Important changes to superannuation laws to boost women’s retirement balances are needed as part of a wider move towards a ‘Parent Equality Model’, a new KPMG report argues.
The paper, ‘Towards a more equal sharing of work’, finds that Australia performs relatively poorly compared to other OECD countries, in terms of both the female workforce participation rate (10 percent less than men) and in the proportion of unpaid, caring work done by men compared to women – just over half as much. This leads to the well-established gender pay and superannuation gaps.
The report, the seventh in KPMG’s gender equity series, makes three key recommendations to the superannuation laws:
Previous papers in the series have made significant proposals on the tax and transfer system, childcare subsidy and the paid parental system as key mechanisms to aid a societal shift towards a Parental Equality model of more equal responsibility for work and caring for children.
Alison Kitchen, Chairman, KPMG Australia , said: “The gender pay gap is 20 percent. KPMG estimates that, based on the rate of reduction over the 4 years before the pandemic struck, it will take until 2046 for the gender pay gap to be eliminated, and there are fears that business leaders will pay less attention to this issue as they try to battle back from the COVID crisis.”
“The gender pay and super gaps stem from the fact that in Australia, our policy settings are still based on a model in which fathers do most of the paid work while mothers do part-time paid work but most of the unpaid work. In effect, paid work, dominated by men, is valued more highly than unpaid work, which is mostly is performed by women. If you put a dollar value on unpaid work, as we have done in this paper, but which orthodox economics does not do, we can see women contributing at least half the overall hours worked. Yet this unpaid work is not recognised, which leads to the gender inequity in pay and super.”
The paper finds that in Northern Europe men typically do 75 percent as much unpaid work as women, whereas in Australia, they do just over half as much. The gap between male and female workforce participation rates in Australia is a full 10 percent, the 16th highest of OECD countries. While many of the problems lie in the interplay of childcare and tax and transfer systems, which generate a barrier to women returning to the workforce, KPMG believes its three super recommendations could also play a major role in addressing gender financial inequality.
Linda Elkins, KPMG National Sector Lead for Asset & Wealth Management, said: “The PPL scheme does not include Super Guarantee contributions, which, given women take most of the parental leave simply means the income and super gaps are exacerbated. While KPMG has recently proposed a major overhaul to the PPL scheme, the Super Guarantee issue still needs to be addressed even if the current system is maintained. There will be a significant cost but this is a major impediment to equality.”
‘Second, concessional contributions made by employers to employees can be used for up to five years but this then runs out, which disadvantages women who have taken time out to raise children. There is no good policy reason why this cannot be changed.”
“Third, employers might wish to make higher contributions to attract and reward talented female employees who have taken time out, but this would be in contravention of the Sex Discrimination Act. The Act could be amended at no cost, but with significant benefit.”
The KPMG paper points out that since the 1970s, the increase in women’s workforce participation has been almost entirely in part-time work.
Alison Kitchen said: “The tax and transfer systems penalise women trying to get back to work. Everything else flows from this. It is perverse that taxpayers willingly subsidise part of the cost of university degrees, which are attained by more women than men, and yet the same tax system penalises those women for trying to get ahead in the paid workforce. Male taxpayers often complain that the top rate of 47 percent is a disincentive to work – yet women trying to get back fully into the workforce can face effective rates of over 100 percent, when considering lost childcare benefits.”
The paper, the seventh in KPMG’s series of reports on gender inequality since 2018, follows Enhancing work-life balance: a better system of Paid Parental Leave, released last month, which proposed a significant revamp of the PPL scheme.
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