Ending workforce discrimination against women – it could have massive economic benefits

Alison Kitchen, National Chairman, KPMG
Grant Wardell-Johnson, Lead Tax Partner, KPMG Economics and Tax Centre

Addressing fully the gender pay gap in Australia and reducing entrenched discrimination against women in the workforce is not only the right thing to do – it could also have massive economic benefits.

Economic modelling, in KPMG Australia’s new report, Ending workforce discrimination against women, suggests that if the gap between Australia’s male and female workforce participation rates could be halved, our annual GDP would be $60 billion greater in 20 years’ time.

This could also result in a $140 billion lift in our cumulative measured living standards by 2038.

The problem is indisputable – 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.

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, Canada and New Zealand.

More than half of Australia’s university graduates are female – so by not addressing barriers against women in the workforce, our society is not achieving the best possible return on the value of women’s experience and education.

Added to this is the cost in lower income tax revenue, lower consumer spending and ultimately, with less superannuation, extra dependence on the aged pension.

Childcare is 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 because of lack of affordable and suitable childcare.

We believe 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.

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 three days per week to four, this professional woman would obtain additional disposable income of just $14.50 per hour – less than the minimum wage.

If she moved from four to five 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.

These measures should be capable of bipartisan support.

In terms of superannuation, some positive measures were recommended by a bipartisan Senate committee report on achieving economic security in retirement released in 2016:

  • Removing the exemption from paying the Superannuation Guarantee in respect of employees whose salary or wages are less than $450 in a calendar month.
  • Re-targeting 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.

Once again, these 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. This is simply unacceptable.

Policymakers must make addressing the problem of getting women back into the workforce a higher priority.

Read the full paper, Ending workplace discrimination against women.

One thought on “Ending workforce discrimination against women – it could have massive economic benefits

  1. What an insightful and meaningful study! Hopefully the benefits this study highlights will shape the minds of policy-makers and the business world to make equal pay a reality before 2048.

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