Cultural issues within Fire and Emergency NZ have been addressed and the Government has announced its plan for replacement ferries to begin service in 2029. Video / NZ Herald
Opinion by Bali Haque and Dr Michael Johnston
Bali Haque (MNZM) was a secondary school principal and is currently a New Plymouth District councillor and author. Dr Michael Johnston is a Senior Fellow at the New Zealand Initiative.
THREE KEY FACTS
The gender pay gap in New Zealand is 8.2%.
The gap is 4.2% when comparing only full-time male and female workers.
The gap is larger for older workers.
To solve a problem, first you have to understand it. Once you understand it, you sometimes realise it isn’t the same problem you had thought it was.
For Dame Theresa Gattung, the gender pay gap isn’t merely a problem – it is a “crisis”. She sayswomen effectively work for free after December 2 each year.
Gattung claims 80% of the pay gap is explained by “harder-to-measure factors like conscious and unconscious bias and differences in choices and behaviours”. Her proposed solution is to pressure businesses to publicly report their pay gaps, presumably to shame them into action.
Research published in the Journal of Economic Surveys in 2023 suggests such transparency can reduce pay gaps. However, it can sometimes do so more by reducing men’s pay than by increasing women’s pay.
The gender pay gap is far more attributable to men and women and women choosing different kinds of work and having different average levels of experience than it is to bias or sexism, Bali Haque and Dr Michael Johnston say. Photo / 123RF
It is easy to misunderstand what causes the pay gap if we don’t compare the right things.
As Gattung says in her article, New Zealand’s overall gender pay gap, calculated on an hourly basis across both full-time and part-time earnings, is 8.2%. But women are more likely to work part-time than men. When hourly rates of pay for men and women in full-time work only are compared, the gap is 4.2%.
The pay gap is much larger for older workers than for younger ones. Generational factors are at play here. Older women suffered genuine educational and workplace discrimination when they were young. That set many back for their entire working lives. But times have changed, and young men and women now start out on par.
In 2016, The Economist reported on a large European study on gender pay parity in Europe. The overall pay gaps in the United Kingdom, France and Germany were 29%,17% and 15% respectively. However, when jobs at the same level were compared, the gaps shrank to 9% in Britain and 4% in both France and Germany. When jobs within the same company and at the same level were compared, the gap was 3% in all three countries.
That study shows the importance of making the right comparisons to properly understand the issue. The gap is far more attributable to men and women and women choosing different kinds of work and having different average levels of experience than it is to bias or sexism.
The Ministry for Women acknowledges this. So does Gattung, obliquely at least, when she attributes part of the pay gap to “differences in choices and behaviours”. But what kinds of choices and behaviours might she mean?
Professor Henrik Kleven and his colleagues at Princeton University used data from Denmark – a country with a high level of gender equality – to investigate the effect of parenthood on the pay gap. They found Danish men and women earned very similar hourly rates before they had children. However, there was a sharp drop in women’s earnings after the birth of their first child. There was no comparable drop for men.
This “motherhood penalty” persisted for around 20 years, reducing women’s career advancement and remuneration considerably. Women with no children stayed on an upward earning trajectory, while the incomes of women with children fell. Typically, they never fully recovered.
A similar study was funded by the New Zealand Ministry for Women and carried out by the Motu research organisation. The researchers compared the monthly earnings of a sample of parents who had their first child in 2005 with those of a sample of non-parents. They followed the earnings of both samples from 2000 to 2015. Mothers earned lower hourly pay than women without children. Those out of paid work for more than a year suffered a motherhood penalty of 8.3%.
These studies show that the main culprit in the pay gap is the motherhood penalty. Motherhood takes women out of the workforce, often for years. Working mothers frequently opt for part-time work or work well below their capabilities to make room in their lives to care for their children.
Most men spend much less, if any, time out of the workforce when they become fathers. If anything, many probably work harder to increase their incomes, motivated by a need to support their families.
To some extent the motherhood penalty looks set to take care of itself. Women are increasingly choosing career over motherhood, and this trend is ongoing. In 2010, New Zealand’s fertility rate was 2.2 children per woman. Now it is 1.5.
The pay gap has declined alongside the fertility rate, and it will likely continue to do so. In a few decades, that might cause a different problem – population collapse. But that is a topic for another column.
Men could consider taking on primary childcare responsibilities more often. In the 2020-21 financial year, just 504 men used the paid parenthood leave to which they were entitled, compared with 34,184 women. In the end, though, mothers and fathers make the choices they think best for their families and for themselves.
Workplaces could be more accommodating of working mothers by offering flexible hours, onsite childcare and work-from-home options. All of these things would impose a cost, which might impact everybody’s pay.
There are no straightforward solutions. But calling the situation a crisis, making overheated claims about women working for free or simplistically calling for employers to report their pay gaps certainly won’t work.
