Published by the 50/50 by 2030 Foundation, University of Canberra

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What Gender Pay Gap? Big little lies?

by | Aug 27, 2019 | The Agenda

Australia’s gender pay gap currently sits at 14%

Australian full-time working women take home an average of $1485 per week in pay, while full-time working men take home an average weekly pay packet of $1726. 

This gap of $241 is calculated using the latest workforce earnings survey information collected by Australia’s official data agency, the Australian Bureau of Statistics. 

Now, there may be many people reading this who believe that the gender pay gap is a load of nonsense. Or who are a bit confused by what it all means.

At a first glance, the concept of the ‘gender pay gap’ might not make sense. Especially because we know it’s against the law to pay workers different rates for doing the same job. It’s understandable to have some doubts and criticisms.

As an economist who studies the labour market, I want to address some of the commonly expressed concerns. 

The gender pay gap is a myth

In Australia’s industrial relations system, it is illegal to pay a woman less than a man when they’re employed to do identical jobs – which is why you might be thinking that the gender pay gap is not real. 

This law stems from the 1969 Equal Pay Case and is reflected in several subsequent pieces of legislation including the 1984 Sex Discrimination Act.

But paying workers the same rate for doing exactly the same job simply reflects the basic moral principle of ‘pay equity’ – this is not the same thing as the ‘gender pay gap’.

The gender pay gap is a calculation of the difference in female earnings compared to male earnings across all jobs and industries. It reflects a combination of factors, which I will unpack here.

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Women earn less because they work less

If you’re thinking that women take home less money than men because they usually work fewer hours in paid employment than men, you’re right.

Around 45% of working women are employed part-time, compared to less than 20% of working men. This reflects the reality that many women are juggling paid work alongside their family and caring responsibilities.

This is why the 14% gender pay gap calculation is based only on full-time earnings

(Although, if we include part-time workers and calculate hourly wages, the gender pay gap still exists, as demonstrated in this latest KPMG report).

Women earn less because they work in industries that pay less

If you’re thinking that women receive lower pay because they tend to gravitate towards lower-paid industries such as education, healthcare and social assistance – while men are concentrated in higher-paid industries such as construction, mining and utilities – again, you’re right.

Imagine what would happen to society if we started losing nurses, school teachers, childcare workers, aged care workers, mental health workers and counsellors? 

Some people argue, therefore, that if women wish to earn more, they should move out of traditionally female fields, and switch into jobs like engineering, mining, building and the trades instead. While this might sound like logical advice, imagine what would happen to society if we started losing nurses, school teachers, childcare workers, aged care workers, mental health workers and counsellors? 

These female-dominated jobs are essential to fostering a healthy and educated society. The problem is that the true value of many of these ‘human services’ jobs are dispersed widely throughout society – the benefits are not immediately visible and not fully reflected in their low wages.

You might also argue that many women opt into care-oriented job because they’re more strongly motivated by a desire to help people than by higher earnings. Thank goodness we do have people in our society who care about helping others! But should it really mean that these caring jobs deserve to receive less pay?

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Women earn less because they do less dangerous work

Possibly you believe that female-dominated jobs, like nursing and teaching, don’t need to be paid as much because they are less risky and demanding.

It’s correct that the highest rates of workplace fatalities are reported in male-dominated industries – transport, warehousing, agriculture and construction. This is largely reflective of the physical element of these jobs.

Rather than use these risk factors as leverage to justify a gender pay gap, surely a target of zero fatalities and minimal mental stress should be the aim of all modern workplaces

Fatalities are undeniably the ultimate tragedy, though also not the only way to measure danger. If we look at the top 10 jobs with highest number of claims for workplace-related mental stress, we find the female-dominated professions health and welfare support workers, nurses, personal carers and school teachers, alongside paramedics, defence personnel, police officers, and bus and rail drivers. Stress in these occupations often comes from exposure to violence or a traumatic event, assault, harassment, bullying, and ongoing work pressures.

Rather than use these risk factors as leverage to justify a gender pay gap, surely a target of zero fatalities and minimal mental stress should be the aim of all modern workplaces.

Women earn less because they work in lower ranked jobs 

Again, you’re right. Within most workplaces, men are more heavily represented among the senior occupational roles such as managers and CEOs.

Men tend to climb the career ladder more rapidly than women. Taking time out of the workforce to raise children is one of the obvious factors that interrupts women’s career progression. Remaining out of the workforce after having children is not always by choice, if the partner can’t share the caring load or the childcare costs preclude the financial gains of returning full-time.

But even if we remove the effect of motherhood, childless women do not necessarily reach senior ranks as quickly as men either. And even when women reach management levels, they still earn less than their male counterparts. 

Women earn less because they lack ambition and confidence

While it might be perceived that men are more strongly motivated by money, there’s no consistent evidence that women flounder in terms of career ambition.

In fact, a study of Australian school students found no major difference between males and females in the factors motivating their career aspirations. Women are now surpassing men in terms of post-school educational achievements. Surely pursuing educational qualifications, especially at university level, takes ambition.

There is no economic evidence that higher confidence actually makes a worker a more productive and valuable to a company

When it comes to confidence, it’s true that men generally report stronger confidence in their capabilities compared to women. And higher levels of confidence are linked to higher pay. But the sticking point here is that there is no economic evidence that higher confidence actually makes a worker a more productive and valuable to a company. Quite the opposite, an overconfident person can be more of a liability for a company through reckless decision-making.

Any advice offered to women to lift their confidence as a way to boost her earnings might sound well-intentioned, but is not backed up by any solid evidence. On the contrary, there’s greater risk that women who show assertiveness and ambition will be perceived disfavourably – think of how female managers are often stereotypically viewed as too pushy and too bossy

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Women earn less because they are worse at negotiations

It’s now been shown that Australian women ask for a pay rise just as often as men, but are less likely to be awarded it. And if we add in bonuses and allowances – which are often negotiable components – the gender gap in total remuneration widens further.

Men are accruing more through negotiating – but any suggestion that women need to bargain more aggressively is not the solution, as women bear the risk of backlash for showing assertiveness in the workplace. In fact, women are pretty good are tuning into their environment and identifying when would be a good time to negotiate – and when not to. Plus, they are also pretty good at negotiating for others.

Often it’s the subtle influence of unconscious bias that makes all of us lean towards men for senior roles and reward them with higher pay – simply because it’s the societal template we are accustomed to. Unconscious bias is a factor we can start to tackle.

Ok, but why should I care about the gender pay gap?

Taking home lower pay means that women are less financially empowered than men. This has rippling effects, such as having less money to their name for a home loan, and less superannuation to cover their retirement years.

The 14% gap in pay means that women would, hypothetically, need to work an additional 59 days – that’s nearly two months extra – to catch up to the same pay packet as men over the course of a year. If we count of 59 days since the start of the financial year, we arrive at the 28th August as the date of  “Unequal Pay Day”. Today is a symbolic reminder of that gap.

As individuals, the most important step you can take is to recognise that the gender pay gap exists in the first place

What can we do about it?

There are many everyday steps that workplace can take to close the gap in men and women’s pay and employment opportunities. 

Organisations can be more transparent about current rates of pay, salary bands, and what items can be negotiated for. They can undertake an analysis of their own internal pay gaps. Interview panels can use performance-based objective criteria to judge a candidate’s suitability – as opposed to subjective assessments like “he reminds me of my younger self”. These strategies reduce the potential for unconscious bias to contaminate hiring and pay decisions, ultimately ensuring you are appointing and rewarding your workers on the basis of merit and value.

And, as individuals, the most important step you can take is to recognise that the gender pay gap exists in the first place.

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