Closing gender pay gaps is good for the economy – and investors

Closing gender pay gaps would bring significant benefits to the Australian economy – and to investors, argues Pendal’s ELISE McKAY

• Australian women still earn less than men
• Closing the gender pay gap would pay dividends for investors
• Find out about Pendal Horizon Sustainable Australian Share Fund

CLOSING gender pay gaps could significantly boost Australia’s economy, potentially increasing GDP by 6.2 per cent and creating 461,000 jobs annually — six times more than the current job creation rate.

And for investors, there is substantial evidence that companies with better gender equity tend to perform better financially.

“There’s a strong business case for all stakeholders to work together to close the gender pay gap,” says Pendal equities analyst and portfolio manager Elise McKay.

“The financial benefit to the Australian economy of closing the gender pay gap is substantial, and it would benefit all corporates with revenue ties to Australia.”

What is the gender pay gap?

Gender pay gap is not the same as pay inequality, where women and men are paid differently for the same role.

Equal pay for performing the same role has been a legal requirement in Australia since 1969.

Instead, a gender pay gap refers to the overall uneven distribution of salaries within an organisation.

Gender pay gaps can arise even when employers are committed to pay equality, says McKay.

Gender pay gaps can occur when women are under-represented in leadership roles, when women with caring responsibilities have fewer opportunities for career advancement, or when roles typically undertaken by women are undervalued in the workplace.

“The median gender pay gap in Australia is 19 per cent,” says McKay.

The Workplace Gender Equality Agency says that means that over the course of a year, the median of what a woman is paid is $18,461 less than the median of what a man is paid.

All organisations with more than 100 employees must report their gender pay data annually.

Investors should review a company’s gender pay data

McKay says the gender pay gap in many organisations is often a result of women and men being represented differently in high and low-paying jobs.

Carefully understanding these types of representation issues is the first step towards closing the gap.

“It’s a general story across the economy – there are leaders and laggards within each sector,” she says.

“The gender pay gap is a complex issue to resolve and it’s something that stakeholders need to work together to fix.

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“We recognise that different companies have different workforces and different segments of their workforce may be traditionally male or female dominant.”

But there are things people can do within organisations to start understanding how to solve the problem.

“The first step is trying to understand the composition of your workforce and what’s driving your gender pay gap,” she says.

“Is it an actual remuneration issue, or is it a representation issue? And what is driving those differences in representation across hiring, promotions, and other factors?”

Proven solutions

McKay says representation issues take time to solve but there are proven paths for organisations to take.

“The company boards I speak to are at different stages in the journey. They range from some that haven’t really thought it through to some that are very evolved in terms of how they’re thinking about it.

“There’s still a bit of trial and error.

“But there’s many steps companies can take that have been trialled and are proven to work – for example, we know that sponsorship of females within organisations is more successful than mentorship.

“We also see companies that have re-thought their rostering to conduct work in ways that are more integrated with women’s lives.”

Case study: Viva Energy

Fuel retailer Viva Energy, which employs more than 1500 people, discovered that overtime payments were a significant driver of its pay gap.

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This was partly because a threshold of five years’ experience to be eligible for the operational roles that attract overtime meant fewer women than men qualified.

Men also progressed faster, spending less time at each competency level than women because they were more likely to come to the business with a trade background.

Viva took action to improve the representation of women in operational roles and has reviewed its operator training programs to ensure women progress as quickly as possible – even without a trades background.

Devil in the detail

McKay says it’s important to look beyond the headline data when assessing progress on closing the gender pay gap.

That’s because actions taken to improve gender representation, such as hiring more women at entry-level positions, can sometimes temporarily distort pay gap statistics.

“More women coming in at lower levels can skew the data – so the devil is in the detail and just looking at the headline number does not necessarily show what’s actually going on in an organisation,” she explains.

That means companies need to be prepared to explain their gender pay gap numbers – and investors need to be careful when analysing the reports.

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About Elise McKay and Pendal Australian share funds

Elise is an investment analyst and portfolio manager with Pendal’s Australian equities team. Elise previously worked as an investment analyst for US fund manager Cartica where she covered a variety of emerging market companies.

She has also worked in investment banking and corporate finance at JP Morgan and Ernst & Young.

Pendal Horizon Sustainable Australian Share Fund is a concentrated portfolio aligned with the transition to a more sustainable, future economy.

Pendal Focus Australian Share Fund is a high-conviction equity fund with a 16-year track record of strong performance in a range of market conditions. The Fund is rated at the highest level by Lonsec, Morningstar and Zenith.

Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management. 

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