Seven years on from a landmark review [i] examining the economic implications of the gender pay gap in Australia an update report, released today by KPMG Australia, has found that sex discrimination continues to be the single largest factor contributing to the gender pay gap. And disturbingly, it’s on the increase.
The gender pay gap has remained stubbornly flat for the past 20 years - currently sitting at around 16.2% [ii].
Understanding the drivers of the gender pay gap is critical to designing interventions which will enable organisations to close the gap. The KPMG Australia report - She’s Price(d)less: The Economics of the Gender Pay Gap - prepared for Diversity Council Australia (DCA) and the Workplace Gender Equality Agency (WGEA), aims to do just that.
The report uses structured econometric modelling to determine the factors that underpin the gender pay gap, and to what extent they contribute. The report is partnered with an Executive Companion document highlighting a range of tactical improvement opportunities for every size of business in Australia, and supported by case studies from some of Australia’s leading companies.
“The drivers of the gender pay gap are complex. They include a broad range of factors including human capital and educational qualifications, on-the-job training and accreditation, work experience and tenure,” said Susan Ferrier, National Managing Partner for People, Performance and Culture at KPMG Australia.
“Critically, they also include labour market discrimination – where skilled individuals may face different earning potential and employment opportunities due to discrimination by gender, values and culture,” she said.
Libby Lyons, Director, Workplace Gender Equality Agency said: “The gender pay gap is a powerful symbol of lost potential for individuals, businesses and the economy. Understanding the factors that lead to women being consistently undervalued in the workforce is critical to creating change.”
“Clearly we need to redouble our efforts to address the gender pay gap. And while organisations can do a lot to close the gap in their individual workplaces, there are structural inequities between industries and in the wider economy which must also be addressed. Business, government and the wider community all have a role to play,” commented Lisa Annese, CEO of Diversity Council Australia.
- Sex discrimination continues to account for the single largest component of the gap. This component of the gap is increasing over time (from 35% in 2009 to 38% in 2016). The research shows that systemic discrimination remains a persistent feature of the workforce, while the proportion of the pay gap that can be attributed to differences in skills, tenure and education between men and women decreases each year, as women continue to close the gap in terms of education and labour participation.
- The proportion of the gap attributable to part-time employment has decreased from 14% in 2009, to 4%. Women are still over-represented in part-time employment, making up 71.6% of this workforce. Of women working part-time, the proportion of those who fall into higher income brackets has increased since 2009. These changes are significant when considered against the efforts undertaken by Australian businesses in the last several years to normalise cultures of working part-time and flexibly.
- One of the most significant contributors to the gap is the influence of ‘traditional’ roles and industries for women and men, which accounts for almost one third of the total wage gap. Jointly, industrial and occupational segregation accounts for 30% of the gap. While significant gains have been made in occupational segregation in the last seven years for women (reducing from 18% in 2009 to 11% in 2016), these are countered by increases in industry segregation. In the period under review, the proportion of men in male-dominated, higher paid industries such as mining and construction has grown – as has the proportion of women in female-dominated, lower paid industries such as healthcare and social assistance.
- The proportion of the gap attributable to years out of the workforce has increased from 9% to 21%. This reflects the criticality of businesses continuing to identify and address the structural barriers that prohibit women from returning to the workforce. Recent research continues to highlight the additional pressures on women in this respect, in particular in relation to the compounding effect on lifetime wealth accumulation and superannuation. Notably the 2007 HILDA survey included 'access to unpaid maternity leave' as a factor, which was subsequently omitted in 2014 as a result of the introduction of a Government funded Paid Parental Leave scheme. However, in both reports it is clear that interruptions in work history continue to play a role in explaining the gender pay gap.
KPMG has identified the following relative contribution of factors in driving the gender pay gap:
Taking Action: The Executive Companion
The Executive Companion identifies six areas with supporting actions to help businesses mature their position on addressing the gender pay gap:
- Know the numbers – It is crucial to first understand the quantum of the pay gap in the context of a particular business and industry, including an honest assessment of the cultural, environment and business behaviours and processes which may be contributing.
- Leverage the lifecycle – Key phases of the employee lifecycle (e.g. recruiting, performance review, remuneration setting and reporting) provide an opportunity to consider how current business processes could be amended to drive great equality in pay outcomes.
- The ‘caring conundrum’ – A key focus area for workforce participation is the early to mid 30s period which often coincides with child bearing and rearing years. This is a critical juncture at which many women opt out of fulltime work, moving to part time roles. Businesses need a focus on how they can retain employees who take time out and ensure their return is sustainable.
- Train the team – The availability of on-the-job training initiatives provide critical access to skill development and the building of professional networks which can drive women’s greater participation and career progression.
- Deal with the dollars – While remedying the processes going forward is critical to achieving pay equity, steps to redress remuneration-related gender bias which women have encountered in the past must be taken.
- Change the culture – The right organisational culture is absolutely essential to driving out the behaviours that lead to the pay gap. It is critical to realise that intervention will be required to address the pay gap problem in a timely manner at an organisational and macro-economic level.
“While the research reveals outcomes which are disappointing, we need to keep talking about this challenging issue. It would be easy to stop talking because it seems too hard. Many Australian businesses are showing great commitment to diversity and inclusion programs and we have seen some fantastic examples of innovative programs and strong leadership addressing the gap,” said Susan Ferrier.
“We are confident that this research will be a valuable contribution to keeping this conversation relevant by understanding the true factors that influence the gap. We need more purposeful, impactful action,” she concluded.
[i] Understanding the Economic Implications of the Gender Pay Gap in Australia, 2009, KPMG Australia.
[ii] Workplace Gender Equality Agency (WGEA), 2016, Gender Pay Gap Factsheet, August 2016.