Gender Income Gap in Australia

The Gender Income Gap is the percentage differences in the earnings of males and females. As the following analysis illustrates, sytematic lower income for women is a feature of the Australian labour market across all industries and occupations. The most significant component of the income gap is the gender pay gap which is reported by Australian companies under the requirements of the Workplace Gender Equity Agency (WGEA).

WGEA Reporting

All non-public sector ‘relevant employers’ under the Workplace Gender Equality Act 2012 (the Act) report Gender Pay Gaps to the WGEA which provides a comprehensive summary of pay gaps by industries for individual employers. The WGEA defines the Gender Equity Pay Gap is calculated in Australia as:

where is the average remuneration for workers of each gender. In reporting any part year employee has earnings provided as if they worked the full year, and any part time employee has earnings provided as if they worked full time hours.

ABS Pay Gap

The ABS gender pay gap, reported as part of Average Weekly Earnings Labour Force Survey, shows trend in the pay gap across industries since 1995. The most material improvements in the pay gap commened at a national level in 2015, with some industries (mnostly those with the most severe gaps) demonstrating improvements from 1990s. The following chart compares the pay gap in individual industries with the pay gap overall. It highlights:

• the gap has been highest (Finance, Health Care) and lowest (Education, Hosptiality);
• where the greatest progress in reducing the pay gap has occurred (Mining) and the least (Administration, Professional Services).

Note: Full-time adult average weekly total earnings

Adjusted Pay Gap

The official calculation of the gender gap compares the unconditional average salary of all men with the average incomes of all women for an employer, industry or the whole economy. The calculation does not account for differences in seniority, education, job roles and skills between workers. As a result it is commonly referred to as the unadjusted pay gap.

To provide in insight into the contribution of education, occupation and seniority towards the persistence of the pay gap the following analysis provides a statistical decomposition to derive an adjusted pay gap.

Methodology

The method of control is to estimate an regression model for males which explains the variation in income based on education, industry, occupation and age. The model is then used to predict the incomes of females with equivalent characteristics. The difference between the predicted income and observed income is then averaged over all females as the adjusted income gap.

The estimation of male incomes is a simple linear regression with dummy variables for age, education, occupation and industry:

This fitted model is used to predict female incomes based on female mix of seniority, education, occupation and industry. Consistent with the WGEA definition, the income gap is the percentage difference between predicted income (estimated off the male population) and actual income:

The estimation is used performed:

• using ABS Census estimates of income, this includes wages and all other personal income, the ABS does not report labour income separately in census data — the gap is therefore referred to the income gap;
• the estimation uses only full time employees, it excludes income gaps on part time employees, casual workers and contractors — this ensures the calculation is comparing workers in similar life circumstances;
• a simple additive least squares model is used, interaction effects between industry, occupation and education are not captured — this highlights the marginal effects of features such as education and experience across the workforce and eliminates idyiosyncratic differences these might have in individual industries.

Overall Income Gap

The following table compares the adjusted (conditional) income gap with the unadjusted income gap using ABS census data for 2016 and 2021. Controlling for education, occupation and seniority, the income gap is approximnately 2.1% higher across the full time workforce.

While the income gap has reduced significantly between 20126 and 2021, the difference between the adjusted and unadjusted income gaps has widened. This change is a result of a workforce composition shift: the female workforce has grown most strongly (and proportionally) in sectors with larger income gaps, such as professional services.