Unpacking Australia's gender pay gap

Last week we learned that the gender pay gap widened in the first half of the year, with men earning on average $260 per week more than women. In today’s analysis, economist Leonora Risse (@LeonoraRisse) of RMIT, the Women and Public Policy Program at Harvard (@wapppHKS), and the Women’s Leadership Institute Australia (@WLIAus), parses the numbers to provide a more nuanced understanding of where the pain points are most acute, and provides policy remedies for this seemingly intractable issue.

There were lots of numbers for economists to crunch last week with the release of the ABS Average Weekly Earnings data.

These statistics come out every six months and are used by the Workplace Gender Equality Agency to track Australia's progress in closing the gender pay gap. The latest statistics give us a picture of Australians' labour market earnings for May 2021.

So, what is the size of Australia's gender pay gap?

When we look at full-time workers, Australian women are earning an average of $262 less each week than men. Women are earning an average of $1576 each week, while men are earning an average of $1837.

This equates to a gap of 14.2%.

This figure are based on ordinary hours of work. If we add in overtime hours, the gender gap in earnings widens to 16.7%.

These figures leave out almost half of all working women, as it's based on full-time earnings for comparable. If we add in part-time workers for a fuller picture, the overall gap widens further to 31.3%.

How does the gender gap compare by public or private sector?

The private sector, with a gender earnings gap of 17.5%, does worse than the public sector where the gender earnings gap is only 10.7%.

What about differences across state borders?

In the spirit of the interstate rivalry that has been hotly ignited during the pandemic, we can look at the sizes of the gender gaps across states and territories.

Western Australia sits at the top of the ladder for the largest gender gap in earnings, a whopping 21.9%. The heavy role of the mining and construction industries in the West, which pulls up men's average earnings, help to explain this.

South Australia can claim the title of the state with the narrowest gender gap in earnings. Dishearteningly, this is not because women's earnings in South Australia are particularly strong. It's because men's earnings in South Australia are also rather weak compared to the nation-wide average. Tasmania is in a similar position.

Does industry make a difference?

Yes. Much of the gender gaps in earnings is explained by the different industries that men and women tend to be concentrated in.

That's why it's important to look at the gender difference in earnings within each industry.

The industry that claims top spot for the widest gender gap, at 25.3%, is Professional, Scientific and Technical Services (for example, lawyers, architects, computer programmers, business consultants). In dollar terms, that's a weekly difference of $571.

Hot on its heels is the Financial and Insurance Services industry with a gender earnings gap of 24.1%.

It might come at a surprise that the Healthcare and Social Assistance industry has the third largest gender earnings gap at 20.7%, given its high female share. This is partly explained by occupational segregation within an industry. Think of the gender composition of nurses compared to surgeons. This illustrates that gender gaps in earnings even prevail in industries that are female-concentrated.

Other Services – a cryptically-named category that includes car repairs, beauty services, personal services, religious services, and other personal care services – is the only industry that comes close to no gap.

Has the COVID-19 pandemic affected these numbers?

These statistics were collected in May 2021 when the Australian labour force was in economic recovery following the pandemic-induced recession, but business activity was still curtailed by restrictions especially in the services sectors.

These earnings statistics do not include any workers who lost their job or dropped out of the workforce due to the pandemic. Labour force participation rates tell us that it was predominately women who dropped out of the workforce. Not only because their job got swallowed up by the pandemic, but because their caring and home-schooling responsibilities made it unfeasible for them to sustain their workforce involvement.

Even if some these women have managed to recover work, this interruption to their workforce attachment means they are likely to be starting at the lower rungs of the career ladder again. Under-employment data also tells us that women are more likely than men to fewer hours of work than they hope for.

The pandemic has created further dampeners on women's economic outcomes, even in ways that go beyond the gender pay gap data.

What can be done?

The gender gap in earnings is due to many factors. This includes differences in the occupations and industries that men and women are concentrated in, the industrial relations system, the value placed different types of work, organisational practices, and policy settings. Societal norms, attitudes and biases play a powerful underlying role in shaping both men and women's vocational pathways, opportunities, and workforce experiences.

It’s not for individual women to bridge the gap; the gender pay gap is a social and policy issue. Photo by Sammie Chaffin on Unsplash

While the numbers might be demoralising, the positive news is that our research knowledge and evidence on "what works" to close gender gaps is growing. It's up to organisations and government to put this knowledge into action.

1) Set up systems for gender gap auditing and reporting

Organisations that regularly conduct gender pay gap audits, and make a commitment to report on the outcomes of their audit, are more likely to narrow their gender pay gap.

2) De-bias organisational processes and policies

The conventional ways that many organisations make their hiring, promotion and pay decisions, undertake performance evaluations, conduct meetings, and communicate in general, is usually teeming with unconscious biases. De-biasing people is hard. But re-designing systems in ways that reduce the opportunity for bias to contaminate these decisions and processes is possible.

3) Dismantle gender norms that limit both men and women

Gender equality is not just about supporting more women to step into traditionally male-dominated roles, but also about liberating men to step into roles that go beyond the traditional image of masculinity. This includes supporting men to choose vocations in the care sector and take on more unpaid caring responsibilities in their family and community.

4) Embed educational insights and knowledge-building into the policy package

Gender equality initiatives have a greater likelihood of success when people are given the opportunity to build their own understanding of the causes and consequences of gender bias. This equips them with a genuine and accurate understanding of the reasons why gender equalities policies are being implemented.

5) Understand where pushback stems from

It’s to be expected that not everyone will be on board with gender equality initiatives. Understanding the reasons why some people might feel resistant or sceptical about gender equality initiatives needs to be part of the policy approach.

The gender pay gap sits within a bigger picture of inequity

Gender inequities prevail in all corners of the world. From the chilling brutality confronting women in Afghanistan under the rule of the Taliban, to the Australian mothers being pushed to the brink shouldering the heavier burden of unpaid care and home-schooling during the pandemic, to women's tennis champion Ash Barty taking home only a fraction of the prize money awarded to the men's champion (39% to be precise).

Gender gaps in pay add up to gender gaps in lifetime earnings, economic security, and the opportunities and freedoms that this brings. Plus they are compounded by further layers of discrimination and disadvantage that face women from under-represented cohorts.

But beyond the statistics, gender gaps in earning and economic outcomes are a reflection of something deeper. Gender inequities in power. Gender inequities in decision-making and control over resources, translating into gender disparities in autonomy and independence. And, they are a reflection of women being valued less than men.

These gender imbalances ultimately compromise the opportunities, freedoms and rights that are within the reach of women, in contrast to what is granted to men.

That's why the gender pay gap matters.

This post is part of the Women's Policy Action Tank initiative to analyse government policy using a gendered lens. View our other policy analysis pieces here.

Posted by @SusanMaury