It seems to me to be an important fact that men receive $4bn a week more than women in the Australian labour market. This is the aggregate of the gender wage gap, but at $200bn a year it represents more than a gap in individuals’ earnings. It is a significant macroeconomic flow shaping both the economy and gender relations.

The Gender Wage Gap

The gender wage gap is a common measure of the difference between the average earnings of women and men in the workforce. It is generally expressed as a percentage of men’s earnings based on average total remuneration for full-time workers (a gap of 20.1%), full-time base salary (15%) or full-time average weekly earnings (14.2%) (WGEA data).

These measures are all based on full-time work. This is useful for comparing like-with-like (i.e. full time work) and can be important for highlighting differences in pay rates with women on average in less senior jobs and clustered in low paid jobs and industries. However, the full-time data ignores the actual work of just under half of the female workforce where around 45% of female jobs are part-time. Further, given that only 19% of male jobs are part-time, the focus on full time work centres and normalises male-work patterns and underestimates the differences in wages actually taken home.

These problems are corrected somewhat by calculating the gender wage gap based on the average weekly earnings of all workers. This blows the gender wage gap out to 31.3% because women are not only being paid less by a straight comparison (full-time earnings), they are working fewer hours so their average earnings are lower. Yet this adjustment only goes part of the way to recognising differences in labour force participation because the average weekly earnings do not tell us how many men or women are earning that income.

It would be theoretically possible to have an economy with no gender wage gap, but very few women employed. Indeed, if there were no women employed there would be no gender wage gap!

Alternatively, (and more realistically), women’s participation in the labour force may increase over time, which would be important in terms of the income, independence and economic power of women. However, if that increased participation simply replicates existing patterns then the gender wage gap data would remain unchanged.

The gender wage gap does not tell us how many people are impacted by the gap.

Gender Wage Share

Alongside these disaggregated averages and the expression of the gender wage gap in individual terms, I think it is important to record and express the aggregate outcome of the gender wage gap. This can be done by calculating the share of the total wages pool taken home by men and women. This will be a function of both earnings and participation and is used in the United Nations’ Gender Development Index.

The calculation in the UN index is complicated by the need to ensure international comparability, but in Australia the gender wage share can be calculated fairly easily. Using the ABS Labour Force and Average Weekly Earnings data, it is simply a matter of multiplying the average male wage by the number of male workers and the average female wage by the number of female workers. This gives an aggregate wage pool, and the male and female share of that pool. The table below shows the data for May 2021.

There are caveats on this data in broader gender terms given that it relates to labour earnings only, and does not include investment or other income. Nor does it deal with the distribution of non-market production income, or the redistribution of wage income within households, or the range of other inequalities which are tied up in wage gaps.

However, wages are the main source of income for most Australian households, and the data above shows that women take home 38.5% of the total wages pool, a gap of 23 percentage points to the male share – or 11.5 points to an equal share.

But for me, the standout figure is the differential in total earnings of $4bn a week between men and women. That is, the ABS data shows that in any week men as a group earned around $4bn a week more than women as group.

To put that in perspective, it is over $200bn a year – an annual figure which is about the same size as the entire federal government expenditure on social security (Commonwealth Budget Paper No.1, Statement 6, Table 3).

In a recent submission to the Federal Government’s review of the Workplace Gender Equity Agency (WGEA), I contrasted this difference wage share with the annual budget of the agency. Obviously responsibility for addressing the gap in women’s wages and workforce participation does not lie solely with the WGEA, but it seems fairly optimistic to expect an expenditure of $6m to have much impact on a $200bn problem (quite apart from the limitations of the liberalism of the agency – which I did not mention in the submission!).

Macroeconomics

But beyond the individualism of liberal workplace strategies, understanding the quantum of the difference in the gender share of wages is important because of its macroeconomic reproductive role. I noted above that $200bn a year was roughly equivalent to the entire federal government expenditure on social security. It is also around ten times the size of the entire South Australian state budget.

It would seem fairly uncontroversial to say that the social security system and state governments have an important role in total income distribution, and in the stability, direction and reproduction of the economy and society. Could we not then also see that a $200bn a year income differential between men and women is an important income distribution in itself? And that it has a role in the reproduction of society – and specifically the gendered inequalities across society?

For those familiar with structural analysis, this should seem logical. But for those with a more individualist starting point, it may be challenging to posit gender groups as collective economic entities. After all, the social security system or a state government are institutions with formal rules, lines of authorities and someone in charge, whereas “men as a group” or “women as a group” are just collections of individuals making their own decisions with no governing force or collective interest.

However, in macroeconomics we happily talk about a $120bn tourism industry, when it is a myriad of small and large operators competing to maximise their individual business profits. We talk about flows of money to and from a “finance sector” which is a range of entities responding to the savings made available by and the financial needs of individual actors outside of its realm. At a more abstract level, we lionise the disparate decisions of many people into a collective entity called “the market”, so the concept of women or men as a group should not be too much of a stretch.

There are of course differences within gender categories, issues of intersectionality and critiques of such a binary construction of gender. These are big and important issues, but beyond the scope of this post. My point here is simply that if we are to talk about a gender wage gap, then it seems reasonable to also talk about it at a collective and aggregated level.

At this aggregate level, the shares of total wages going to men and to women, and the substantial difference between the two is important because money is not neutral, or simply a conveniently exchange mechanism. It is a store of wealth and an enabler of access to goods and services.

It matters to gender relations and the structures of society that men as a group have access to $200bn a year more cash than women as a group (or that women’s access to that extra money is mediated by men at home or by the state at large). That money enables men as a whole to do more things (or more economically rewarded things) than women, to occupy public space and power, and to command greater aggregate purchasing power to be met by market production.

A gendered labour market not only reflects inequalities, it begets further inequality.

Concluding Directions

I am not claiming that gender differences are limited or reducible to the economic sphere, or determined by economic forces. But I am trying to move away from individualist economics, and in this instance, mainstream theories of the gender wage gap as being a result of differences in human capital or household income maximisation strategies. I am arguing for a more macro-level and structural analysis.

In a future post I may use the gender wage share data to track changes over time (spoiler: the female wage share has increased with greater labour market participation, but tracks a bit differently to the more traditional gender wage gap data). For now though, I am simply putting the $200bn figure out there and challenging anyone to say that an aggregate flow of that amount of money is not important.