In Australia, we know that women have less retirement savings than men. But we know less about how that gender gap evolves over time and whether the gap is closing.
New research by Monash Business School’s Dr Carly Moulang has identified fresh evidence of how the ‘gender pay gap’ begins from the first days of employment – a deficit of more than $80,000 women fail to recoup towards the end of their careers.
Dr Moulang from the Department of Accounting says the results provide an explanation of why women persistently fall behind men when it comes to superannuation savings and therefore rely heavily on the age pension in retirement.
“Gender-based differences in labour force participation, the presence of dependent children, and other caring responsibilities impact on women’s ability to access waged work more than men. Women are also more likely to be employed part-time and work fewer hours,” Dr Moulang said.
This study used administrative data from Mercer Australia to examine superannuation accumulation trends across a 10-year period from 2002-2012. This allowed them to track specific people during this period to estimate the cumulative effects on their individual retirement savings. The age cohorts tracked were early career (24-26), mid-career (34-36) and late career (44-46).
“In 2002, comparing the retirement balance of men and women, the youngest cohort had an average gender gap of $1142 in 2002 while the oldest group had $21,889,” Dr Moulang said.
“When measured again in 2011-12, this gap had widened to $18,608 and $81,769 respectively – figures that are most alarming.
“We found that the young cohorts experienced more gaps in their contributions as they are more likely to be establishing their family around this time, where the more stable 44-46 year olds did not have as many gaps.
“At 24-26, generally around the time of one’s first professional job, graduate employment rates are high for women but their salaries are lower. This has a significant long-term impact on women’s superannuation balances from which they cannot recover.”
According to Dr Moulang, a possible solution to this ongoing gender-based fiscal discrimination is to continue paying women’s superannuation contributions during employment gaps, like maternity leave.
“Our study provides clear evidence of the Australian labour market generating a statistically significant economic disadvantage for women over time,” she said.
“Much of the recent response to gender inequalities in pension savings has been to encourage women to save more. This is an inadequate response that will not bridge the gap revealed here.
“The continuation of contribution payments during this time would mean that experience less gaps in their accumulation. This would help women, at least to some extent, become more on par with men as they access their retirement funds.”
Other authors of the research include Professor Paul Gerrans (University of Western Australia) and Professor Noel Whiteside (University of Warwick, UK) and Jun Feng (formerly Monash Business School).