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Accumulating poverty: Women’s experiences of inequality over the lifecycle

Speech by Elizabeth Broderick

Sex Discrimination Commissioner and Commissioner responsible for Age Discrimination

Australian Human Rights Commission

Sydney Institute
15 September 2009

It’s a great pleasure to be speaking here today at the Sydney Institute.

My father first took me to the Institute of Public Affairs as it was then known, before Anne and Gerard Henderson revolutionised it as the Sydney Institute. I remember the topic was “Should Australia have an Aircraft Carrier?” I sat next to an English engineer who was on the first nuclear submarine. He spend 4 months submerged near the Russian base of Murmansk. There was absolute radio silence and he didn’t learn of the birth of his daughter until he returned to England many months later. In my role as an independent adviser to the Chief of the Defence Force, Angus Houston, I often think of this circumstance and the challenges of work life balance in the armed forces.

Thank you very much Anne and Gerard for the invitation to speak here tonight.

I have been the Sex Discrimination Commissioner for two years now and during this time, I have met countless inspirational women and men from all walks of life. Many of these have been Aboriginal and Torres Strait Islander.

So let me begin by firstly acknowledging that we are gathered here today on the traditional land of the Gadigal people of the Eora nation. I pay my deepest respects to their elders past and present.

Tonight, I will be talking about what is perhaps one of the gravest and most pressing aspects of gender inequality in Australia - the gap between women and men’s retirement savings.

The picture that I will paint this evening is quite grim but it is exactly for this reason that our community must formulate a viable action plan.

Let me start with a hypothetical scenario about a woman named Leena.

Early in life, Leena chooses a career in aged care. She does the relevant training and enters the aged care sector. A few years down the track she and her partner decide to start a family. Because her partner is paid more, they decide that it makes sense for her to stay at home in the first few years and then work part-time once her daughter is at school.

Her daughter is born hearing impaired. Because of her daughter’s medical appointments, Leena isn’t able to find work that accommodates her caring responsibilities. In the end, for the flexibility it offers, she takes on casual work which of course is lower paid.

Fast forward 15 years later at retirement, Leena has separated from her husband, has a mortgage to manage on her own and has little to no retirement savings. She will be solely reliant on the Age Pension. She faces a future of struggling to make ends meet, dipping in and out of poverty.

I realise this is a bleak example, but as I run through this scenario, there is not a single point where you could say that Leena made a bad or a wrong decision in community terms. In fact, at each point she has made the decision that we would consider the right decision.

She is working in an industry that desperately needs well-trained, committed workers. She is caring for a child who will be a future tax payer. She is taking responsibility for the additional care needs of a person with disability.

Nobody could dispute that Leena is playing a crucial role in her family and community. Nor that the wellbeing of the Australian economy is reliant on people just like Leena, making exactly the decisions Leena has made.

Yet, if we look at each point in her lifecycle, as I have described it, she has paid a financial penalty, leaving her vulnerable to poverty in retirement. Each event I have described is a lived experience of gender inequality.

Policy frameworks have commonly focussed on gender inequality as individual incidents of discrimination, each separate from the other. We have failed to recognise the cumulative impact of each of these individual events.

But let’s look at the end point – namely the gender gap in retirement savings - through the prism of a woman’s lifecycle. When we do this it becomes clear that there is not one single point in the lifecycle where the gap begins and ends.

The gap is the cumulative result of women’s inequality over the lifecycle. It’s a result of:

Each of these has a cause and consequence and they are interconnected.

More so, each of these experiences leads to women having less time in the paid workforce and being paid less over a lifetime. And, because of the linking of superannuation exclusively to paid work, this has consequences for the accumulation of retirement savings.

The shocking reality is that, because of these cumulative experiences and the design of our retirement income system, women are more likely to be accumulating poverty during their lives, than accumulating wealth.
This is my main point.

May I sketch some background to this problem.

Over the last 12 months, there has been significant public focus on the retirement income system, through the Henry Tax Review and the Harmer Pension Review. Despite this, the issues of the gender gap in retirement savings and women’s financial security have remained largely invisible.

Our superannuation system has been designed to provide maximum benefit once you have completed 35 years of continuous full-time labour market participation.

In essence, the system is designed to deliver the greatest benefits to those who fit a very specific trajectory of life – the typical male life. Certainly, it does not reflect the reality of a typical woman’s lifecycle.

On last count in 2006, women’s superannuation balances and payouts sat at about half of those of men.[1] That’s right – half.

Even more concerning is the breakdown of superannuation amongst age groups. In 2004, half of all women aged 45 - 59 had a tiny $8000 or less in their superannuation accounts. The corresponding figure for men is $31, 000.[2] That’s not much either, but it’s significantly more.

As a consequence, women generally have lower incomes during retirement. [3] Retired men aged between 55 and 64 years have around 1.7 times the disposable weekly income of retired women in this age group.[4]

These figures should ring alarm bells for all of us.

I am describing someone you know - your mother, your grandmother, your sister, your aunt, your partner, your friend, your daughter or even yourself.

We are right to be concerned.

Women are currently and will continue to be heavily reliant upon the Age Pension. Currently, 73% of those receiving the single rate of the Age Pension are women.[5]

Between 2000 and 2005, single elderly female households had not only experienced the highest incidence of poverty compared to other household types, but also have been at the greatest risk of persistent poverty.[6]

Economic modelling of the recent increases to the single rate of the Age Pension show that while the increase will go some way to alleviate poverty, around one in three women on the single rate of the Age Pension will remain in poverty.[7] By international standards our pension rates are low. Pensions make up 3.5% of GDP here in Australia compared to an average of 7% in OECD countries.

But, before I continue, I want to be perfectly clear about two things.

Firstly, I am not saying that women are the only ones vulnerable to poverty in retirement. Many men and individuals from other disadvantaged groups have low superannuation balances. I am talking about ensuring that all individuals can live with dignity and respect over their lifecycle.

Nor am I suggesting that women should choose paid work over family and caring responsibilities. Many women want to spend large portions of their lives caring for those they love. My point is that women should not end up in poverty for choosing to care. Caring is a contribution that benefits everyone.

I’d like to recount a contribution from my Listening Tour blog, which I think illustrates how life typically unfolds for women:

I’m a mother who has been out of the paid workforce for two years and will probably be for the next 4 years, until my children are ready for pre-school. My return to work will probably be on a part-time basis and I will probably have to re-start my career after so many years out so I don’t expect that I will earn very much. I never thought this would be the case - I studied for many years, earned a higher degree, worked overseas and then started my family...I can’t see how, after this time out of the workforce, my earnings will ever come close to my partner’s. I dread to think of how I will ever manage if I have to rely upon my meagre superannuation contributions in retirement.[8]

This case study provides insight into the complexity of women’s experiences and the harsh consequences that await them as they enter retirement.

Perhaps the best way to illustrate how the lifecycle of a woman is effectively geared to accumulating poverty might be to examine three broad aspects of women’s lives.


It’s also important to understand that, whilst there are shared experiences among women, there are also notable differences in experiences of paid work and care based on other factors. These are brought about by ethnicity, disability, age, sexuality and socio-economic status, issues which are outside the scope of tonight’s discussion.

So firstly, I’d like to explore women’s experiences of education and training and their decisions relating to careers.

Women in Australia have made significant advances in education. When compared with other countries, Australia is ranked first in the world for women’s educational attainment.[9] Women account for over half of all students enrolled in higher education and over half of all students who complete a higher education qualification.[10]

These significant advances obscure the fact that educational choices remain highly segregated on the basis of gender. Women continue to be over-represented in areas of study linked to lower earning industries, while men continue to be over-represented in higher earning industries. For example women outnumber men by 3:1 in health and education courses and men outnumber women by 5:1 in engineering courses.[11] Unsurprisingly, there is a considerable disparity between the weekly earnings of a teacher and an engineer.[12]

I am not at all suggesting that women choosing to work in these areas are making bad decisions. The problem is not the women’s decisions to work in these areas – it is the undervaluation of these kinds of work and the long term financial penalty that follows.

This leads me into my second area - looking at the point in a woman’s lifecycle where she enters the paid workforce.

Right from the entry point, women’s lower earnings begin to impact on their retirement savings. The gap between women’s and men’s pay, also known as pay inequity, remains a factor contributing to the gender gap in retirement savings across the lifecycle.

The disparity between men’s and women’s ordinary full time earnings is currently close to 17%.[13] It’s even greater when women’s part-time and casual earnings are considered, with women earning around two thirds of the amount earned by men.[14] If current earning patterns continue, the average 25 year old male will earn $2.4 million over the next 40 years. The average 25 year old female will earn $1 million less - $1.5 million.[15]

The reasons for pay inequity are complex and interconnected. In Australia, women constitute a higher proportion of casual workers. Women are more likely to be working under minimum employment conditions. Women are more likely to be engaged in low paid occupations and industries.

Further, the Australian workforce is highly segregated by gender and female dominated industries have been historically undervalued. Industries such as aged care, childcare, health and community services are all female dominated and generally lower paid. Women such as Leena working in lower paid female dominated industries will inevitably accumulate lower retirement savings.

The third point in a woman’s lifecycle that is critical for her long term financial security is having children.

According to the Commission’s complaints statistics and other research, pregnancy and return to work following maternity leave are times when women are commonly vulnerable to discrimination. This comes in the form of demotions, missing out on promotions, redundancies, denial of family friendly conditions and even, in some cases, bullying.[16]

Perhaps the most fundamental barrier to women’s full participation in paid work, is the struggle to balance paid work and caring responsibilities.

In Australia, the workforce participation of mothers continues to be low by international standards. [17] It is projected that women who have children will earn around half that of men who have children.[18] There is also a stark difference in the projected lifetime earnings between women with children and women without.[19] These gaps in lifetime earnings demonstrate the financial penalty women are subject to because of their gender and their caring responsibilities.

Unfortunately, contrary to the Commission’s recommendation, the proposed Australian Government Paid Parental Leave scheme does not include superannuation payments.

Maximum benefits from superannuation are likely to flow from the maturation of contributions made early on in working life. We can therefore assume that because women and many employers are not making superannuation contributions when they are on maternity leave, this is a key point in the lifecycle where the retirement savings gap widens.

Caring for children also has consequences for retirement savings in terms of the unequal division of unpaid work. Women continue to shoulder the large majority of unpaid work in households. This includes caring for children and other domestic work, such as cleaning.[20] The birth of children is a common point in the lifecycle where gender inequality in the division of unpaid work widens.[21]

Women like Leena often decide not to continue in paid work after having a baby. This is because, if you take the cost of child care, commuting and the loss of tax benefits into account, it is simply not financially ‘worth it’.

So, it is no surprise that when superannuation balances are broken down by age, the largest widening of the gender gap occurs between the 23 - 44 age brackets. These brackets coincide with the time when women commonly have children.[22] It’s also the time when many women are working some of their longest hours caring for young children. Paradoxically, this is exactly the time that women are most sharply falling behind on their retirement savings. [23]

You might be thinking that women will be able to make up their superannuation contributions when their kids go to school or when they can re-commence full-time work. But this assumption ignores the fact that women continue to care across the lifecycle –caring for elderly relatives, for grandchildren or for adult children with disability.[24] They also continue to trade off money for the ability to care. This will only increase as we face a period of unprecedented demographic change. Many women never go back to full time work.

The fact is that family and caring work is not rewarded in dollar terms. While there are a range of payments and tax benefits to support individuals with caring responsibilities, these do not adequately reward the considerable benefit this care provides to communities and the economy.

It is estimated that in 2005, informal carers provided approximately 1.2 billion hours of care at an estimated replacement value of $30.5 billion.[25] This work is not recognised or rewarded as work in the retirement income system. So the community benefits immensely but those who do this important work are rewarded with a retirement in poverty.

Before I conclude, I’d like to add that, for some women, these experiences of inequality are compounded by experiences of domestic and family violence. One in three Australian women will experience violence from a current or former partner in their lifetime. [26] Studies have shown that domestic and family violence has a lifelong impact on financial security and participation in the paid workforce.[27] Violent partners may control a woman’s participation in paid work. Or a woman may leave paid work because of threats. Or a woman’s absences from the workplace due to violence may place her employment at risk. Again, these experiences have consequences for women being able to build their retirement savings.

The other issue is their relationship status. The number of divorced or separated women entering retirement is expected to rise in the next two decades.[28] Compared to men, women are more likely to experience financial insecurity following divorce.[29] Women commonly experience a much greater drop in income than men. In 2003, men who separated experienced an average drop in their household disposable income by $4,100 per year. Women who separated experienced a drop of $21,400.[30]

If we look at the financial circumstances of individuals between 55-74, by marital status and gender, they show that divorced women have the lowest levels of income, superannuation and assets compared to married couples and divorced men. Like Leena, women who are divorced or separated are at greater risk of poverty.

So now I’d like to pull all this together and summarise.

I hope I have made myself clear - each experience of inequality that I have described represents an injustice in itself.

However, the fact that women are penalised in the retirement income system is a compounding injustice. When left unaddressed, it leaves women extremely vulnerable to poverty and financial insecurity in retirement.

The reality is, that a significant facet of women’s disadvantage in the retirement income system stems from the unequal division of unpaid work between women and men over the lifecycle. This work contributes significantly to the well-being of individuals, to communities and to the economy at large. This work is also completely unrecognised in the retirement income system.

As a nation, we need to ask ourselves one big question, “If we all have a birth right to gender equality, why is poverty the end-point for so many women - is it right that poverty should be the reward for a lifetime spent caring?”

I don’t want to leave you at this low point in our story. So I’d like to briefly offer some hope by looking at what can be done to address women’s disadvantage in the retirement income system.

Firstly, we must continue to remove the barriers to women’s participation in the paid workforce and close the gender pay gap. This includes addressing the inequalities that underlie women’s lower rates of paid workforce participation and lower lifetime earnings. The Australian Government’s Paid Parental Leave scheme is a good start, but it is just that - a start. Let’s not forget that it doesn’t include superannuation payments at this point.

We need stronger regulation of flexible work arrangements to support all employees – women and men – to better balance their paid work and caring responsibilities. There are many men who want to be more involved in caring. It is time that we also think innovatively about how we can support men to take on a greater role. For example, some countries have seen benefits in providing a period of leave specifically for dads – but on a ‘use it or lose it’ basis. This means that if dad doesn’t use it, it doesn’t revert to mum.

These measures must be accompanied by accessible, affordable, quality child care and other care services that will support employees with their caring responsibilities across the life course.

Secondly, we need to invest in measures that redress women’s disadvantage in the superannuation scheme. For example, we know initiatives such as the superannuation co-contribution scheme have had positive outcomes for women and others on low incomes. It should be expanded.[31] What about greater tax incentives for low income earners to make voluntary contributions to their superannuation?

Thirdly, we need to specifically recognise and reward unpaid caring work in the retirement income system. The fact remains that the current retirement income system fails to recognise the value of unpaid caring work to our society and economy. Given the levels of unpaid work for women remain unchanged; focusing solely on women’s workforce participation and tinkering at the edges of the superannuation system will not deliver financial security for women.

You might argue that the Age Pension is a form of redistribution and equity for women who have been unable to save for their retirement because of caring responsibilities and low earnings. However, given that it is a broad based entitlement at a minimal rate, not to mention Australia’s comparably low spending in this area[32], it does not properly recognise or reward unpaid work.

It is increasingly evident that a more substantial reform is needed to make the system better reflect the reality of a woman’s lifecycle. It is time to start a new debate about how the system can properly value unpaid caring work, in addition to what is currently offered through the Age Pension. Is it a national scheme of social insurance? Is it credits that are paid to those who have cared when they retire?

Conclusion

The issues paper I am releasing tonight is called “Accumulating Poverty”. It examines these matters in much greater depth and complexity. It makes for very sober reading. This is a complex area of policy - and we cannot continue to ignore it.

I hope this issues paper will spark a national inquiry into the gender gap in retirement savings.

We can no longer park this issue in the “too hard” basket. We must confront the problem and look for innovative policy solutions.

Whatever the remedy, we cannot afford to leave half the population behind.


[1] Ross Clare, Retirement Savings Update (2008) p 3. At http://www.superannuation.asn.au/Reports/default.aspx (viewed 31 August 2009).
[2] Simon Kelly, 'Entering Retirement: the Financial Aspects' (Paper presented at the Communicating the Gendered Impact of Economic Policies: The Case of Women's Retirement Incomes, Perth, 12-13 December 2006) p 12.
[3] Rebecca Cassells, Riyana Miranti, Binod Nepal and Robert Tanton, She works hard for the money: Australian women and the gender divide, AMP.NATSEM Income and Wealth Report issue 22 (2009) p 27. At http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjA5fENoaWxkSUQ9LTF8VHlwZT0z&t=1 (viewed 2 July 2009).
[4] Ibid.
[5] FAHCSIA, Pension Review Background Paper (2008) p 6. Available at http://www.facs.gov.au/seniors/pension_review/pension_review_paper.pdf (viewed 9 February 2009); Robert Tanton, Yogi Vidyattama, Justine McNamara, Quoc Ngu Vu and Ann Harding, Old Single and Poor: Using Microsimulation and Microdata to Analyse Poverty and the Impact of Policy Change Among Older Australians (2008) p 15. Available at https://guard.canberra.edu.au/natsem/index.php?mode=download&file_id=880 (viewed 9 February 2009).
[6] The poverty measurement tool for this study is 50% of the median income poverty line. Bruce Heady and Diana Warren, Families, Incomes and Jobs, Volume 3: A Statistical Report on Waves 1 to 5 of the HILDA Survey (2008) p.55. Available at http://www.melbourneinstitute.com/hilda/statreport/statreport-v3-2008.pdf (viewed on 9 February 2009).
[7] Robert Tanton, Yogi Vidyattama, Justine McNamara, Quoc Ngu Vu and Ann Harding, Old Single and Poor: Using Microsimulation and Microdata to Analyse Poverty and the Impact of Policy Change Among Older Australians (2008) p 15. Available at https://guard.canberra.edu.au/natsem/index.php?mode=download&file_id=880 (viewed 9 February 2009).
[8] Tamara, Blog entry (2008) Human Rights and Equal Opportunity Commission Listening Tour website at 21 March 2008
[9] Ricardo Hausmann, Laura Tyson and Saadia Zahidi, The Global Gender Gap Report 2008 (2008) p 43. At http://www.weforum.org/pdf/gendergap/report2008.pdf (viewed 31 August 2009).
[10] See Chapter 2, Australian Government, Women in Australia 2009 (2009) At http://www.fahcsia.gov.au/sa/women/pubs/general/womeninaustralia/2009/Documents/chap2.pdf (viewed 13 August 2009).
[11] Ibid.
[12] Australian Bureau of Statistics, Average Weekly Earnings, May 2009, Cat No 6302.0 (2009). At http://www.abs.gov.au/ausstats/abs@.nsf/mf/6302.0 (viewed 31 August 2009).
[13] Australian Bureau of Statistics, Average Weekly Earnings, May 2009, Cat No 6302.0 (2009). At http://www.abs.gov.au/ausstats/abs@.nsf/mf/6302.0 (viewed 31 August 2009).
[14] Ibid.
[15] Rebecca Cassells, Riyana Miranti, Binod Nepal and Robert Tanton, She works hard for the money: Australian women and the gender divide, AMP.NATSEM Income and Wealth Report issue 22 (2009) p 34. At http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjA5fENoaWxkSUQ9LTF8VHlwZT0z&t=1 (viewed 2 July 2009).

[16] Human Rights and Equal Opportunity Commission, Pregnant and Productive: It's a right not a privilege to work while pregnant (1999). Available at http://www.humanrights.gov.au/sex_discrimination/publication/pregnancy/report.html (viewed 16 August 2009).
[17] Australian Bureau of Statistics, Australian Social Trends, 2007 Cat No 4102.0 (2007).
[18] Partnered men with children are expected to earn 2.6 million over their lifetime, compared to 1.3 million for partnered women with children. Rebecca Cassells, Riyana Miranti, Binod Nepal and Robert Tanton, She works hard for the money: Australian women and the gender divide, AMP.NATSEM Income and Wealth Report issue 22 (2009) p 33. At http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjA5fENoaWxkSUQ9LTF8VHlwZT0z&t=1 (viewed 2 July 2009).
[19] Partnered women with children are expected to earn 1.3 million over the lifetime, compared to 1.9 million for women without children. See Cassells et al, above.
[20] Rebecca Cassells, Riyana Miranti, Binod Nepal and Robert Tanton, She works hard for the money: Australian women and the gender divide, AMP.NATSEM Income and Wealth Report issue 22 (2009) p 11. At http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjA5fENoaWxkSUQ9LTF8VHlwZT0z&t=1 (viewed 2 July 2009); Lyn Craig, 'Is there really a "second shift", and if so, who does it? A time-diary investigation' Feminist Review 86 (1) 149-170 (2007).
[21] Human Rights and Equal Opportunity Commission, Striking the Balance: Women men, work and family (2005) p 35. At http://www.humanrights.gov.au/sex_discrimination/publication/strikingbalance/index.html (viewed 31 August 2009).
[22] Ross Clare, Retirement Savings Update (2008) p 6. Available at http://www.superannuation.asn.au/Reports/default.aspx (viewed 11 February 2009).
[23] Lyn Craig, 'Is there really a "second shift", and if so, who does it? A time-diary investigation' Feminist Review 86 (1) 149-170 (2007).
[24] In 2003, of the 2.5 million carers, 19% were primary carers and over two-thirds (71%) of primary carers were female. For further information please see Australian Bureau of Statistics, A Profile of Carers in Australia, 2008, Cat no. 4448.0 (2008) p 8.
[25] Access Economics, The Economic Value of Informal Care (2005) p i. At http://www.accesseconomics.com.au/publicationsreports/getreport.php?report=6&id=6 (viewed 2 September 2009).
[26] Jenny Mouzos and Toni Makkai, Women’s Experiences of Male Violence: Findings from the Australian Component of the International Violence Against Women Survey (IVAWS) (2004) p 3. Available at http://www.aic.gov.au/publications/rpp/56/RPP56.pdf (viewed 29 May 2009).
[27] Suzanne Franzway, Carole Zufferey and Donna Chung, ‘Domestic violence and women’s employment’, Paper presented at Our Work, Our Lives Conference, September, Adelaide (2007).
[28] Matthew Gray David de Vaus, Lixia Qu and David Stanton, The consequences of divorce for financial living standard in later life (2007) p 13. Available at http://www.aifs.gov.au/institute/pubs/rp38/rp38.html (viewed 9 February 2009).
[29] Matthew Gray David de Vaus, Lixia Qu and David Stanton, The consequences of divorce for financial living standard in later life (2007) p 13. Available at http://www.aifs.gov.au/institute/pubs/rp38/rp38.html (viewed 9 February 2009).
[30] AMP and NATSEM, Financial impact of divorce in Australia: Love can hurt, divorce will cost, Income and Wealth Report Issue 10. 2005, p 9-10. At http://www.melbourneinstitute.com/hilda/Biblio/ophd/AMP.NATSEM_love_can_hurt.pdf (viewed 6 February 2009).
[31] Australian Tax Office, Taxation Statistics 2006-2007 (2007) p 132. At http://www.ato.gov.au/content/downloads/00177078_2007CH15SPR.pdf (viewed 2 September 2009).
[32] Pensions make up only 3.5% of national income in Australia, compared with an average of over 7% of GDP in OECD countries. Please see OECD, Pensions at a Glance 2009: Retirement-Income Systems (2009). At www.oecd.org/els/social/pensions/PAG (viewed 1 July 2009).