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Income Distribution: Female/male earnings
Female/male earnings ratio among full-time adult non-managerial employees - May 1974 to May 2004(a)
TRENDS IN AUSTRALIAN EARNINGS RATIOS
In Australia, prior to the 1970s, female pay rates were set as a proportion of the adult male basic wage. Differences between female and male wages were greatly reduced by a series of decisions on specific awards which followed a 1972 decision granting equal pay for equal work.
The gender wage gap, as measured by the ratio of female to male average hourly ordinary-time earnings among full-time adult non-managerial employees, narrowed markedly between 1974 (0.78) and 1978 (0.90).
A further but less pronounced narrowing of the pay gap occurred between 1983 (0.88) and 1994 (0.94). Over the last decade, the gap has moved within the range of 0.90 to 0.94.
OVERSEAS RATIOS AND TRENDS
There is interest in knowing how levels and trends in the Australian gender wage gap compare with those in other countries. There is also an interest in the reasons for differences between countries, and the underlying factors that contribute to variation and change in the size of the gap.
Comparisons between countries can be problematic. For example, some of the international difference in female/male earnings ratios may be due to the lack of strict comparability of data, caused by slightly different national definitions of earnings and hours worked, different data collection methods, and different age ranges. (endnote 2)
Issues of strict comparability aside, narrowing of the gender wage gap occurred in many other OECD countries during the closing quarter of the 20th century. However, at around the end of the century, the gap was considerably narrower in some countries than in others. As reported by the OECD, the Australian female/male earnings ratio (of average gross hourly total earnings among full-time wage and salary employees aged 18-64 years) of 0.91 in 2000 was higher than in many other OECD countries at around the same time. This indicates that Australia has a relatively small gender wage gap. (endnote 2)
Female/male ratio of average hourly earnings among full-time wage and salary employees(a) aged 20-64 years(b) - selected countries and years
According to the OECD, there is a range of factors that can influence a country's gender wage gap. These include differences between men and women in level of education, types of jobs held, amount of employment experience accumulated, and rate of employment of those with a relatively low level of education and skill. The structure of remuneration rates, premiums received for working in high-paying industries and occupations, wage setting practices and government policies and legislation can also affect a country's pay gap. (endnote 2)
The remainder of this article focuses on these factors in the context of the Australian gender wage gap.
WAGE SETTING PRACTICES
Along with other countries, Australia was influenced by the OECD's Dahrendorf Report on labour market flexibility, released in 1986. By the early 1990s there was general support for moving away from centralised determination of wages and conditions via industry and occupational level awards, in favour of setting wages and conditions through enterprise and workplace agreements. Enterprise bargaining was formally introduced in Australia in 1993 through amendments to the Industrial Relations Act 1988, then actively promoted by the Workplace Relations Act 1996.(endnote 4)
Currently in Australia, there is a range of methods used to set the pay of employees, including awards, collective agreements and individual arrangements. In 2004, full-time adult non-managerial employees who had their pay set by award only (i.e. who were not paid more than the award rate of pay) received considerably lower average hourly ordinary-time earnings ($16.70) than those who had their pay set by collective agreement ($24.10) and individual arrangement ($23.30). A higher proportion of female full-time adult non-managerial employees had their pay set by award only (15%) compared with their male counterparts (12%).
There is variation among both industries and occupations in the gender mix of employees, the methods by which pay is set, and the level of average hourly earnings. The overall female/male earnings ratio will partly reflect such structural differences, if men tend to be more heavily concentrated in higher-paying industries and occupations that are more likely to set pay by collective agreement or individual arrangement.
The proportion of full-time adult non-managerial employees who were women ranged widely between industries (from 10% in the Construction industry to 71% in the Health and community services industry).
For both men and women, there were some large differences in pay rates between industries. In May 2004, among both male and female full-time adult non-managerial employees, average hourly ordinary-time earnings for those employed in the Mining industry ($34.30 for men and $27.10 for women) were almost double the hourly earnings of those in the Accommodation, cafes and restaurants industry ($17.60 for men and $17.10 for women) and the Retail trade industry ($18.10 for men and $17.00 for women). Overall, differences in hourly earnings between industries tended to be greater than earnings differences between men and women in the same industry.
FULL-TIME ADULT NON-MANAGERIAL EMPLOYEES - MAY 2004
Between May 1994 and May 2004, average hourly ordinary-time earnings increased at a slightly higher rate among male (51%) than female (48%) full-time adult non-managerial employees. However, in particular industries such as Mining, and Education, female earnings increased more than male earnings in percentage terms.
While there was a gender pay gap in each industry, the female/male earnings ratio was much higher in some industries (e.g. Government administration and defence 0.98) than others (e.g. Finance and insurance 0.77, and Mining 0.79). The wage gap tended to be narrower in industries with lower hourly earnings, especially lower male earnings, and wider in industries with higher hourly earnings.
Hourly rates of pay differ between occupations. In general, people in highly skilled jobs receive higher rates of pay than those in less skilled jobs. Differences in the concentration of men and women in particular occupations contribute to the gender wage gap.
The skill level of an occupation is measured by the amount of formal education and training and previous experience usually required for entry. In 2004, for both male and female full-time adult non-managerial employees, average hourly ordinary-time earnings rose with occupation skill level.
However, there were some marked differences between occupations at the same skill level. For example, at the highest skill level, both male and female Medical practitioners had considerably higher hourly earnings ($47.40 and $38.80 respectively) than male and female Social welfare professionals ($22.70 and $24.10).
Overall, 40% of full-time adult non-managerial employees in 2004 were women. Some occupations had a much higher than average proportion (e.g. Enrolled nurses 90% and Hairdressers 91%) while others (e.g. Mining, construction and related labourers) had a much lower than average proportion. Within each skill level, occupations with higher hourly earnings generally had lower proportions of women.
In 2004, at most skill levels, there were examples of relatively high-paying, predominantly male occupations with comparatively low reliance on the award only method of pay setting. There were also examples of lower-paying, largely female occupations, often substantially reliant on award increases for their pay rises.
The accompanying table shows the variability in hourly earnings and the gender mix that can exist among occupations at the same skill level. The two occupations presented for each skill level represent the highest and lowest paid recognisable occupation minor groups at that level which have a sufficiently sized sample to produce reasonable estimates. At Skill level 3, for example, Mechanical engineering tradespersons (99% male) had considerably higher hourly earnings than Hairdressers (91% female) and were much less likely to have their pay set by award only.
SELECTED OCCUPATIONS OF FULL-TIME ADULT NON-MANAGERIAL EMPLOYEES - May 2004
A reason often given for the persistence of a gender wage gap in Australia is that work performed by female-dominated occupations is undervalued relative to work performed by male-dominated occupations. While men and women doing the same job for the same employer may get paid at the same hourly rate, men and women performing 'comparable' work in very different occupations are paid at different rates. (endnote 5)
Pay rate differences between occupations at the same skill level suggest that factors other than skill (e.g. danger, remoteness, labour supply and demand, competitiveness and bargaining strength) also influence the hourly earnings of occupations in Australia.
Within the same occupation, female average hourly ordinary-time earnings are often (but not always) lower than male earnings. This may be partially attributable to different rates of pay for working at different grades of an occupation, and could reflect differences in levels of lifelong accumulation of experience obtained from working in a particular occupation. For example, the female/male average hourly ordinary-time earnings ratio of 0.88 among full-time adult non-managerial police officers in 2004 is likely to largely mirror the distribution of male and female officers at different grades across the ranks of Australian police forces.
Some occupations are typically characterised by career progression across an incremental pay scale. In these occupations, women who withdraw from the labour force to raise children or perform other caring roles may forgo or postpone promotion-based increases that men of the same age may receive through continuous employment in an occupation.
Female/male average hourly earnings ratio(a) by age group - August 2004
In 2004, the female/male average hourly total earnings ratio was relatively high among 15-19 year old full-time non-managerial employees (0.98) and even higher among those aged 20-24 years (1.07). Thereafter, the ratio generally declined with increased age, falling to 0.82 among 45-49 year olds before rising again. This pattern was similar to that which prevailed a decade earlier, in 1994.
In addition to relative differences in lifelong accumulation of employment experience by same age male and female full-time non-managerial employees, higher female/male earnings ratios among younger age groups may represent fewer gender differences in educational attainment and employment opportunities. Lower earnings ratios among older age groups might also reflect the types of jobs women do when combining work and family.
1 Australian Bureau of Statistics 2005, Employee Earnings and Hours, Australia, May 2004, cat. no. 6306.0, ABS, Canberra.
2 The Organisation for Economic Co-operation and Development 2002, OECD Employment Outlook, July 2002, OECD, Paris.
3 Whittard, J 2003, 'Training and career experiences of women part-time workers in a finance sector organisation: persistent remnant of the 'reserve army'?', Australian Journal of Labour Economics, vol. 6, no. 4, December 2003, pp. 537-557.
4 Australian Government Department of Employment and Workplace Relations 2003, Good jobs or bad jobs: an Australian policy and empirical perspective <http://www.workplace.gov.au/workplace/Category/Publications/LabourMarketAnalysis/GoodJobsorBadJobs-anAustralianPolicyandEmpirical.htm>, accessed 28 April 2005.
5 Wooden, M 1999, 'Gender Pay Equity and Comparable Worth in Australia: A Reassessment', The Australian Economic Review, vol. 32, no. 2, pp. 157-171.