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Improving workforce participation rates for women could boost GDP

Improving workplace participation in women

Halving the gender pay gap in Australia and reducing entrenched discrimination against women in the workforce could result in a massive payoff to society valued at $60 billion in GDP by 2038, according to a new report by KPMG Australia released today.

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The KPMG report also uses economic modelling to show that taking focused steps to increase female participation rates could deliver a $140 billion lift in living standards in 20 years’ time.*

The report, Ending workforce discrimination against women, looks at the ways in which females are discriminated against in the Australian workplace, the economic costs of that discrimination, and what can be done to improve the situation.

“Women make up just over half of the Australian population yet, on average, they are paid $26,000 less per annum than men,” said Alison Kitchen, Chairman KPMG Australia. “What’s also made clear from the report is that women face strong work disincentives that cost them individually but also cost the economy more broadly. In addition, female superannuation payouts are currently 50 percent less than those of males.” Ms Kitchen said it was vital that steps were taken to remove workforce discrimination against women, with a focus on awareness, reform, and action. She highlighted the findings of the report which shows that women are disadvantaged relative to men in four ways:

  1. Lower pay rates for work of comparable value.
  2. Smaller superannuation payouts.
  3. Strong disincentives for professional women to increase their working days.
  4. Continued low representation on company boards and in senior executive position

The report found that if recent slow progress in closing the gender pay gap was to be continued into the future, it would take until 2045 for it to be eliminated. KPMG’s analysis also shows that the cost of child care and the interaction of the income tax system with the family payments and child-care subsidy arrangements can create punishing disincentives for women to increase their hours of work.

Likewise, Australia’s tax and transfer system creates strong disincentives for women with children to increase their hours of work. To illustrate the true nature of the economic disadvantage, the report examines the case of a professional working mother earning the full-time equivalent of $100,000 per annum.

Grant Wardell-Johnson, Partner, KPMG Economics & Tax Centre, said: “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 penalties for those women affected.”

Mr Wardell-Johnson said that while the new Child Care Subsidy which comes into force on 2 July will help, the phase-out rules will inhibit the productivity gains that would come from experienced and qualified women maximising their working hours. This also needed to be looked at, he said.

Although Australia’s overall female workforce participation rate has risen strongly since the 1970s, it still remains below the rates achieved in Europe, Canada and New Zealand, and is a full 10 percentage points below the rate for males in Australia. In looking at strategies to address the economic gender imbalances, KPMG recommends further proactive policies are needed 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.

Mr Wardell-Johnson noted that these measures were recommended by a bipartisan Senate committee report on achieving economic security in retirement released in 2016. “Given this, the measures should be capable of attracting bipartisan support – and that is what we need,” he said.

Looking at the broader landscape of the Australian workplace, Alison Kitchen said that three factors determine a country’s prosperity: population, productivity and participation. “If our living standards are to continue rising, Australia needs to achieve a combination of a growing workforce, increasing workforce productivity and rising participation – and the latter can be achieved by removing the barriers to women entering the workplace,” she said.

To achieve that outcome, the KPMG report’s recommendations also include:

  • 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.

In subsequent reports this year, KPMG will examine ways of reducing workforce disincentives for women, as well as the treatment of workplace-provided child care for Fringe Benefits Tax purposes.

* The KPMG report Ending workforce discrimination against women has modelled the effect of halving the gap between Australia’s female and male workforce participation rates. It assumes a doubling over five years of spending on the Child Care Subsidy.

For further information

Ian Welch
KPMG Communications
0400 818 891
iwelch@kpmg.com.au

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