Pay equity: two steps forward but one big step back!

The Australian Bureau of Statistics released figures in November 2010 that show, across Australia, women's average full-time weekly earnings are now 16.9 per cent less than men’s. When part-time and casual work is taken into consideration, the total earnings gap between men and women is 35.3 per cent.

This gender pay gap has a significant impact on women's lifetime earnings. AMP NATSEM’s She Works Hard for the Money: Australian Women & the Gender Divide (PDF 1.83MB) report quantified that the gender pay gap over a lifetime accumulates to an average earnings deficit of $1.5 million for all women; and $1.8 million for those with bachelor degrees or higher.

Thankfully there is widespread support in the community for addressing the problem. Auspoll polling (PDF 260KB), commissioned by Diversity Council Australia (DCA) and conducted during the recent federal election campaign, showed that 76 per cent of Australians agreed that steps should be taken to close the pay gap. However, some still don’t really understand the extent of the problem or the urgent need to act.

The “equal pay” concept that requires we pay women and men equally for doing the same work is enshrined in Australian industrial law. But this is only part of the story. “Pay equity” is a much broader concept that considers the value we place as a community on work that is gender-segregated across industries or occupations. Achieving real pay equity therefore means paying men and women equally for work of equal value.

So why is some work more “equal” than others? Our society has traditionally valued certain types of work more highly. Jobs such as healthcare, education and even human resources in a business context, have traditionally been seen as feminine and have been paid less because they are seen as “softer” and less important. Jobs that are perceived as more masculine such as engineering, senior management and stock-broking are seen as requiring tougher skills and have been traditionally more highly valued.

Pay inequity is exposed when comparing industries but it can also be found within organisations where men and women are segregated into different roles. Women are over-represented in lower-paid industries and in lower-paid occupations. They are also under-represented in higher paid occupations. For example, of the top 200 companies listed on the Australian Stock Exchange, women hold only six CEO positions and 8 per cent of Executive Key Management Personnel positions in 2010.

KPMG’s report, Understanding the Economic Implications of the Gender Pay Gap, commissioned by DCA, revealed that occupational and industry segregation, where there are differences in types of occupations and industries in which men and women typically work, together account for 28 per cent of the pay gap. Sex discrimination is also likely to account for another 35 per cent of the gap.

There are sound economic reasons why the gap should be addressed. Goldman Sachs JB Were’s landmark report, Australia’s Hidden Resource: The Economic Case for Increasing Female Participation (PDF 345KB), estimated that closing the gap between male and female employment will boost Australia’s GDP by 11 per cent and increase economic activity by over 20 per cent.

The KPMG report also found that closing the gap would result in greater competitiveness and economic output as workers would be better matched to their capabilities; companies would reduce costs through lower turnover rates; and individuals with the best skills and firm-specific knowledge would remain with the company.

This year has seen some encouraging progress in addressing the gap. The Australian Services Union and other unions initiated an equal remuneration order under the Fair Work Act for the social and community services sector. Under the test case, the unions are arguing that for too long the community services sector, which employs 85 per cent women and the highest number of multiple tertiary degree holders, has been under-valued and under-resourced.

Unfortunately, this progress has been dealt a blow with the federal government withdrawing its support for the funding component of the test case at the present time. The government is now presenting an alternative argument, claiming it will have too big an impact on the budget bottom line immediately post-GFC.

DCA understands the bottom line and the surplus issue. As the independent, not-for-profit diversity advisor to business in Australia, we were established by Australian business more than 25 years ago. We recognise that addressing the problem may initially cost more but strongly believe there is plenty of evidence that it will result in significant economic benefits in the longer term.