KPMG estimates that 6,500 talented women can be in the Australian workforce if we reduce workforce disincentives. It is time to start rethinking equity with an increased focus on gender.
The cost of coming back to work
KPMG's report, The cost of coming back: Achieving a better deal for working mothers shows that it can cost some professionally qualified working mums almost $30 a day in tax, lost payments and out-of-pocket childcare expenses if they increase their working days from three to four per week. Other working mothers can lose almost $80 a day if they move from four to five days of work per week.
These are just some of the punishing disincentives confronting working mothers up and down the pay scale.
By reducing workforce disincentives facing professional, university-educated women, KPMG estimates up to 12 million working hours could be added to the economy annually. This is the full-time equivalent of an additional 6,500 highly talented women in the Australian workforce.
The report urges a national rethink of the notion of equity. The interplay of the tax and transfer systems is clearly aggravating the negative consequences of social biases against women. It is time to start rethinking equity with an increased focus on gender.
Workforce Disincentive Rate
The KPMG report develops a measure of the deterrence facing working women – the Workforce Disincentive Rate. This is the proportion of any extra earnings that is lost to a family after taking account of additional income tax paid, loss of family payments, loss of childcare payments and increased out-of-pocket childcare costs.
A 100 percent Workforce Disincentive Rate rate means the family is no better off from the mother working more hours, while a Workforce Disincentive Rate greater than 100 percent indicates the family is actually worse off when the mother works additional hours.
KPMG’s study finds Workforce Disincentive Rates of between 75 percent and 120 percent are commonplace for mothers seeking to increase their days of work beyond three per week.
The particularly severe Workforce Disincentive Rates of over 100 percent would be experienced by professional, university-educated women whose fourth or fifth working day caused the family’s income to exceed one of two “cliff” thresholds, significantly reducing the family’s Child Care Subsidy entitlement as a consequence.
However, KPMG recognises that fixing the problems for those professional women would not affect the numerous disincentives for working women with young children further down the income scale. Without a major shift in the public policy philosophy underlying taxpayer-funded childcare support, these female workforce disincentives will persist.
This is the second in a three-part series of papers addressing issues of gender inequality in the workplace. KPMG’s first report in the series, Ending workforce discrimination against women, is also available.
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Other reports in the gender equity series
- Addressing the gender superannuation gap
- Parental equality and unpaid work reforms
- 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