Gender and ethnic pay gap equates to $17.6 billion in lost earnings

Media announcement – 5th October 2022.

Findings from Strategic Pay’s third annual Pay Equity analysis show the gender pay gap closed slightly this year. However, research shows that gender and ethnic pay gaps, when combined, result in a whopping penalty of $17.6 billion, or 11 per cent of wages and salaries.

While it was positive to see some ground being clawed back after a widening gap last year, these gains were mostly in the public and not for profit sectors. The private sector has remained relatively unchanged over the last 12 months suggesting they have some ground to make up. “This analysis differs from the Statistics New Zealand figures, as we can look beyond just base salary and examine what the pay gap looks like when benefits such as vehicles or insurances are included.” Says Strategic Pay’s managing director, Cathy Hendry.

The analysis found the overall gender pay gap since 2021 has slightly improved – it’s now at 16.7 per cent compared to 18.5 per cent last year.  The not for profit sector still boasts the lowest pay gaps which have halved since our inaugural analysis. The public sector gender pay gap reduced by 1.9 percent, while the private sector gender pay gap only shrunk by 0.8 per cent.

“Both the public and not for profit sectors have likely benefited from initiatives to target pay gaps, including a number of large pay equity settlements and compulsory reporting of pay gaps within the core public service,” says Hendry.

In addition to analysis on Strategic Pay’s own remuneration database, they commissioned additional research using the official Labour Market data from Statistics New Zealand. The research was conducted by economic and policy researchers Motu, in partnership with MindTheGap to try and understand the true economic cost of both gender and ethnic pay gaps in New Zealand.

“When you broaden the analysis to incorporate ethnicity, the enormity of the deficit experienced by women and ethnic minorities reinforces the need for employers to comprehensively address pay disparity,” says Hendry.

“Not just by raising pay, but through cultural change within organisations.”

In addition to the gender pay gap, there is a substantial hourly pay gap between ethnic groups. Compared to Pākehā/European men, Māori men earn 17 per cent less, Pacific men earn 23 per cent less and Asian men earn 11 per cent less.

Women are subject to both the gender and ethnic pay gap. Compared to the average hourly pay rate of Pākehā/European men, Pākehā/European women earn 12 per cent less, wahine Māori earn 23 per cent less, Pacific women earn 24 per cent less, and Asian women earn 17.4 per cent less.

The research found that even after discounting factors that are arguably outside an employer’s control, substantial gender and ethnic pay gaps remained. This means that discrimination is still probably the main driver, so there is plenty of room for pay and employment practices to close the gender and ethnic pay gaps.

Employers can begin to address these inequalities by putting in place a formal job evaluation system. A recent UK study found that these, on average, cut the pay gap in half.

Hendry says this is likely to be a new area of focus.

“Job evaluation systems can be a useful tool to begin to address the gender and ethnic pay gaps that have been highlighted, but we need more clarity and better data. Strategic Pay has plans to expand its database in the future so we can learn more about ethnic pay gaps.”

The research also indicates that while pay rates differ markedly across employers, pay gaps within firms are substantial, and cannot be explained by productivity differences.

“These disparities are not easy to fix – we need to address the systemic and structural gender and racial inequality which exists in the labour market and in society,” she says.

The Motu research also noted that women on average have higher levels of qualifications than men, something we would normally expect to result in higher wage rates. This indicates that the gender pay gap is understated.

“The pay gap is even worse than what the numbers are telling us. Organisations need to play their part and address their own pay gaps and examine any unconscious bias in recruitment and promotions,” Hendry says.

The Strategic Pay report is based on data from over 192,000 employees around New Zealand, in 1,141 public, private and not for profit organisations. The findings are based on data as of March 2022, and takes into account not just base salary, but also variables such as KiwiSaver and bonuses.

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