Mon Aug 19

Australia’s gender pay gap has hit a record low – but we still have work to do

Written by: Leonora Risse, Associate Professor in Economics, University of Canberra

Australia’s gender pay gap – a key measure of economic inequality between men and women – has fallen to a record low of 11.5%.

That’s down from 13% this time last year, the steepest annual fall since 2016. Ten years ago, it was almost 19%.

The latest figures are great news for our economy and our society – evidence we’re getting better at recognising and fairly valuing women’s capabilities and contributions.

More opportunities are now open to women in the workforce, helping them gain and retire with greater financial independence than in previous decades.

But national averages don’t tell the whole story. While gender pay gaps have fallen in some industries, they’ve also been rising in others.

Today, August 19, is equal pay day ^[1]. This marks the 50 extra days past the end of the last financial year that Australian women would need to work for their earnings to match those of their male colleagues.

This offers us a timely opportunity to reflect on what exactly has driven this year’s improvement – and where we still have work to do.

Women’s earnings picking up pace

We calculate the gender pay gap by comparing the average weekly ordinary-time, full-time earnings ^[3] for men and women.

In dollar terms, women are now earning $231.50, or 11.5%, less than men, on average, in their weekly full-time pay packet.

The recent narrowing is being driven by women’s average earnings growth picking up pace. This contrasts with earlier periods ^[4] in which the narrowing of the gap tended to be due to a slowdown in the growth of men’s earnings.

What’s behind the improvement?

While changes in the gender pay gap reflect a range of economy-wide factors, the Albanese government has been quick to attribute the recent fall to the various targeted actions ^[5] it has taken since coming to office.

Let’s look at whether and how these actions have played a role.

First, the government sought to make wage information more transparent. It banned pay secrecy clauses ^[6] and now requires the gender pay gaps of all large companies in Australia to be publicly reported ^[7].

These reforms took effect from 2023, targeting private companies. The gender pay gap in the private sector, though higher to begin with, has fallen more swiftly than that of the public sector, suggesting these actions have had an effect.

Second, the government targeted gender-patterned biases in industrial relations – including the legacy effects ^[8] of past decisions – and instilled gender equity as a new objective of Australia’s Fair Work Act.

The Fair Work Commission is now required to take gender equity into account in its wage deliberations, including its minimum wage decision ^[9].

The government also introduced multi-employer bargaining in an attempt to strengthen workers’ bargaining capacity in female-concentrated sectors.

The effects of these changes will continue to flow across the workforce as the Fair Work Commission undertakes its review of modern awards, prioritising those affecting female-concentrated industries ^[10].

Closeup of nurse using stethoscope on wrist of senior man.

Recent reforms have targeted the historic undervaluation of women’s work. StockLite/Shutterstock ^[11]

And third, further addressing the historical undervaluation of “women’s work”, the government directly addressed low pay in female-concentrated sectors by supporting a pay rise for aged care workers ^[12].

Targeting the low pay and under-valuation of an industry that is about 87% female helped fuel the downward momentum in the overall gender pay gap.

The government’s recently announced pay rise for early childhood education and care workers ^[13] – a workforce that is around 95% female – will also target gender patterns in low pay once they come into effect.

These government actions have been essential for undoing the gender biases embedded in existing systems. And they have complemented other initiatives that have taken effect in the past year, such as the Respect At Work Act ^[14], requiring employers to proactively stamp out sexual harassment.

But there is still a way to go to keep closing the gender gaps across all parts of the workforce.

Falling in some industries, rising in others

Breaking down the gender pay gap in earnings by sector paints a more varied picture.

In industries like construction, public administration and safety, and retail trade, it has fallen notably over the past two years.

But it remains high in industries like healthcare and social assistance, at over 20%, and finance and insurance at 18%.

In some industries, the gap has actually increased over the past two years. In arts and recreation services, as well as electricity, gas, waste and water services, it’s been continually rising.

That could reflect a bigger shift

It’s important to interpret these figures carefully. In some instances, a widening of the gender pay gap can reflect a positive shift in an industry’s makeup, if it reflects more women joining a male-dominated sector at entry level, and growing a pipeline of senior women for the future.

That’s why the Workplace Gender Equality Agency (WGEA) gives organisations a chance to explain these dynamics in their employer statements ^[15], which are published on the WGEA website alongside organisations’ gender pay gaps.

Over time, the entry of more women at the junior level can flow through to more gender balance as these women progress to senior and decision-making roles.

The real test will be to ensure – by fostering more gender equitable, inclusive and respectful work cultures and systems – that they do.