The Impact of a Sustained Gender Wage Gap on the Australian Economy

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The persistence of the gender wage gap in Australia and overseas has been the subject of much research. Debates about how best to measure the wage gap, how to calculate the relative contribution different factors make to the gap, and how the gap and its determinants differ across sectors and income levels abound. However, few if any studies, and none for Australia, provide a comprehensive and detailed account of the impact of the gender wage gap to economic growth. This paper seeks to identify the key determinants of the wage gap in Australia and the impact of the wage gap on the Australian economy. Overall, our finding that simply being a woman is the major contributing factor to the wage gap in Australia is significant. Consistent with results from other Australian studies it highlights the considerale impact that discrimination and other differences between men and women, including differing motivations and preferences, can have on reducing the earnings of women relative to men, irrespective of similar labour force and work-related characteristics. Using rigorous macroeconomic modelling techniques, selected on the basis of a critical evaluation of several methodologies, we found that the gender wage gap has a substantial effect on Australia's economic performance, measured in terms of GDP per capita, and that the value of reducing the gap is substantial. Our results indicate that eliminating the whole gender wage gap from 17 per cent to zero, could be worth around $93 billion or 8.5 per cent of GDP.


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