June 2016

Inside Australia’s gender pay gap

  • By Associate Professor Rebecca Cassells, Principal Research Fellow, Bankwest Curtin Economics Centre, Curtin Business School, Curtin University

New evidence highlights a number of opportunities to target and reduce gender pay gaps across Australian organisations, including those in the minerals sector

Despite major advances for women in both educational attainment and workforce participation, the gender pay gap remains a permanent fixture of the Australian labour market, with the full-time gender pay gap remaining at or around 20 per cent for more than two decades. The pay gap currently stands at around 18 per cent, with women earning on average only 82 per cent of a man’s pay (ABS, 2015). This means that a woman would have to work an additional 65 days each year to earn the same as a man (WGEA, 2015).

The persistence of the full-time gender pay gap is surprising given the advancements women have made in education, particularly younger generations. Australian women have achieved parity with men in education and health according to the Global Gender Gap Index, but do not fare as well in economic participation and opportunity or political empowerment. Women currently outnumber men at universities and achieve higher marks across the board throughout their schooling years. The lower labour market returns that women are likely to receive despite the considerable investment in human capital is a concern from both a social justice and an economic perspective.

Persistent gender pay gaps have been shown to affect economic growth negatively through disincentivising labour force participation (Cassells et al, 2009; KPMG, 2009). Gender pay gaps are manifested in other forms of gender inequity, such as restricting the accumulation of wealth in the form of property and superannuation, increasing the reliance on government assistance over the life-course, and increasing the likelihood of women living in poverty at every life stage.

Numerous actions and initiatives have been implemented by organisations, industries and government to address the gender pay gap. Legislation has been enacted to prohibit discrimination based on gender; government policies have sought to support women’s participation in the paid labour force through childcare and the tax/transfer system; and numerous organisations have continued to advocate for gender equity within the workplace. Yet despite all of this activity, inertia exists and the full-time gender pay gap remains stubbornly high.

More recently, the Workplace Gender Equality Act 2012 was legislated to promote and improve gender equality in remuneration and employment within Australian workplaces. The act requires organisations to report annually against a number of gender equity indicators, including remuneration and female board representation, and provides each organisation with an individual report that compares its gender equity standing to industry benchmarks. In 2014-15 the Workplace Gender Equality Agency (WGEA) reporting data captured almost 4 million employees and more than 12 000 employers.

Australia is one of only a handful of countries to require such comprehensive reporting of gender equality indicators across organisations. The UK has recently initiated a similar policy, but goes one step further by requiring big companies to publically disclose their gender pay gaps. A number of Australian companies have also made commitments to do this, with the big four accounting firms disclosing company-wide gender pay gaps towards the end of 2015.

The Bankwest Curtin Economics Centre (BCEC) partnered with the WGEA to produce a Gender Equity Series, using the new data reported by organisations across Australia. The insights contained in the report are intended to shine a light on the conditions under which gender pay gaps are most likely to occur and generate discussion and debate about how to promote pay equity in Australian workplaces. Some of the key insights
are discussed in this article.

Gender pay gaps among senior managers

A key finding of the report was the greater remuneration men receive compared to women in almost every scenario – particularly among more senior occupation levels, where award agreements play a lesser role and pay setting is more discretionary in nature.

Within the managerial grouping, the gender pay gap widens as the management level increases (Figure 1). Among top tier managers (those reporting directly to the CEO), female managers are paid on average $100 000 less than their male counterparts when comparing total remuneration.

graph11

A notable feature of these comparisons is that the average total remuneration for female managers is equal to the base salary for male managers across all managerial groupings. These gaps in remuneration can result in significant differences in earnings not only on an annual basis, but also as men and women progress through their careers.

Both women and men receive additional remuneration beyond their base salary, which can include superannuation, bonuses, share allocations, allowances, overtime and other discretionary pay. However, men consistently earn more additional remuneration than women. Women working full-time are paid an average additional 18 per cent of their base salary in extras and men an additional 25 per cent of their base salary. That leads to an average male ‘bonus’ premium of almost eight percentage points for full-time workers.

Large and persistent gender pay gaps among managers highlight the likely evidence of biased organisational behaviours, where men are given preferential recruitment and pay treatment over women at senior management levels. This is further evidenced by the greater additional remuneration that men receive compared to women beyond their base salary in the form of bonuses, superannuation and other discretionary pay.

These differences in remuneration at the top end of the occupation scale are shown to have severe negative impacts on women’s expected career earnings, where women progressing through managerial levels at the same pace as men can expect to earn $600 000 less in a ten-year period.

A number of industries fare better than the overall industry average when examining gender pay gaps among managers. Table 1 shows the full-time gender pay gap across the four managerial levels within each broad industry grouping. Manufacturing, electricity, gas, water and waste services, wholesale trade, and education and training tend to have consistently lower gender pay gaps across their managerial levels when compared with the overall industry average.

graph12

The mining sector has considerably lower gender pay gaps across all management tiers when compared to the all industry average. However, as with most industries, the gender pay gap within the mining sector increases with the management level, from eight per cent for ‘other managers’ to 17 per cent for ‘key management personnel’.

Women on boards and gender pay gaps

Female representation on governing bodies and boards speaks to basic considerations of gender equity in recognising the achievements of women in senior leadership positions. Yet there are many additional benefits from achieving gender balance in board representation. The role model effect from seeing women on boards gives powerful encouragement to talented women in management positions. Achieving gender balance in organisational governance structures is both reflective of, and can lead to, a broader recognition of equity and diversity in core business values. And there is strong evidence to show that improved gender diversity leads to better decision-making and business outcomes. A number of studies have shown a positive effect of board gender diversity on outcomes such as corporate performance (see for example Adams and Ragunathan, 2013; Anderson et al, 2011), fraud (Capezio and Mavisakalyan, 2015), and social responsiveness (eg Galbreath, 2011; Williams, 2003).

Overall, around 37 per cent of organisations have no female representation on their boards (Figure 2). For 29.8 per cent of organisations, women directors make up no more than a quarter of all board members. Around 12.7 per cent of organisations have up to a third of female board members, and a further 14.1 per cent up to a half. Only 6.3 per cent of organisations have more women than men serving on boards.

graph13

There is a huge gap between the best and worst performing industry sectors when it comes to achieving gender equity in board representation. For example, there are no women sitting on boards for at least half of all organisations in retail (50.7 per cent), mining (55.0 per cent), wholesale (55.5 per cent), manufacturing (56.8 per cent), construction (61.3 per cent), public administration and safety (64.7 per cent), and agriculture, forestry and fishing (69.6 per cent).

In contrast, nearly two in five organisations in health care and social assistance (17.3 per cent) and one in eight in education and training (12.4 per cent) have over 50 per cent female representation on their boards. Our findings indicate a clear gender-industry gradient in the share of women serving on boards.

A more positive finding borne out by a special investigation within the report reveals that greater representation of women on boards is associated with a significant reduction in organisation-wide gender pay gaps – particularly among managers.

Even after taking account of other factors that are likely to influence pay gaps at an organisational level, we find that increasing the share of women on boards from zero to equal representation is associated with a statistically significant 6.3 percentage point reduction in the gender pay gap for full-time managers and a 7.8 percentage point reduction for part-time managers.

At one level, achieving greater female representation on boards reflects a basic consideration of equity in access to governance roles between men and women. Yet this research has uncovered some of the strongest evidence yet that appointing more women to serve on boards leads to improved gender outcomes – specifically, reduced gender pay gaps in the workplace.

Summary

This new evidence highlights a number of opportunities to target and reduce gender pay gaps across Australian organisations. Decisions related to recruitment and remuneration (especially at the managerial level) are one such opportunity. Ensuring that new hires are drawn from a diverse pool, and that any tendencies to recruit in one’s own image are minimised. Critically auditing the current employee pool and their remuneration and levels is also likely to result in better outcomes for gender pay gaps.

Furthermore, findings showing the relationship on increased female board representation and a lower organisational gender pay gap add strength to the business case for greater female board representation. The stronger this evidence becomes, the more likely it is that organisations will make the business decision to increase female representation on boards.  

References

Australian Bureau of Statistics (2015). Average Weekly Earnings, May 2015, Cat No.6302.0, Canberra

Adams R B and Ragunathan V, (2013). Lehman sisters. Financial Research Network (FIRN). Available at SSRN:http://ssrn.com/abstract=2380036 or http://dx.doi.org/10.2139/ssrn.2380036 (accessed 2 February 2014).

Anderson R C, Reeb D M and Upadhyay A, et al (2011). The Economics of Director Heterogeneity. Financial Management 40: 5–38.

Capezio A and Mavisakalyan A, (2015). Women in the Boardroom and Fraud: Evidence from Australia Australian Journal of Management, doi:10.1177/0312896215579463

Cassells R, Vidyattama Y, Miranti R, and McNamara J, (2009). The Impact of a Sustained Gender Pay Gap on the  Australian Economy, Report to the Office for Women, FaHCSIA

Galbreath J, (2011). Are there Gender-Related Influences on Corporate Sustainability? A Study of Women on Boards of Directors. Journal of Management & Organization 17: 17–38.

KPMG, (2009). ‘Understanding the Economic Implications of the Gender Pay Gap in Australia’, Report prepared for the Diversity Council Australia

Williams R J, (2003). Women on Corporate Boards of Directors and their Influence on Corporate Philanthropy. Journal of Business Ethics 42: 1–10.

WGEA, (2015). Gender Pay Gap Statistics, Sydney, September.

Photograph: Creative Commons Ronald Sarayudej

Connect with other minerals industry professionals via AusIMM’s LinkedIn group and AusIMM’s Women in Mining Network LinkedIn group 

Share This Article