Fri Oct 1

Australia has ranked last in an international gender pay gap study — here are 3 ways to do better

Written by Anna von Reibnitz, Senior Lecturer in Finance, Australian National University

Australia has ranked equal last on a gender pay gap scorecard across six countries, according to a major report ^[1] released today.

It studied the gender pay gap reporting frameworks in Australia, France, South Africa, Spain, Sweden and the United Kingdom. Based on 11 indicators, Australia received a score of 4 out of 11, ranking equal last with the UK. Spain was the top ranked nation, scoring 8.5.

The good news is the research, detailed in our Australian-focused companion report ^[2], shows how making a small number of changes can give Australia a chance to ramp up progress to close the gender pay gap.

What the study looked at

In a global study aimed at identifying best practice in gender pay gap reporting systems, six countries were selected on the basis of having unique, potentially high-impact design features. Australia was selected on the basis of its world-leading gender equality dataset.

The research identified 11 indicators of best practice reporting, including accountability, coverage, enforcement and penalties, intersectional elements (such as race and ethnicity), transparency and action plans. The six countries were ranked against the indicators in a pay gap reporting scorecard.

The findings were based on interviews with key stakeholders from government, gender equality advocates and experts, and employers and trade unions. The report also used evidence from academic literature, reports and publications from international and country-specific organisations, and cross-country comparisons to identify strengths and weaknesses in each reporting system.

We used to be a world leader

Australia was one of the pioneers when it came to legislating for equal pay in 1969 and 1972, and then with gender equality reporting since 1986.

Introduced in 2012, the Workplace Gender Equality Act ^[3] requires employers to report data by gender on remuneration, workforce composition and the recruitment, promotions and resignations of their employees. This data goes to the Workplace Gender Equality Agency.

The gender pay gap in Australia is more than 14%. Erik Anderson/AAP

The act was an important step towards accountability and produced promising early results, with the national gender pay gap dropping steadily from 18.6% in 2014 to 14.1% in 2018. This means average weekly earnings for women working full-time were 14.1% less than their male counterparts.

Since then, progress has stalled. In fact, the COVID pandemic has seen the gender pay gap increase slightly, to 14.2%^[4].

This means that in 2021, the average woman working full-time has to work an extra 61 days each year to earn the same as the average man.

Why was Australia ranked last?

Although Australia’s legislation has generated a world-leading dataset on workplace gender equality, our research found that data collection and monitoring alone are not enough to drive widespread change.

Australia falls behind on aspects of transparency and accountability for corrective action. This means that neither the incentives nor punishments are strong enough to change organisational behaviour. This has ultimately stifled our progress.

Australia also ranks behind other countries for only requiring relatively large, non-public sector organisations to report on gender equality (plans to expand to the public sector have been announced by the federal government). Australia also fails to capture other measures of social disadvantage like race or ethnicity.

Catching up with other countries on these metrics requires re-thinking how our pay gap legislation works – this will be essential in driving widespread and inclusive workplace equality into the future.

In the short term, we need to make our current legislation work harder to incentivise employers to reduce their gender pay gap. The upside is that accountability and transparency can be improved with minimal change.

This can begin with three steps.

Step one: publish pay data for individual organisations

Although Australia calculates individual organisations’ gender pay gaps, the 2012 act does not allow these gaps to be published. Rather, only aggregated data for whole industries and Australia overall can be released publicly.

Publishing the pay gaps for each organisation would require minimal legislative amendment.

But it could have a major impact. For example, it would enable investors, consumers, employees, trade unions and activist groups to exert pressure on employers to improve their gender equality performance by investing in, purchasing from, or working for companies with lower pay gaps.

Step two: set a new minimum standard that matters

Under the current legislation, the minister for women can nominate minimum standards that large organisations must meet in order to fulfil gender equality reporting obligations under the 2012 act.

At the moment, the minimum standard is satisfied if a company simply has one gender equality policy or strategy in place. But having a policy does not ensure it is followed or that its goals are met.

With some small legislative changes, Australia could speed up progress on closing the gender pay gap. Lukas Coch/AAP

We need a performance standard that matters. Tying the minimum standard to outcomes will explicitly require organisations to correct pay inequalities and reduce their gender pay gap over time.

Step three: make use of sanctions

There need to be consequences if organisations don’t comply with laws requiring them to report pay data and meet the required minimum standards.

Current legislation does not impose specific sanctions, but does include the provision that non-compliant entities “may not” be eligible for government contracts and financial assistance such as Commonwealth grants.

A recent audit ^[6] found 31 non-compliant organisations were still awarded government contracts.

Applying this provision would not be a major burden on government procurement processes and would signal government support for gender equality.

Unleashing the legislation’s full potential

The gender pay gap reporting legislation is only part of a broader package needed to promote gender equality — and there is always more work to be done. But we believe these minimal changes would have a significant impact on closing Australia’s gap.

We have the opportunity to ramp up support for the economic security of women and we should take it.