Andrew Leigh

GENDER EQUALITY AND THE VALUE OF WORK

CEDA

SYDNEY

FRIDAY, 8 JUNE 2018

Thank you Ursula for the most generous introduction. Can I too acknowledge the Gadigal people of the Eora nation, on whose lands we’re meeting today and pay my respects to their elders past and present. And just to say how chuffed I am to be back at CEDA, speaking on this critical topic. I thank CEDA, Macquarie University and Deloitte for putting on today’s event, acknowledge Lee Kelly, Mary Delahunty, Narelle Hooper, Lucy Taksa and particular Libby Lyons, the head of the Workplace Gender Equality Agency. It’s not many countries that can boast that the head of their gender equality agency is also the granddaughter of the first female parliamentarian. So we should be pretty proud of that.

I have some good news and some bad news for you. The good news is the gender pay gap is closing. The bad news is that it is happening at a glacial pace. According to the Workplace Gender Equality Agency’s most recent report, the gender pay gap among full time workers was 16 1/2 per cent in 1997. Twenty years later, in 2017, it had narrowed to 15 1/2 per cent. That’s a gap of $250 a week. If we continue at that rate - closing the gender pay gap by half a percentage point every decade - then in just 310 years we will have done it.*

I suspect if you’d told Jessie Street or Vida Goldstein or Louisa Lawson or Eileen Powell that it would take until 2328 for Australia to close the gender pay gap, they would have told you that’s not good enough. And while we fail to close the gender pay gap, it has other implications. If you look at superannuation balances for those aged 55 to 64, men average $310,000, while women average $196,000. Fewer women run top Australian companies today than men with the name of John.

I want to talk today about some of the research on the gender pay gap and what it can teach us about accelerating the rate at which we close it. I’m no longer an economics professor, but I do get to play one at CEDA gatherings, so that’s the spirit in which I come before you today.

So what do we know about the gender pay gap? Well, while on average it sits at around 15 1/2 percent, work by Hiau Joo Kee, done while she was at the Australian National University, looked at the gender pay gap across the distribution, asking the question: is this more a challenge of sticky floors or glass ceilings? Her work found that for the bottom decile of earners, there was no gender pay gap. But for the top decile of earners, there was a 27 percentage point gender pay gap. That accords with work the Workplace Gender Equality Agency has done, showing that the gender pay gap in finance is 26 per cent. Among managers, it’s 29 per cent.

The gender pay gap is highest at the top of the wage distribution. And indeed, when Alison Booth and I did a randomised audit study, in which we sent out fake CVs varying the gender of the name and applying for entry level jobs in occupations such as hospitality and sales, we found that women had an edge on those low paid entry level jobs. We know too that the gender pay gap has persisted despite the fact that women have outpaced men in terms of their attainment of formal education and in terms of test scores. You know well that women tend to outdo men on literacy tests, it may surprise you to learn that on many numeracy tests, women now have the edge.

We know also that the gender pay gap widens over the lifecycle, particularly in the childbearing years. We have strong evidence of gender-based discrimination - not just from the audit studies, not just from the surveys, not just from the lived experience, but also from research which look at what happens to wages when people have sex change operations. Those who change their sex from male to female see their average wages fall. Those who change their sex from female to male on average see their wages rise.

But there are two new strands of research that can shed some light on the problem and help us to close the gender pay gap. The first is work being done by Claudia Goldin around part time penalties. The second is the work being done  on the intersection between economic inequality and the gender pay gap. Let me deal with each in turn.

As she was president of the American Economic Association, Claudia Goldin gave a seminal lecture titled ‘A Grand Gender Convergence: Its Last Chapter’. Her focus was on a pattern that she had noticed across American occupations, that women were more likely to be in part time work (something which is also true of Australia – 45 per cent of women work part time compared to just 16 per cent of men) and that many jobs carry a part-time penalty. That is, somebody who works 40 hours doesn’t just earn twice as much who works 20 hours, they earn more than twice as much.

In economic jargon, you see a non-linearity in the relationship between earnings and hours. Now this occurs because firms don’t regard two half time workers as being a perfect substitute for one full time worker. And this part time penalty, Goldin has argued, is at the heart of much of what is driving the gender pay gap. She shows that across a whole range of American industries. But in particular she uses the examples of law and pharmacy. The occupation of law has a large part time penalty. Part timers in law are less likely to attain higher ranks with law firms, and somebody in a law firm who’s working 20 hours typically earns considerably less than half of somebody working 40 hours. Put another way, full-time lawyers have higher hourly wages than part-time lawyers. And the gender pay gap in law is among the highest across the professions.

By contrast, pharmacy is a reasonably well paid occupation – the eighth best paid occupation in the United States. Pharmacy carries no part time penalty. Somebody in pharmacy who works 20 hours earns precisely half of somebody who works 40 hours. The hourly wages of part time workers in pharmacy are the same of the hourly wages of full time workers in pharmacy.

Goldin then discusses what this might teach us about closing the gender pay gap. In decades past, pharmacy was a male dominated and self-employed occupation. But with standardisation of drug schedules, with the development of IT systems, it has increasingly become the case that one pharmacist can walk out the door and the next one can come on shift and the customer feel just as happy. The IT systems ensure a seamless handover. Standard prescribing schedules mean that people don’t walk into pharmacists feeling that they must see Mrs Smith or they’ll never recover from their illness. They see an expertise in a profession, rather than the specific person they’re dealing with.

Goldin points out that the same sort of trend that’s occurred in pharmacy, of work sharing and of greater use of teams, can also be seen in other professions. Veterinarians used to be mostly male, self-employed and full time. But over recent years, veterinary practises have moved towards larger team practices in which the work is shared and in which customers don’t ask to see the same veterinarian, but expect that as they take their pet along to the veterinarian, they will get standard treatment of care and the IT systems will allow a proper handoff between veterinarians.

Obstetrics is another occupation Goldin points to. What was a male dominated, self-employed occupation a generation ago has now increasingly become an occupation involving greater teamwork, in which obstetricians will say ‘I’m not going to be available for certain hours and one of the other members of my practice will help you out’. That has been particularly important because pregnant women tend to prefer women obstetricians. Allowing the occupation of obstetrics to become more family friendly isn’t just good for obstetricians, it’s also great for expectant mothers.

The big challenge now is how we do this in other workplaces. How in each of your work places can you think about making your occupation a little more like pharmacy and a little less like traditional old law? How can you better encourage job sharing? Because according to Goldin, if we can get rid of that non linearity, if we can see close the hourly wage gap between part-timers and full-timers, it will help close the gender pay gap.

The second big strand of research that I think could play a significant role in closing the gender pay gap, is the relationship with economic inequality. You probably know the basic story of inequality – over the last generation, we’ve seen earnings rise three times as fast for the top tenth as the bottom tenth. We’ve seen the top one per cent’s share double, the top 0.1 per cent’s share triple. That increase in inequality has also served to hold the gender pay gap wider than it would otherwise be.

Let’s just think about the gender composition about some of Australia’s lowest paid occupations. Child carers are 97 per cent female. Hairdressers are 89 per cent female. Cleaners are 65 per cent female. Now let’s look at the gender composition of some of the best paid occupations. Surgeons are just 13 per cent female. Financial dealers are 17 per cent female. Actuaries – 35 per cent female. So as the pay gap between these occupations have increased, the gender pay gap has mechanically increased as well. A rising gulf in the pay of cleaners and surgeons drives a widening of the gender pay gap. It pushes back against other constructive changes we might be making in, for example, reducing discrimination.

So anything that you can do to reduce economic inequality, to narrow the gap between what a doctor and a nurse is paid, what a cleaner and a CEO is paid, what a financial dealer and hairdresser is paid – anything you do to narrow those gaps will also mechanically narrow the gender pay gap. That means that weekend penalty rates are a feminist issue. Collective bargaining is a feminist issue. Workers’ rights in the gig economy is a feminist issue.

It also highlights the importance of getting more information into the public arena. In April, Britain began publicly reporting the ratio of the median hourly pay of men and women across all firms with 250 or more employees. That has highlighted the fact that Apple UK has a 24 per cent gender pay. JP Morgan a 52 per cent gender pay gap. Ryanair has a 72 per cent gender pay gap. Greater transparency has driven more of a conversation about equality within those occupations.

In Australia, we don’t have this kind of information publicly reported. But a similar conversation was kicked off at the end of last year when it was revealed that Lisa Wilkinson was paid $200,000 less than her co-host Karl Stefanovic. Again, transparency driving a better conversation around inequality and potentially helping us narrow the gender pay gap.

I want to narrow the gender pay gap for its own sake, but it’s vital to point out that this isn’t a zero sum game. The great thing about a workplace in which part timers have the same hourly wages as full timers is that it’s a more flexible workplace for everybody. That’s a more flexible workplace for somebody who wants to take time off to care for a child or for an ageing parent. It’s also a more flexible workplace for somebody who might want to take time off to take a sabbatical, to travel overseas, to simply recharge their batteries. Men benefit from flexibility too.

Egalitarian is also going to benefit all Australians. Ours is a nation that prides itself on our egalitarian ethos, where many of us sit in the front seat of taxis, don’t stand up when the prime minister enters the room, prefer the word ‘mate’ to ‘sir’ and don’t have private areas on our beaches. That egalitarian ethos is at risk from a nation in which the gap between rich and poor is widening. So if we’re able to reduce inequality in Australia, not only are we going to narrow the gender pay gap, but we will also stick true to one of our great national values.

Thank you, and I look forward to the conversation.

ENDS

* This text has been corrected to reflect a mathematical error. The version as delivered incorrectly suggested that the current pace would see the gender pay gap closed in 150 years, rather than 310 years.