Woman and savings

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.

Last
updated 11 November 2004.