Why we have financial inequality

The different life paths of men and women seriously affect their financial security, writes Byron Smith.

Financial inequality between the genders is markedly obvious, with latest figures from the Workplace Gender Equality Agency showing a $27,000 difference in annual earnings between male and female full-time workers.

Bias and social expectations early in life begin to set boys and girls on different paths that at the end of life leave women with much less superannuation than men.

In ANZ Women's Report: Barriers to Achieving Financial Gender Equity, the bank outlined a number of factors to explain why there is such financial inequality between men and women at retirement.

"These factors combine to prevent women from contributing to their superannuation and growing their savings in the same way as men. This gender inequity means that 90 per cent of Australian women will have inadequate savings in retirement," stated ANZ in the report.

As the report shows, on average, women are more educated than men but immediately begin earning less money than them when they enter the workforce. This is the first in a series of factors that create inequality. The report cites six primary factors:

  • employment choices and pay rates
  • salary levels and pay gaps
  • impact of career breaks for family responsibilities
  • buden of unpaid work
  • relative absence of female leaders in society
  • Australia's retirement savings system.

Despite higher education levels, women constitute only 35 per cent of the full-time workforce, according to Australian Bureau of Statistics labour force data for December 2015. For 2014-15 the Workplace Gender Equality Agency reported a 24 per cent gender pay gap in favour of men (average full-time total remuneration), equivalent to $27,254 per year in earnings.

As the Grattan Insitute noted in December 2015, in its submission to the Australian Senate's inquiry into the economic security for women in retirement, "women accumulate fewer retirement savings than men because they earn less over their working lives".

The wage gap worsens with career breaks and move to part-time work, for family responsibilities, which further reduce income. According to the Workplace Gender Equality Agency, 84 per cent of mothers who started or returned to work following the birth of their child worked part-time.

"The disadvantages women incur at this point in their lives seriously impact their lifetime earnings and have adverse implications for their ability to save for retirement," states ANZ in its report.

ANZ's view is also reinforced by the Financial Planning Association of Australia, in its submission the Senate inquiry, which states "the structure of the retirement system, whilst not directly discriminatory against women, is structurally (indirectly) discriminatory against women".

The association believes Australia's approach to retirement savings magnifies the pay gap between men and women.

The end result? Women retire, on average, with about half as much in their superannuation as men. About 90 per cent of women won't be able to fund a comfortable retirement according to The Association of Superannuation Funds of Australia.

A tale of two women’s finances