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There’s economic growth hiding in gender pay gaps

by Matthew Smith | 16 May 2017
Rather than taxing banks or building airports, the government should instead address the gender pay gap in search of economic prosperity, recent research highlights.
A 10 per cent reduction in gender income inequality can in fact boost productivity by up to 3 per cent, according to a recent article in the Economic Analysis and Policy journal.
The findings are based on research led by Tom Kennedy, an economist at the University of New England.
“Put another way, eliminating Australia’s existing gender wage gap would lift long-term labour productivity growth by 5.7 per cent,” the study, highlighted recently in The Conversation, shows.
Lower pay inequality lifts productivity by making it easier for companies to attract and retain talent. Moreover, an equal playing field creates incentives for individuals to maximise their effort, regardless of gender, the researchers find.

Finance industry behind

The finance industry has the largest pay gaps to address out of any other industry, InFinance has revealed in the past.
It’s recently been revealed by the Office of the Chief Scientist that more work needs to be done to address gender bias in the science, technology, engineering and mathematics (STEM) career paths.
In March, InFinance raised the issue of the lack of females entering economics as a profession and highlighted work the Reserve Bank of Australia is doing to close the gender gap in economics in Australia.
The lack of gender diversity in funds management is also recently highlighted here.
More broadly – away from finance – the gender pay gap for full-time employees is 23.1 per cent, the Kennedy research highlights. This means, on average, that women earn $26,853 less per year than men, it states.
The research looks at the Australian Bureau of Statistics’ average weekly ordinary time earnings data from 1986 to 2013, and accounts for other factors that affect labour productivity.
“As a point of comparison, if we increased the number of people in the workforce with a university degree by an equivalent amount, it would only boost labour productivity by 1.3 per cent,” the research notes. Its original point of comparison was the finding that eliminating Australia’s existing gender wage gap would lift long-term labour productivity growth by 5.7 per cent.
“This means businesses and governments can no longer afford to ignore this important social issue. It disadvantages everybody in the long run,” the researchers comment.
Between 1986 and 2016, female labour force participation increased from 48.2 per cent to 58.8 per cent, the researchers outline.
Meanwhile, Australian gender income inequality is now considerably higher than the OECD average – highlighted here.
Equal pay cases and legislation achieved limited success in narrowing the gender wage gap, the researchers say. However they add that these measures have failed to address other structural drivers of wage inequality, such as gender-based occupational segregation
Women are still more likely to be employed in traditionally feminised occupations, which are lower-paid and often part-time. This only serves to exacerbate the income gap, the researchers state.


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