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The reality of the gender wage gap

As long as people see the gender wage gap as normal, society has a problem. This view is illustrated in a comment by Jeremy Sammut on a Centre for Independent Studies email newsletter: “Forget that the…

Australian Service Union branch secretary Sally McManus is showered in streamers after Fair Work Australia awarded community workers a landmark pay rise. AAP

As long as people see the gender wage gap as normal, society has a problem. This view is illustrated in a comment by Jeremy Sammut on a Centre for Independent Studies email newsletter: “Forget that the decision is based on dodgy comparisons – why should someone with a three-year social work degree have income parity with a trained economist or scientist?” This viewpoint is shared by those that assume market forces determine wage rates on the basis of supply and demand. If many appropriate people want the job, the necessary pay rate drops. If this model worked, the lowest paid workers would be parliamentarians - obviously, this simplistic model does not work.

Pay rates respond to a range of rational and irrational assumptions. The latter beliefs are responsible for the differences between pay rates for the jobs mostly done by men or women. These often derive from biases that undervalue skills that are seen as feminine or overvalue those seen as masculine.

This bias, which enabled employers to pay women less than men for the same jobs, was legal until the 1970s when the laws changed. There was catch up until the 80s, but since then, the difference in pay rates has persisted at around 18%. The gaps persist, even with equal qualifications. It’s not about time in the job or family responsibilities, either - recent data shows an average annual gap of $2,000 in starting pay for new graduates. The statistics show gender pay differences between industries and occupations.

Complexity of equal pay

Equal pay is complex because the gender gap is pervasive and affects broad categories of employees in very varied jobs. Sometimes, it is the result of undervaluing the actual type of job - for example, one that mimics home-based unpaid care - but others are underpaid because they are in industries where the most jobs are feminised. This is the case put in the current Australian Services Union (ASU) claims, which has allowed a significant change in the ways the gap is determined by Fair Work Australia. In their initial finding in 2011, they looked at the range of jobs covered by the Social and Community Services (SACS) award and declared that community services pay rates were affected as such by gender biases.

The traditional approach of finding that an employer or particular wage rate showed the gender bias in particular jobs is not appropriate for resolving the overarching bias that affects all award-based pay rates in a sector as diverse as this one. Wider analysis has shown how the problem is industry based, rather than job based. All jobs in feminised industries tend to be lower paid than similar ones in male-dominated industries. Therefore, most of the 14% of men in this industry share the low pay rates of the women. Unfortunately, the reverse doesn’t happen in masculinised industries. Gender gaps are highest in industries such as finance and mining. So, the remedy in this case is not job by job comparators, but comparing particular industry groups.

Community work march for a pay rise. AAP

The community sector is comprised mainly of not-for-profit private employers, but many of the jobs in the community sector are also offered in the public services. These public servants are paid much more than community sector counterparts because the pay rates lack gender biases and are equated with other similar public service jobs. This means feminised jobs in the public service areas such as health, welfare and education are paid more than similar private sector jobs offering an industry comparator.

The current judgment has used the difference between the two wage rates as a way to estimate the gender proportion of the differences. This strategy was originally part of a Queensland equal pay decision and was extended to the federal system. It is particularly appropriate to use it in the community sector because this industry’s funding base makes it vulnerable to institutionalised structural discrimination.

The wage gap and “being a woman”

The FWA judgment covers the sector’s diverse multitude of occupations and qualifications by raising the levels of pay by approximately 60% - the estimated gender gap loss. The calculation was based on a 2011 Equal Opportunity for Women in the Workplace Agency (EOWA) report, which says: “The gender pay gap is caused by a variety of factors including the undervaluation of women’s work, women’s access to training and inflexible work practices which limits their employment prospects. However, a recent report by the National Centre for Social and Economic Modelling (NATSEM) found that the main contributing factor to the wage gap was simply ‘being a woman’, and this accounted for 60% of the difference between women and men’s earnings.”

It is this approach that has enraged more conservative employers, because the model could be used for claims from workers in other undervalued industries. Two other similar sectors are child care and aged care, being largely community based and feminised. The two are often in tandem as many of the services reflect what would have been home-based services. These sectors, however, are also often commercialised but dependent on public subsidies. Therefore, workers in these areas have little or no bargaining power at the enterprise level.

Lack of bargaining power “ignored”

This factor is ignored by many of the objectors, as illustrated in the dissenting report of Fair Work Commissioner Justice Graeme Watson: “To selectively extract an entire industry from the enterprise bargaining legislative framework is a change of mammoth proportions … The precedent it creates for many other industries who cannot afford to pay significantly above the award and are female dominated highlights the need for great caution. It is not an overstatement to suggest that the future status of enterprise bargaining in this and other industries with similar attributes is at stake.”

He goes on to say: “Of course women carers should get equal pay to men doing the same job, and the same as other women doing the same job as well – as long as their employers have the money. That’s the way enterprise bargaining works: the capacity of the employer to pay is taken into account.”

However, the judge fails to acknowledge that enterprise bargaining does not work well for women when the enterprise has very limited control over its budget. A circuit breaker is needed to ensure that governments will increase subsidies for staff pay. The present judgement was delayed by FWA to allow negotiations with the major funders. The Commonwealth has agreed to carry its share and there are indications that most states will contribute.

Women’s groups have welcomed the decision as it will offer a model for a substantial - if slow - decrease to wage inequity as a result of gender bias.