Women, given equity, can drive Australia’s economic recovery

Australia will forgo A$60 billion in GDP in the 20 years to 2038 if it fails to improve female workforce participation.

The Australian economy — already facing challenges in its ageing population, low fertility rates and ongoing structural changes — is now confronted by stalled migration in the wake of COVID-19.

The pandemic has highlighted and intensified entrenched gender inequalities in Australia.

Working from home — catalysed by a rapid technological uptake in response to lockdowns — was initially heralded as a boon for work-life balance, but it often reinforced the gendered distribution of labour as women took on a larger share of unpaid housework and caring.

Australian women were almost twice as likely to spend 20 or more hours a week on unpaid caring and supervision of children, spent five or more hours on unpaid housework and two in three women spent this amount of time on unpaid cooking and baking compared to men.

Women also spent twice the time doing unpaid work compared to men and men did twice the paid work of women. The deeply embedded social and cultural norms behind this are reinforced by parental leave and childcare policies.

Lockdowns led to a decline in female labour market participation due to school closures and women caring for elderly and disabled family members.

Unequal workforce participation currently contributes to a gender wage gap, a retirement income gap and greater financial insecurity for Australian women. The pandemic recovery provides an opportunity to address these gaps.

Higher female workforce participation will help cover the shortfall in migration and empower women financially, providing higher tax revenues in the short term and less demand for pensions and allowances over time.

KPMG projects better participation would bolster Australian living standards by A$140 billion over the 20 years to 2038. And it’s female-dominated industries such as healthcare that are expected to grow the fastest in coming years.

Parental brain drain

Australian women are highly educated — a higher proportion of women have bachelor degrees than men — but once they have children many reduce work hours or drop out of the labour market. This is not the case in countries with more gender-equitable parental leave.

Some parental leave policies have a non-transferrable individual component for a parent (often referred to as the father quota in Nordic countries), or a ‘family’ component which can be transferred from one parent to another. This supports female participation in the workforce, while confronting the social norms of gender inequality.

Australian parental leave payments are designed with women as the primary caregiver in mind. For example, if a mother earns more than A$150,000 per annum, the couple is not eligible to receive parental leave payments. In contrast, if the mother earns less than A$150,000 she is eligible irrespective of the father’s income. This scheme ultimately discourages female breadwinners and stay-at-home dads.

Scandinavia and Quebec have found the benefits of more inclusive parental leave policies outweigh the costs and “transform the level of cultural support” for equal parenting.

Australia’s tax and childcare policies further underscore traditional breadwinner models and gender roles by disincentivising women to work more than three days per week. Women are considered as individuals for tax purposes but childcare subsidies are based on household income.

Since most women are secondary income earners, they need access to childcare. The decision to increase work days is then based on out of pocket expenses for childcare costs relative to the mother’s salary rather than household income.

Under the current tax and childcare subsidy scheme, working an extra fourth or fifth day means a woman’s marginal wage after tax and child care subsidy declines such that her marginal wage from the fourth day is A$121 and from the fifth day is A$110. Although her take home pay may be larger in aggregate if she works more days, the marginal decline in her daily take home pay is a strong disincentive to work more days.

Investing in childcare pays off for governments. Universal childcare would cost the Australian government A$12 billion, but boost GDP by A$27 billion.

In contrast, the recent boost to the childcare subsidy for second and subsequent children costs the government A$3 billion, translating into 5 percent more participation and a A$6 billion increase in GDP, according to Grattan Institute research.

Lessons learnt

The economic fallout from COVID-19 hit women harder than men, and government stimulus packages failed to address this disparity, in some cases making it worse. Wage replacement schemes failed to benefit many women since short term casuals were excluded along with the female-dominated higher education sector.

A construction industry scheme was introduced, yet no direct support was provided to the hardest hit female-dominated sectors. And wage support in the female-dominated childcare sector was withdrawn ahead of schedule — earlier than any other sectors — which in turn made childcare unaffordable for many families who lost jobs or hours.

Increasing female workforce participation is needed to aid Australia’s economic recovery, but policy levers need to be reset so men get time to step in while women get time to step out to ensure a better work-life balance and more prosperous future for all Australians.

Originally published under Creative Commons by 360info™.

Tania Dey is a Research Economist at the South Australian Centre for Economic Studies (SACES) at the University of Adelaide. Her work encompasses macroeconomic issues, energy economics, labour market issues, economic evaluation and impact assessment, social issues, public policy and regional development. She has a special interest in gender economics. Prior to joining SACES, Tania has worked at the Essential Services Commission of South Australia (ESCOSA) on utility regulation. Tania Dey has declared no conflicts of interest in relation to this article.