Woman and savings
Speech by Pru Goward at the The ASFA 2004 National Conference and Super Expo, Adelaide, 11 November 2004.
- Michaela Anderson, Director of Policy and Research, the Association of Superannuation Funds of Australia (Chair)
- Judith van Unen, Immediate Past President, Australian Federation of Business and Professional Women. (panel member)
- Thank you for inviting me here today. I am delighted to address ASFA's Saving for the Nation conference here in Adelaide. I am particularly pleased to be able to make a contribution in the women's superannuation and saving debate.
- I don't think there's any doubt that Australia's current superannuation arrangements are not working for women.
- There have been great improvements in superannuation law- improvements in the share of superannuation after divorce, greater portability, the ability to combine accounts and for those in paid work to contribute to the superannuation of their spouses, government co-contribution for low-income earners- to name a few.
- These improvements coupled with introduction of superannuation contributions through centralized industrial awards in 1985 and the introduction of mandatory superannuation contributions by SGC in 1992, have gone someway to redressing the imbalance between the superannuation of men and women.
- But there are studies confirming the super gap still persists.
- Statistics from the HILDA survey of 2002 and referred to in Ross Clare's research paper demonstrate that currently women with superannuation by the age of 60, will have half the average account balance at the time of retirement as that of men.
- As Ross has said, this disparity between women's and men's super begins at about age 25 and progressively increases with age. One in six 35-44 year old males had super balances of over $100,000 compared with only one in twelve women.
- Already women are two and a half times more likely to live in poverty in their old age than men, because they have contributed so much less to superannuation.[1]
- By the year 2019, men, on average, will have accumulated double the superannuation that women, on average, will have done.
- That will be after a life time of 9 or 12 percent superannuation contributions.
- With the average age of retirement expected to be 59 for women (60 for men) this imbalance is of real concern. The outcomes of the survey conducted by ANOP for ASFA suggests that the mean actual retirement age is 57 for men and 55 for women and that it is likely both men and women may retire earlier than anticipated ....and women will be living on less.
- One of the sad ironies is that women need more, not less super than men
- Not only are they retiring earlier, they are, on average, living longer than men. Women's life expectancy is 82 years, compared with 78 years for men. That's four years more living costs to find. And the UN predicts life expectancy to continue to rise as the population ages, while the population of young people stabilizes
- And the days of Darby and Joan retirements are long gone for so many.
- Higher divorce rates and lower remarriage levels particularly in later stages of life are expected to result in more women living alone and being dependent on their own financial resources.
- Under the old Australian welfare settlement, none of this mattered much. Australians died in their sixties and those that actually made it to retirement lived in modest circumstances on a pension in homes they owned outright. There weren't many of them so what were a few free beds in public hospitals to the tax payer? The range of pharmaceuticals available to enhance their quality of life was so limited, it too, was affordable for a country with a relatively young population and thriving work force.
- But how times have changed. The ageing of Australia and the fertility collapse have turned dependency ratios on their head.
- The looming burden of aged care for the biggest generation of old people ever to hit retirement, the baby boomers, has encouraged governments to privatise old age - in particular to encourage superannuation so that people can provide for themselves and pay full price for their hospital expenses and those costly and ever expanding lists of life enhancing as well as life saving pharmaceuticals.
- In this new order, the old age pension will increasingly become a bare minimum and other aged care government benefits will need to be strictly rationed in order to keep the lid on government spending.
- With the ratio of aged dependents to tax payers set to double in the next thirty years- which is another way of saying the tax burden per tax payer will double- successive governments have felt they had no choice but to encourage self sufficiency in old age. Inter generational resentment and political polarization is the alternative.
- This disparity may not be so dire for a woman and man sharing a retirement income- although that is something of a challenge in itself. We need also to remember that widows rarely receive the full amount of superannuation enjoyed by their contributor- husbands.
- But it remains true that poverty in old age will increasingly be a problem for women.
- To address the disturbing trend, let's look at the obstacles women face in providing for their old age.
- Let's start with why women will have on average half as much money as men when they retire from the workforce.
- Essentially there are two reasons for the lower retirement savings of women- they work less paid work and they are worth less in the paid work they do.
- Superannuation is based, of course, on savings accumulated during a working life. But unfortunately it is based on a male model of working, the linear progression over 40 years of a fairly stable working life. That is not the career path of the vast majority of Australian women. 80% of Australian women reproduce. Given that we have always , and continue to see it as women's role to carry the major unpaid caring load, women's working life almost inevitably changes when they have babies. And almost inevitably that means that Australian women will accumulate insufficient funds over their working lives to support themselves comfortably
- So if we care about adequately supporting Australia's women who have spent a life time of caring and juggling, in considering superannuation policy we need to take into account the lives of women, as well as those of men.
- Perhaps we need to think laterally. Perhaps governments and employers could start by providing women with continuing Superannuation Guarantee Contributions from their employers while they are on maternity leave. This will give them at least continuity of savings despite broken periods of employment.
- And what about women who are out of the paid workforce caring for others. In some countries, the social security system already recognises the contributions of women in caring for young children and the disabled, by giving age pensions credit for carers. Superannuation contributions, paid by the government and additional to the Carer Payment, could provide a means of rewarding caring services. Or perhaps, a system of credit bonuses could be developed to accrue additions on a pro-rata basis to top-up their age pension. So that, for example, someone who spent their entire working life performing necessary (but unpaid) work would have some additional entitlements when they receive the age pension.
- I cannot say I am wedded to any of these or especially endorse them, but if we accept that women will spend a significant period outside paid work, then, to be consistent, we need to protect their retirement interests.
- It is my contention that a better way of doing this would be to build workplaces that acknowledge and make room for workers' family responsibilities and to encourage a more equitable sharing within families of unpaid caring work.
- First let's deal with pay equity: lower earnings mean lower levels of savings - and women earn less than men. Women earn 84.7c in the male dollar when the average weekly earnings of full time ordinary time workers are compared. We are not talking here about women who choose to work part time or choose not to do overtime. We are talking about forty hour workers, men and women. When part timers and casuals are included, the gap widens to 65.3 cents in the male dollar. (ABS 2003) These gaps are almost entirely the result of women needing to juggle the double load of being primary parent and carer.
- Without denying the non-remunerable rewards of bearing and raising children, this pay gap is clearly of direct concern to the nation's women.
- The income difference between women and men occurs even before women begin to bear children. Before the age of 30, that is, before the age when many women start having children, men already have 1.5 times the superannuation assets of women, reflecting mainly the differences in relative earnings. The disparity only widens as the workforce patterns of women destabilize in comparison to men.[2]
- From the moment a woman, even without children, enters the workforce she experiences disadvantage as a result of her potential to bear children - she will earn less, be less likely to be considered for promotion and be more limited in her career opportunities.
- Take for example law graduates. Female graduates make up 60 % of all Law graduates, but one year out receive $1,900 a year less in median salaries.[3]
- According to the Graduate Careers Council of Australia report, the average university graduate can expect to receive $35,500 in their first year of employment, however males were more likely to occupy high-paying jobs than females. In their first year of employment, men earned an average of $37,000 a year while women earned $35,000.
- Research in the United Kingdom found "[t]he annual salary of male graduates aged 20-24 is 15% higher than the annual salary of female graduates in the same age group. ... a gap exists even when women and men have studied the same subject, achieved the same class of degree, work in the same occupations or the same industries."[4]
- But you can't explain much of the gender pay gap by worrying about earnings differences between men and women lawyers. There just aren't enough of them to make a big difference.
- Women's employment is concentrated in the lower paid sectors of the workforce in occupations such as cleaning, teaching, hospitality, retail and nursing.
- In these sectors it is arguable that the work itself is under-valued. Teaching is so badly paid men won't do it and nursing has been underpaid for so long our nursing graduates are now easy pickings for overseas hospitals.
- Fixing the gender pay gap by addressing the value of female-dominated occupations will go some way towards addressing the super gap between men and women.
- But undoubtedly the greatest contributor to the lower retirement savings of women is the amount of paid work women do.
- On average women are currently in the workforce for a full time equivalent of 20 years, while men work for 38 years.[5] Studies predict that even with an increase in the labor force participation rate of women over the next 30 years, women's working lives will only average 28 years by 2030.
- Again, these shorter working lives are about having children. It is estimated that women forgo up to as much as $239,000 in lifetime earnings as a result of leaving the workforce to bear and raise children.
- It would be very sad indeed if women, the centre-pieces of our families, ended up living in poverty in their retirement because they put their family caring responsibilities first. If for no other reason, women must be encouraged to continue working for as long as possible.
- And if international comparisons are anything to go by, this is not an unreasonable ask.
- The Labor Force participation rate of women in Australia is 55.8% , lower than the OECD average. What's more, women in Australia who do paid work are much more likely to participate in casual or part time work- almost half of all women in paid work in Australia work part time or casually.
- This in itself is not necessarily a bad thing but these positions are likely to be less secure, less well paid and tend to be unstable and short term.
- For these women superannuation contributions are particularly at risk of non-compliance by employers
- Subsequently many women are not aware of where their super is or whether it has even been paid.
- Some women, who are paid less than $450 per month are not entitled to employer superannuation contributions. Women who earn more than $450 but who work for several different employers in which each job may not reach the $450 threshold, will also not acquire any superannuation contributions
- Australia's lack of family-friendly working conditions is again one of the most significant factors in the under-employment of women, of gender inequality in our workforce and thus of inequality of superannuation savings
- You can't reform women's saving without reforming workplace practices. Superannuation is essentially a workplace issue rather than one of financial management.
- Work requirements that prevent or limit the ability of people with family and caring responsibilities to participate in paid work have a disproportionate effect on women. Family friendly employment provisions can assist in addressing these barriers and hence in achieving genuine equality of opportunity for women and men.
- The best way to address women's economic disadvantage is through workplace reforms - by encouraging and assisting women to stay longer in the paid workforce; by ensuring that women are paid equitably; given access to career and training development despite broken patterns of paid work and are given the opportunity to progress in their respective employment and thus increase workplace retention.
- International comparisons reveal a low level of workforce involvement among Australian mothers. Of Australian women with two or more children, only 43% are in the workforce, compared with 82% in Sweden and 62% in the UK.[6]
- Perhaps women would do more paid work more if our work places made it easier for them to work and, significantly, to share caring responsibilities, with partners who could be encouraged to take a greater share of care.
- Reforming the sharing of house work and child chare is proving even more intractable than reforming work places. The recent HILDA (Household Income and Labour Dynamics Australia) survey found that 60% of women in full time work do more than 12 hours of housework each week. Only 11% of full time male workers do so. The survey established that women were more frustrated by the difficulties they had meeting their parenting responsibilities, and that many women found motherhood more a burden than a joy. If we are serious about greater workforce engagement for women, we clearly have to do some hard thinking about how we can help them meet their onerous housekeeping and child care responsibilities at home.
- Family responsibilities are not divided equally among men and women: women do 90% of childcare tasks and 70% of all family work. Only 15% of fathers are highly participative in family work.[7]
- But we still have a long way to go in the work place. The adoption of so called 'family-friendly' policies needs to be more widespread. Flexible working hours; part time work; job sharing; home based work; career breaks; flexible carer leave, access to flexible child care, paid maternity and paternity leave are all on the list of must haves. It means men also not being discriminated against if they choose to use family friendly conditions and instead being encouraged, through corporate leadership, to give their families the time they crave.
- We need to address people's take up of existing family friendly provisions. We need to make sure that people are aware of their existing employment rights and are willing and able to access them.
- For example, in my consultations on paid maternity leave, it was clear that some women did not know, did not insist upon or were encouraged not to access their right to return to work after unpaid maternity leave. Or they left work rather than experiencing the "guilt" of inconveniencing their employer.
- Currently only 31 per cent of women have employer provided paid maternity leave entitlements. These are overwhelmingly either professional and managerial, or in the public sector.
- Paid Maternity Leave is almost unheard of for shop assistants and waitresses.
- We need to make sure that entitlements and family friendly policies are adopted nationwide, across all industries and positions. It means they are more likely to remain in paid work and enables all mothers and fathers, whatever their work status, to be able to contribute to their own old age.
- We must also assist women who are out of the paid workforce on maternity leave or shouldering continuing responsibilities for children and grandchildren and caring for the sick and the elderly.
- This is a much greater challenge for governments but there are clear equity reasons for doing so.
- There are additional national interest concerns here which go well beyond superannuation but which are served by the same family-friendly remedies.
- Family-friendly work conditions nationwide not only enables more mothers to enter and remain within the paid workforce, they also effectively increase the size of the prime age workforce. In this century of the dragons, where world economics will be dominated by the huge workforces of India and China (between them predicted to have 3 billion people by the middle of the century) increasing Australia's total work effort- and our economic output will be especially important to Australia's economic survival. Australia's declining fertility rate and rising ratios of dependents to tax payers makes this a crucial economic issue, to say nothing of its importance to individual women.
- Overall, Australia suffers from a lower rate of work force participation than comparable western countries. The low female work rate undoubtedly contributes to this.
- This is not just the result of a low participation rate for mothers with children under six, but an even lower participation rate in the 55 plus age group.
- The introduction of family friendly policies, if the experience of other western countries is anything to go by, should assist an increase in female workforce participation. This is not only good for families and for the country, it means employers save the costs of staff turnover. Costs which rise with the experience and skill of the staff involved. Skills retention, lower recruitment costs and diversity are all improved by enabling women to continue to both work and have families.
- An increase in the participation rate makes it a win win - better for families and better for Australia's prosperity.
- And better for women's retirement savings.
- But perhaps we should start any policy thinking by acknowledging that life for Australian women is not going to change quickly. As the figures demonstrate, even by 2030, women on average will only be working 28 full time years, compared with men's 38 years. Should we do more to fill the gap- and in a sense, reward those so called lost years of motherhood and caring.
- Educating women of all ages about the importance of retirement savings is a must. There is a need to create an understanding and appreciation of the importance of savings that can extend to financial planning and investment. Which I'm sure I don't need to tell any of you here. I'm not saying it isn't very difficult either- women of 25 don't think they'll ever have a wrinkle, let alone retire!
- Increasing the role of women in the governance of superannuation funds is essential. We need to see women joining men in the leadership of superannuation funds to ensure the life stories of women are accounted for in superannuation products and policy.
- It is true that these same work-family policy prescriptions apply to almost any issue of gender inequality you care to name. But there is something so especially sad about poor old ladies (who have worked hard all their lives) living on tinned corned beef and sliced white bread, something so especially unfair about old ladies waiting for years on public hospital waiting lists to have quality of life surgery because they cannot afford to pay for it, something so especially wrong with a country that has taken all this female caring for granted and made it so difficult for them to contribute to their own economic security; that this issue of women, savings and super, is one Australia cannot turn its back upon.
1. " ... there
are 106,000 poor single women over 65 as compared with 40,000 men in this group
in 2000" Senate Community Affairs References Committee A Hand up not a hand
out: Renewing the fight against poverty: Report on poverty and financial hardship,
Commonwealth of Australia 2004, p211.
2. C Brown- Conference Paper- Retirement Income Modeling Task
Force- Joint project Treasury , Dept Finance and Dept Social Security, 1997
3. www.gradsonline.edu.au:-
2003 Graduate Destination Survey of graduates who completed their courses in
2002.
4. United Kingdom Equal Opportunity Commission 15% off: Why
are women workers still going cheap? http://www.eoc.org.uk/cseng/policyandcampaigns/studentpack.asp.
5. 1999 OECD Economic Survey of Australia of Australia by ASFA
2001
6. Christina Lee, 'Australian women facing the future: Is the
Intergenerational Report gender-neutral?' An Academy of the Social Sciences
in Australia sponsored workshop held in Brisbane 1-2 July 2004, Policy e-paper
series (www.assa.edu.au/policy/papers/3004/intergen.htm).
7. These conclusions are reached in an overview of various studies
into the division of family responsibilities by Lyndy Bowman and Graeme Russell
Work and Family: Current thinking, research and practice, Macquarie Research
Limited Sydney 2000, 16.
