Men: imagine an extra tax rate of 18% on top of what you already pay. This is the reality of the gender pay gap – a product of the modern workplace, where women on average earn 17 to 18% less than their male counterparts. Engendered by a collection of social factors, from the office to the home, this pay gap trickles down to cost Australian businesses and families billions every year.
The good news, however, is that we can fix it.
For every dollar a man makes, a woman only earns 83c
Research from recruitment firm Glassdoor, the Workplace Gender Equality Agency (WGEA), and FairWork Australia has confirmed this striking differential in wages. But the effect is compounded in the world of superannuation. ABS data indicates that women retire with just over half the superannuation as men – $104,734, compared to $197,054 . This wage gap has changed very little in over two decades.
To address the 60% superannuation gap between men and women, Vodafone launched a ‘Super Bump’ of $250 on 1st January 2017, a wage supplement that’s processed twice annually for every female Vodafone employee employed for over 12 months.
What creates a pay gap?
Several factors underpin the pay gap, a difference in economic access that facilitates erosion in workplace conditions, in family households, as well in the wider economy, where pay disparity contributes to ongoing wage inequality.
Interactive: Enter your starting wage and years worked to discover just how significant the gender pay gap really is in Australia. Our calculator was developed based on data from the WGEA, Fair Work Australia, the ABC and The Sydney Morning Herald, plus research from Fast Company, NAB, Harvard Business Review and Glassdoor.
Though the issue of the pay gap is extensive and complex, several primary themes run through the gender pay gap:
Industrial and occupational segregation accounts for some 38% of wage inequality in Australia. Despite constituting 46% of the Australian workforce, women hold 16.4% of board roles and 3.5% of CEO roles in ASX 200 companies.
Not only have female-skewed industries (eg., Healthcare, Education, and Social Assistance) historically paid less than their male-skewed skill equivalents, research from Professor of Economics at Harvard University Claudia Goldin shows that women are still overtly undervalued in male-dominated industries. For example, female surgeons can expect to earn 30% less than male surgeons, while women barristers will discover a whopping 150% difference in pay in Australia.
— WGEA (@WGEAgency) October 20, 2016
Unconscious bias in the hiring and salary negotiation processes tends to unfairly benefit men. When the ABS decided to put their hiring practices to the test in 2015, the annual recruitment drive was held completely blind. In a company with a 61% female workforce (yet only 21% female leadership), the ABS doubled the size of the female leadership team and reached a nearly 50/50 hiring split between men and women – all by hiring purely ‘on merit.’
The WGEA note that gender bias enforces a social penalty for women who negotiate during the recruitment process – they can be seen as hostile or combative for undertaking the same negotiation practices as men. A study from Carnegie Mellon University found that 57% of male graduates negotiate their starting salary, whereas only 7% of female graduates do – resulting in a 7.6% difference in starting salary. This unwillingness to bargain creates an uneven playing field, found to reduce the expectation of salaries and create a cycle of unfairness in the workforce.
Fair Work Australia identified that inflexible organisation structures restrict prospects for workers, as family and/or carer obligations are perceived as a potential workplace disrupter. Women are more likely than men to work part-time (or flexibly), where they encounter an additional pay gap at an hourly rate between full and part-time workers.
Vodafone Australia offers a range of flexible working options including out of office days, flexible hours, and a maternity leave program that allows 16 weeks fully paid leave, plus 30 hour weeks on full-time pay (for the first six months upon return). The program also includes up to 10 additional days of paid leave per year for employees experiencing domestic violence.
“We really value our staff, and this benefit encourages and supports women and parents to keep working with Vodafone.” – Vodafone Australia CEO Iñaki Berroeta
Why every CEO should care
Closing the wage gap should be an immediate priority for every CEO in the country.
For starters, closing the wage gap would actually be of monetary benefit to companies. A study from KPMG revealed that businesses could save up to $19 billion from providing 16 weeks of fully paid parental leave (recruiting and training new employees to replace women on maternity leave costs businesses $47 billion a year).
The “girl effect” applies to companies too. CEOs need to invest in women leaders. https://t.co/jNcfllELN5
— Cindy Hook (@cindy_hook) September 3, 2016
Equality in the workplace is also known to motivate and retain staff (reducing employee turnover), inspire consumer confidence and build a presence as a best-in-class employer brand (thus attracting better and brighter talent).
So, how do we fix it?
Closing the gender wage gap requires more than rhetoric. It requires leaders to be proactive ambassadors who implement policies, KPIs, and mandatory goals that address the issue head on.
At a recent Amplify talk by Deloitte Australia, CEO Cindy Hook discussed the value change required at a senior level in order to push change faster:
“There is a societal shift that needs to happen where ‘breadwinning’ and ‘caregiving’ become equally valued in society, and I think Australia is behind many parts of the world in putting value on that.” – Cindy Hook, CEO, Deloitte Australia
The WGEA have developed a number of tool kits for businesses to follow to help close the gender wage gap, with a few core best practices for businesses to ensure pay equality in the workforce.
A good first step is to create transparent remuneration policies and practices from recruitment all the way through to negotiation. This includes a regular review of pay rates to justify (or eliminate) any imbalances, recognition of a wider range of skills beyond those required for the role, and making additional work opportunities (like overtime) equally accessible from all employees.
— WGEA (@WGEAgency) October 14, 2016
A transparent hiring policy helps to remove unconscious bias in the recruitment process. Businesses are encouraged to remove names, age, and gender from applications to assess an applicant based on merit, particularly in the early recruiting stages.
A flexible working culture allows employees room to structure work hours around some external commitments. This could include working outside of the office, shifting start/finish times, or allowing for a shorter working week.
Pay gap myths
- The Pay Gap is closing rapidly: While women are certainly catching up to men at 82% of men’s wages as compared to 64% of men’s wages in 1980, the speed at which the gap is closing has slowed. At the current rate, it could take until 2056 to reach parity.
- Achieving equality will cost money: The US economy is $2 trillion bigger now than it would have been if women hadn’t increased their participation and hours. The US GDP could add $2.1 trillion if the country achieved equality.
- The pay gap is due to choices of occupation. Harvard economist Claudia Golden showed that even within fields, like law, wage gaps of up to 35% exist after controlling for race, education, and hours worked.
- To close the gap, we should focus on preventing discrimination. According to the Glassdoor report, bias only accounts for 25-30% of the pay gap and discrimination is already illegal. It’s arguably more productive to focus on employee compensation and leave entitlements. When Google increased family leave from three months to five and made it fully paid, the company saw a 50% drop in the number of mothers who quit.
Closing the gender pay gap requires businesses to think of their employees first and foremost, to take direct action, and to challenge the status quo of a desirable work environment. But if the data tells us anything, the result is a fairer, more productive, and ultimately more effective workforce.
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