Economic modelling in KPMG’s new report Ending workforce discrimination against women shows that halving the gap between male and female workforce participation rates would increase our annual GDP by $60 billion over the next 20 years. This could also result in a $140 billion lift in our cumulative measured living standards by 2038.
The problem is clear – women make up just over half of the Australian population yet, on average, they are paid $26,000 less per annum than men and, female superannuation payouts are currently 50 percent less than those of males.
In our report, we argue that workforce participation is the key – while Australia’s female participation has increased from less than 40 percent in the 1970s to around 70 percent in 2015, this still lags behind much of Europe, plus Canada and New Zealand.
More than half of Australia’s university graduates are female – so by not addressing barriers against women being active in the workforce, our society is not achieving the best possible return on that investment in women’s education.
Added to that is the cost in lower income tax revenue, lower consumer spending and ultimately extra dependence on the aged pension.
Childcare – the nub of the issue
The Productivity Commission has previously estimated that 165,000 parents, mostly women, would like to work, or work more hours but are unable to do so because of lack of affordable and suitable childcare.
KPMG argues that a significant investment in childcare is both essential and economically justified. Our modelling assume a doubling of current spending in this area.
The new Child Care Subsidy which comes into force on 2 July will help to a degree. But, the current phase-out rules will still inhibit the productivity gains that would come from experienced and qualified women maximising their working hours.
The report finds that a key problem lies in the interaction of Australia’s tax and transfer systems. The tax system effectively negates the benefits of the family payments and child-care subsidy so as to create punishing disincentives for women to increase their hours of work.
Take the case of a professional working mother earning the full-time equivalent of $100,000 per annum. In moving from 3 days per week to 4, this professional woman would obtain additional disposable income of just $14.50 per hour – less than the minimum wage.
If she moved from 4 to 5 days per week, her household would actually be worse off by more than $10 for each extra hour she worked. It is this interaction of the tax and transfer systems which needs to be addressed – it creates serious penalties for those women affected.
In looking at strategies to address the economic gender imbalances, we recommend further proactive policies, including:
- paying the superannuation guarantee on Commonwealth Parental Paid Leave and applying it to workers’ compensation payments.
- amending the Sex Discrimination Act to ensure employers are able to make higher superannuation payments to women if they wish to do so.
- reviewing the Fair Work Act to determine the effectiveness of Equal Remuneration orders in addressing gender pay equity – including a less adversarial consideration of the undervaluing of women’s work.
In terms of superannuation, some positive measures were recommended by a bipartisan Senate committee report on achieving economic security in retirement released in 2016 which include:
- removing the exemption from paying the superannuation guarantee in respect of employees whose salary or wages are less than $450 in a calendar month.
- retargeting of superannuation tax concessions to ensure they assist people with lower super balances – usually women – to achieve a comfortable retirement.
- a Productivity Commission inquiry into policy options to reduce work disincentives for second earners.
All of these measures should be capable of attracting support across the political spectrum. Our report finds that if recent slow progress in closing the gender pay gap were to be continued into the future, it would take until 2045 for it to be eliminated.
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Other reports in the Gender Equity series
- Valuing unpaid caring work
- Addressing the gender superannuation gap
- Parental equality and unpaid work reforms
- A better system of Paid Parental Leave
- Further investment in the Child Care Subsidy
- The Child Care Subsidy: Increasing support for caregivers
- A new deal for women pensioners who rent
- Achieving a better deal for working mothers
- Ending workforce discrimination against women