A fair go. Addressing inequality. Supporting employers, communities and families.
The issue of less superannuation for some
Society is changing. Women are participating in the workforce at record levels. One job for life does not exist anymore. Newly arrived young, highly skilled immigrants do not all have the option of having their parents move to Australia to look after grandchildren. There are far more women retiring who are not married and do not own a home than ever before. Yet, what hasn’t changed is the thing that holds society together: stronger communities and it being a collective effort to help those in need.
Yet in aggregate, women and other minority groups, are earning less and retiring with less than the traditional Australian-born homeowning male. Women irrespective of family status who are educated, ambitious, also suffer from this. There is an element of more women taking different forms of carer leave, be it parental leave or other types of carer leave, or even exiting the workforce. Topping this off, there is unconscious bias towards those who are traditionally viewed to be “worth” more for the job.
A defined contribution superannuation system that has evolved in Australia is effectively a type of deferred compensation system. If you earn less in your working life, you will have less super. That is a fact. The challenge in addressing the gender superannuation gap has two components:
- Addressing the gender pay gap
- Enhancing the social security system to address what addressing pay alone cannot do.
How employers are leading with solutions
Diversity, in all its forms, in the workplace, leads to less group-think, better ideas and better outcomes for business customers. The demographic change is happening in Australia through the workforce. The Board composition and executive management remain, largely, stale, pale and male.
Some employers are taking the lead in championing the workforce of the 21st century. Examples of these initiatives include paid superannuation on parental leave with paternal and maternal leave treated equally. This equal treatment allows the sharing of childcare. Mentoring programs to encourage women in management positions, plus flexible part-time and working from home options are key.
Other initiatives include keeping in touch with people on extended parental leave and the greater use of online videoconference meetings. The result encourages higher productivity, retention and greater participation of people without significantly increasing employers’ costs. Happy staff mean happier customers.
The role of government
But there is a limit to what good employers’ alone can achieve.
For a government focused on productivity in the 21st century, a well-defined end goal should be to provide social security, whether paid by the government or by employers, for all working Australians. Addressing the gender pay gap will go a long way to potentially solving this.
Voluntary initiatives by some companies are not enough. Small businesses may not be able to manage parental leave as well as more significant, more resourced organisations. With compulsory superannuation, combined with the age pension, we do have reasonable retirement outcomes. But not the fairest for all. The government must, through the retirement income review and subsequent speedy actions, redistribute the tax concessions more equitably, mandatorily support businesses (or directly) pay parents while taking career breaks and encourage society to embrace change.
Funding to early learning and childcare should always be managed so it always makes financial sense for a mother to return to work and have affordable childcare. Currently, there are some circumstances in our means tested system, where a highly paid father results in serious financial disincentives for the mother to return to work due to the cost of childcare being greater than the income that the mother brings in. There should always be financial incentives to contribute to the workforce.
If we do not do anything, we may create an ageing society. For example, Japan, if the gender and parental inequalities are not addressed, many educated women with aspirations for a career or to make meaningful contributions to society will simply defer having a family or not have a family at all. Over time, this will in turn create a wider issue of an ageing society supported by a smaller working population. Retirement income, medical treatment and long-term care costs will still need to be funded.
The time for government inaction has come to an end.
Let’s give everybody a fair go. We can be a great nation if we address the causes of the gender pay gap. Let’s support business investment and still keep communities and families at the front.
With over 16 years global experience in actuarial, superannuation and investment consulting, Neekhil is the Principal Consultant and conduit to clients and the McGing team of analysts.
Neekhil and the team at McGing Advisory & Actuarial provide a wide range of superannuation support services including investment governance and transition, and actuarial advice.