By Sarah-Joy Pierce
Sarah-Joy attended the 2016 World Bank and IMF Annual Meetings in Washington D.C. She is studying a Masters of Business (Public Relations) at QUT Business School.
The IMF emphasises that in order to maintain Australia’s position as a leading economy, innovative action is required to increase productivity. Australia invests heavily in educating women at the tertiary level, however this level of training does not convert to long term economic participation – the education-to-employment pipeline has a leak. Gender Equality is Sustainable Development Goal number 5, and Australia could reach SDG #5 and its workforce participation targets by retaining more women (and their professional knowledge) in the workplace through tax reform and employer incentives.
Increased female participation in the workforce, particularly at a leadership level, provides benefits for both business and employee (Dezso and Ross, 2011). Even in developed countries like Australia where equal employment opportunity is strongly encouraged, it seems women are not using their education to progress through the ‘pipeline’ from education to employment and then potential leadership. When women do reach this potential, society as a whole is improved (Aguirre et al, 2012). In Australia, at least a quarter of women remain the sole, unpaid contributors to family work, and there is a clear bias toward women working in sectors that are characterised by low pay, long hours and insecure working arrangements (International Labour Organisation, 2010). Changing these norms would improve the transfer and transition of professional knowledge into economic participation, as well as helping to meet SDG #5.
Governments possess the tools to empower female citizens to take advantage of economic opportunities (Aguirre et al, 2012). The proposed recommendations of this paper begin with tax reform, and then move to practical solutions and strategies for increasing the percentage of women in the workforce, regardless of profession or industry.
- Raise the tax free threshold for women with a dependent aged under six years.
- Encourage women into self-employment with access to advisors for practical support and guidance.
- Reduce the barriers for employers to offer part-time or flexible positions by making the related Human Resources costs tax-deductible.
Australian women in higher education have outnumbered men since 1987. However, female workforce participation statistics indicate that higher education participation doesn’t equate to a strong return on investment, particularly in terms of economic productivity. Australia has a significant leaking pipeline issue – at the source of the pipeline, women are going to university in great numbers, with most progressing to gainful employment, however along the length of the pipeline, this knowledge investment does not necessarily correlate to women contributing to the workforce and Australia’s economy over their working lifetimes, as one might expect.
This paper explores possible ways to slow the leakages and increase the flow rate at the employment and leadership end of this pipeline - the Grattan Institute estimated that if Australia’s female workforce participation increased by six percent, our GDP would increase by $25 billion by 2022 (O’Neil, 2016).
Currently, Australia is a world leader in some aspects of gender-based economic participation (Aguirre et al 2012), yet there is plenty of room for improvement. Due to a number of factors, women also are less likely to be confident in starting a business (Johansen, 2013) and less likely to rise to a position of leadership (ABS, 2012), meaning a lower level of lifetime earnings (and a slower rate of paying back HECS-HELP loans). Two key issues are at play here: workforce participation and economic return on investment for tertiary education funding.
While women are encouraged into higher education, this is not translating into gender equality in workforce participation, which currently sits at 59.5% of all working-age women in Australia (WGEA, 2016). The IMF acknowledges that an increase in female participation in the workforce is strongly associated with economic productivity growth (Loko & Diouf, 2009).
The Australian government supports higher education accessibility with HECS-HELP loans, which are repaid at an indexed rate as income increases. However, the longer a woman spends in a low-paying role (or in unpaid domestic work), the longer it will take for the debts to be repaid. With the current Australian gender wage gap at 19%, this debt repayment window lengthens even further
Australia's education, employment and leadership pipeline
In higher education, Australian women outnumber men, with women representing 57% of all students graduating (ABS, 2015). The start of the pipeline is certainly robust. But just down the line a little, women’s participation in the work force is at 59.5%, indicating the source of one significant leak. (WGEA, 2016). However, these employment statistics do not provide the full picture of the leak. The Workforce Gender Equality Agency (WGEA), in conjunction with the Australian Bureau of Statistics, found that part-time and casual workers are more likely to be women, with 71.6% of all part time employee’s women as well as 54.7% of all casual employees (WGEA, 2016).
As we move into the leadership section of the pipeline, the cracks in the education pipeline become even more apparent. A 2011 study found firms with more female senior managers performed better than firms without women in comparable positions (Dezso & Ross, 2011). Women are under-represented in Australian boardrooms, holding only 15.4% of board positions in ASX 200 companies (Deloitte, 2012), although the pace of change in Australia was second only to France.
Together, these statistics paint a picture of ruptures that are draining Australia’s economic potential and dissipating our investment in women’s tertiary education. The World Bank Sustainable Development Goal for gender equality includes improving access to work and economic opportunities, and this an area requiring attention for Australia’s lawmakers and leaders.
Towards global gender parity
The IMF and World Bank Group and the International Labour Organisation acknowledge the importance of encouraging female economic participation, particularly through the World Bank Group’s 2016-2023 Gender Strategy. Even though the statistics paint a dire picture, existing analysis of women’s involvement in work (Aguirre et. al, 2012) portrays Australia as one of the world’s leaders.
Table 1 (from the World Economic Forum’s 2015 Global Gender Gap Report) illustrates the global gap between gender parity in university participation, workforce participation and leadership. Moving women along this education-employment-leadership continuum is vital to advancing economies.
Even as a world leader in this area, Australia’s gender equality policies represent a significant disconnect from the actual pipeline facing Australian women. The recommendations of this policy paper align with the World Bank Group’s 2016-2023 Gender Strategy, and if considered, provide a key opportunity for Australia to set an example on how to fix the leaking pipeline.
Future economic impacts
Achieving gender parity in the workforce will benefit our economy well into the future. It is estimated that Australia loses over $8 billion in GDP per year due to tertiary-educated women failing to enter the workforce (Poynton & Rolland, 2013).
Over their lifetime, women with a bachelor’s degree will earn 58% of a man with an equivalent degree (Cassells, 2014). The potential of adding billions of dollars to GDP by increased participation rates will ensure a return on investment in women’s education. This has far-reaching effects on economic security. Currently, women retire with 52.8% less superannuation than men (WGEA, 2016). The responsibility on future governments lessens if the superannuation gap can be reduced by women remaining in the workplace longer (Daley, Coates & Wood, 2015).
Concurrently, HECS-HELP debt is becoming a major issue for the Australian government’s bottom line, in terms of interest and the level of unpaid loans (Knott, 2016). The flow-on effects of assisting tertiary educated women into employment provides an increased rate of repayment on these education loans. In 2025-26, the nation’s HECS-HELP balance will sit at $185.2 billion, and will comprise 46.3% of Australia’s public debt (Owens, 2016). Currently, the education loan program costs the government $1.7 billion annually, and by 2025-26 this is estimated to rise to $11.1 billion (Owens, 2016). By increasing women’s earning potential, the government can take proactive action to reduce the impact of this issue.
Fixing the leaks
The proposed recommendations include tax reforms and business-based solutions to increase the percentage of women in the workforce, no matter what their profession or industry. These recommendations also take into account that ‘work’ is not necessarily full-time. Females can participate in the workforce to varying degrees, but encouraging participation in any form is a step in the right direction.
1. Raise the tax free threshold for women with a dependent aged under six years.
Tax reforms incentivising mothers to join or remain in the workforce have previously had positive effects on the Australian labour supply rate (Gong & Breunig, 2014, Breunig, Gong & Trott, 2012). Current studies acknowledge that the current personal tax system classifies partnered women with children as the ‘second earners’. This produces significant tax disadvantages for women, particularly with regards to childcare (Apps, 2012). This system effectively limits female labour supply, as it becomes uneconomical for some women to work. A 2015 report on women in business found that just 58% of women with dependents under school age were in the workforce, compared to 94% of men in the same family situation (Scarr, 2015).
This recommendation incentivises women to stay in the workforce and must complement, not compete with, family and care arrangements. Giving women more financial reason to maintain knowledge and economic contributions through the earlier child-rearing years will produce a flow-on effect throughout the work lifecycle, positively impacting women’s superannuation balance and retirement security.
The World Economic Forum’s Global Gender Gap Index (World Economic Forum, 2015) ranks Scandinavian countries as among the most progressive countries when it comes to gender policy. Iceland, Norway, Finland and Sweden all have a progressive approach for mothers with young children, most notably Sweden’s shared maternity/paternity leave policy. While this particular recommendation does not directly address childcare, raising the tax-free threshold would encourage women back into the workforce, particularly if the benefit can only be claimed while their child is under six years old.
2. Encourage self-employment with access to advisors for practical support and guidance.
Women business operators in Australia are more likely to have a degree or diploma than their male counterparts (ABS, 2015). This shows that the opportunity to start a small business is attractive for women seeking to capitalise on their tertiary knowledge. However, women are still under-represented as entrepreneurs in Australia - and this is the case across many OECD countries (OECD, 2013). Research has shown issues surrounding lack of capital and personal empowerment prevent qualified women from starting their own businesses (Raina, 2016, Pines, Lerner & Schwarz, 2010). This recommendation focuses on providing advice and support to those women, particularly in finance, marketing and business planning.
Of the 668,670 women operating a small business in Australia, nearly half have dependent children (Scarr, 2015). This reflects the research finding that women are choosing self-employment and small business to support their lifestyle whilst raising a family (Heilman & Chen, 2003).
Laukhauf & Malone (2015) advocate the benefits of mentoring for women in business, with seventy-five percent of female leaders emphasising the importance of mentoring. These strategies reduce isolation, inspires and assists with key decision-making and business development. By providing access to mentors, women can contribute to the economy through developing their own businesses.
Female entrepreneurship is a focus of the World Bank Group’s 2016-2023 Gender Strategy, and empowering women to start their own businesses increases the economic productivity of Australia, and allows women’s tertiary professional knowledge to be put to use.
3. Reduce the barriers for employers to offer part-time or flexible positions by making the related Human Resources costs tax-deductible.
Part-time and flexible work arrangements are a growing trend in Australia, and currently 45% of women are employed part-time (Abhayaratna, Andrews, Nuch, and Podbury, 2008). In the OECD, Australia is second only to the Netherlands in the total proportion of part-time workers (Abhayaratna et al, 2008), indicating strong supply and demand for part-time positions.
The World Bank Group has identified a demand for flexible workplace policies in the Gender Strategy for 2016-2023. Currently, costs associated with human resources, administration and training overheads are a deterrent to hiring part-time staff in professional positions (Baird, Charlesworth & Heron, 2010). By offsetting these costs with a tax deduction, businesses have less of a barrier to accessing the knowledge capital of staff who may not be able to work full time. Part-time employment still facilitates repayment of HECS-HELP debt to a limited extent, while maintaining contribution to the economy in a meaningful way. It is acknowledged that sometimes part-time positions do not break the HECS-HELP repayment threshold (Knott, 2016), so this policy is more relevant in terms of keeping knowledge capital and female capacity engaged with the workforce, for an economic return on investment rather than a direct financial return for the government.
Creating a tax deduction for employers is a different (and fiscally responsible) approach to providing a cash bonus, which has in the past been implemented via a payment of up to $10,000 to incentivise hiring of mature-age workers (Department of Employment, 2016). A tax deduction means the government simply forgoes a small amount of income rather than funding large programs with a cash outlay.
However, for this approach to be successful, organisational culture and stigma around part-time work will have to be addressed. Recommendations by Wood and Sojo (2014) suggest the need for a thorough implementation plan around part-time workers in each business. Other employees in the business should also be consulted for maximum success.
Fixing the leaking education-employment-leadership pipeline is not an insignificant issue, nor is it one that will be solved overnight. However, encouraging women to remain in the workforce through early child-rearing years has a large flow-on effect across the economy. This includes increased efficiency in recouping costly HECS-HELP loans, female security in retirement and GDP generally.
OECD Secretary-General, Angel Gurria, says that “women are the most under-utilised asset in the world’s economy.” (Aguirre et al, 2012) With determined resolve and clear policy direction leading to legislative reform, Australia has outstanding opportunities to show the world’s economies best practice examples of gender parity in education, employment and leadership.
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