneration gender pay gap in 2017-18 was 21.3%, meaning men working full-time earned an average of $25,717 more than women working full-time in that year.
The gender pay gap is not identical to ‘equal pay for equal work’. A business or industry can genuinely pay men and women equally for work of equal value (or equal status or training) to all its workers and yet still experience a gender pay gap.
Is the ‘gender pay gap’ getting bigger or smaller in Australia?
The good news is that Australia’s gender pay gap has shrunk over the past five years, from a recent peak of 18.5% of male full-time earnings in 2014 to 14.0% in May 2019, according to the Australian Bureau of Statistics (ABS) (see Chart 1).
The bad news is that although the gender pay gap is shrinking, it continues to indicate a significant difference in earnings between men and women, for equivalent full-time work. This has significant implications for other aspects of gender inequality including, for example, in superannuation and retirement incomes, wealth holdings and housing.
The gender pay gap is evident at all stages of men and women’s working lives, from first job and graduation through to retirement, but it gets larger later in life. It is evident across all occupations, skill levels and industries.
Chart 1: Australia’s gender pay gap (full-time average weekly ordinary time earnings, excluding overtime and bonuses)
What factors are contributing to the ‘gender pay gap’?
There is a large body of research into the causes of gender pay gaps in Australia and internationally that point to a range of factors that need to be addressed. It indicates there is no single cause and therefore no single ‘easy’ solution that can close the gender pay gap all on its own. Rather, there are a range of policies and actions that need to be implemented in response.
The latest evidence for Australia is summarised in a recent report, She’s price[d]less 2019 by KPMG, the Diversity Council of Australia and WGEA. The results show that the overall pay gap has reduced by $0.58 per hour between 2014 and 2017, however, the relative contribution of gender discrimination to the pay gap has increased. Drawing on detailed analysis of data from HILDA and the ABS, this research concludes the reasons for the gender pay gap are:
- Gender discrimination. This continues to be the single largest factor, accounting for 39% of the gender pay gap.
- Work hours and experience. The combined impact of women’s years not working due to career interruptions, part-time employment and unpaid work account for 39% of the gender pay gap. Currently, 47% of Australian working women work part-time compared to 18% of working men, so the gap between men and women in paid work experience hours tends to build up over a typical worker’s life cycle.
- Occupation and industry segregation account for 17% of the gender pay gap.
The relative contribution of each factor known to affect Australia’s pay gap in 2014 and 2017 is illustrated in Chart 2. This shows discrimination to be the single largest factor in both years, followed by career interruptions. These factors did not decrease. Pay gaps caused by industry and occupation segregation decreased between 2014 and 2017. These disparate and persistent factors imply that more needs to be done by Governments, businesses and the whole community in order to close the gap entirely. For example, governments could do more to support equality of education and training, and greater occupational and industry diversity, by encouraging women to undertake STEM programs.
Chart 2: Factors contributing to Australia’s gender pay gap (average pay per hour) in 2014 and 2017
Gender pay gaps are evident across all occupations, skill levels and industries in Australia, but they are larger in some industries than in others (Chart 3). On a full-time earnings basis (excluding bonuses and overtime), the smallest gender pay gaps in 2019 are in ‘other services’ (3%), retail trade (4%) and public administration (5%). The largest are in finance (24%), professional services (24%) and healthcare (24%) where, on average, women earn 24% less than men for equivalent work hours. Interestingly, the largest industry-level pay gaps do not correspond to the industries with the highest degrees of gender segregation. Healthcare is one of the most ‘feminised’ of industries (78% of its workers are female) but finance and professional services have almost equal proportions of male and female workers.
Chart 3: Gender pay gap by industry, to May 2019
How does Australia’s gender pay gap compare to other countries?
The OECD estimates that Australia’s gender pay gap is slightly smaller than the OECD average. It is smaller than in most other English-speaking countries (such as the US, Canada and the UK), but larger than in New Zealand, France and several others, when calculated on the same basis for the latest year of data that is available (full-time average weekly employee earnings in 2017 or 2018, see Chart 4).
Chart 4: Global gender pay gaps (full-time average weekly ordinary time employee earnings, excluding overtime and bonuses)
What can businesses do to help close the ‘gender pay gap’ in 2019?
An increasing number of employers are now conducting gender pay gap audits and examining how formal and informal pay practices may be inadvertently contributing to the gender pay gap within their organisations. Leading businesses are adopting an array of initiatives to narrow organisational gender pay gaps, by adopting low-cost and inclusive actions for all employees, not just women.
These steps are not unique to large organisations and nor are they exhaustive, but they may assist organisations of all sizes and gender composition and foster better workforce engagement:
- Limiting the role of an employee’s past salary in determining pay for a particular position – perpetuating any previous pay inequity is not going to narrow any organisational gender pay gap.
- Introducing greater transparency and accountability to the awarding of bonuses and discretionary pay to employees. Discretionary or bonus pay has been identified as a form of remuneration that can enlarge organisational gender pay gaps because of limited transparency in discretionary pay processes.
- Managerial training on unconscious bias and how it can skew one’s view of merit in evaluating employee performance.
- Promotion of high potential employees with options to opt-out of senior roles rather than waiting for such employees to come forward with applications.
- Embedding job flexibility for all in a broad range of roles, including senior and managerial positions.
- Adopting sponsorship and mentoring programs to identify and support high potential employees.
- Embedding diversity recruitment targets within recruitment referral programs for employees. It’s great that employees can refer their friends for a job. A small tweak can help to ensure that such programs also promote workforce diversity.