Submission 167 Australian Council of Trade Unions Workplace Relations Framework Public inquiry

Gender pay inequality

As well as inequality across the earnings distribution another crucially important question concerns gender pay equity. In his overview of wage determination in Australia Keith Hancock observed that male / female pay relativities improved markedly in two periods: in the 1940s when the Women’s Employment Board led a sharp increase in pay for women; and in the 1970s, when the two equal pay decisions took effect.⁷⁷ By contrast, during the last decade the gender pay gap has worsened markedly. After improving during the second half of the 1990s and the first part of the 2000s, the period after 2004 witnessed a sharp decline in women’s earnings relative to men’s (Figure ).

Is this trend likely to continue, or will the gender pay gap start to close again? The answer to this question hinges on a number of factors, two of which are worth noting. First, the gender pay gap differs across the earnings distribution: as a general rule it is narrowest at the bottom and widest towards the top.⁷⁸ This has certainly been the case in Australia,⁷⁹ and is exemplified by the large pay gap evident in the managerial labour market.⁸⁰ Consequently, the pattern in overall earnings dispersion discussed above—with earnings growth much greater at the top of the labour market—suggests that the gender pay gap is also likely to widen.

Figure : Women’s earnings relative to men’s, Australia, 1994 to 2014

Y axis shows female full-time, adult, ordinary time earnings as a percentage of male full-time, adult, ordinary time earnings. Source: ABS Average Weekly Earnings, Trend data. 6302. Note that the series changed from quarterly to biannual in 2012.

Secondly, the basis for gender discrimination has changed. Until the 1970s the gender pay gap was deliberately kept wide by ‘institutionalised gender wage discrimination’.⁸¹ In recent years, institutional arrangements have focussed on eliminating gender discrimination in the labour market. Consequently, the remaining gender pay gap reflects not overt gender discrimination, but a range of more subtle mechanisms at work. As Wooden notes with regard to the managerial labour market, ‘the problem is not necessarily one of unequal earnings, but rather of unequal access to promotion’.⁸² The issue is complex, as it also involves issues around work-family balance, with the career penalties attached to child rearing and caring for other dependants (such as aged parents) invariably falling on women. The introduction of paid parental leave may eventually deal with some of these issues. However, continuing problems with access to and affordability of childcare—given that women are still the majority of primary carers—are likely to see interrupted career paths and confinement to part-time employment remaining the lot of women workers.

Finally, both occupational and industry structures have built-in gender biases, something evident during the long struggle over equal pay for work of comparable worth. This has been recognised in the FW Act which advances the principle of ‘equal remuneration for work of equal or comparable value’ and notes that ‘gender-related undervaluation’ does not require a male comparator or evidence of discrimination. Rather, ‘inferences can be drawn that a particular type of work is likely to be have been undervalued because of gender linked characteristics’. In 2010 the Australian Services Union (ASU) sought a ruling from FWA concerning equal remuneration for work in the Social and Community Services (SACS) Sector. The SACS workers were a largely feminised workforce which had historically been under-remunerated. The ASU drew on earlier cases, such as the NSW pay equity case of 1998, and argued that indicators of undervaluation, rather than male comparators, should be recognised. This made the case different to classic comparable worth cases, which required male comparators. Part of this union argument drew on many of the more subtle bases for gender discrimination in the Australian labour market, such as female concentration, low union density, poor access to training and career paths, a prevalence of small workplaces and large numbers of casuals.⁸³

While the ASU case was ultimately successful in having gender acknowledged as a core element in the lower pay of SACS workers, fixing the problem has been far from simple. Because so much funding for SACS depends on Federal Government allocations, budgetary cuts have limited the extent to which the poor pay in this sector can be improved. This is part of a larger problem for improving the wages for women workers: so many women work in sectors, such as education, health and community services, where the funds available for pay increases come primarily from government. The vertical fiscal imbalance in the Australian Federation—whereby the Commonwealth raises most of the revenue but the States fund most of the services—leaves the situation of pay equity in the Australian labour market largely unresolved while ever austerity policies rule.

Regulating international labour

As is well known, the Australian labour market absorbed large numbers of immigrants from the end of the Second World War onward, and these formed the basis for a major expansion in the manufacturing sector as well as large-scale construction projects.⁸⁴ The distinctive feature of this program of immigration, in contrast to the European experience of ‘guest workers’, was permanent settlement.⁸⁵ In other words, these immigrants became Australian citizens and their families were raised in Australia. As a consequence, the occupational trajectories of second-generation immigrants have shown marked differences to those of their parents: with the scenario of the children of factory workers becoming professionals not being uncommon. In terms of the macro-economy, immigration to Australia since the 1940s has generally been regarded as positive because it increases aggregate demand and it lowers the age profile of labour supply (that is, it brings a younger cohort of workers).

In recent decades this historical pattern has been overturned and the Australian labour market has developed a large component of ‘guest workers’ in the form of visitors on temporary visas with work rights. These have included specific skills-based visas (457s), working holiday visas, and New Zealand citizen visas, with full working rights (though limited social security entitlements). The growth of these categories since the early 2000s has been dramatic: the first two categories each now almost match permanent skilled arrivals in terms of their magnitude (see Figure left panel).

Figure : Immigration arrivals with work rights attached


One could also include international student visas within this framework, since these have work rights attached (up to a certain number of hours). The rise in this category has been quite remarkable (Figure right panel), as was the sudden drop when various restrictions were imposed to prevent rorting (the use of these visas as a backdoor into permanent residency).

In their assessment of this phenomenon, Wilkins and Wooden noted that by March 2014 some 883,000 people were on temporary visas with work rights and they observed: ‘If all these people were labour market participants, they would amount to over 7 per cent of the labour force’.⁸⁶ This calculation did not include people on New Zealand visas. In reflecting on these data the authors suggest that this development has ‘improved the operation of the labour market’ because labour supply can now respond quickly to labour demand. While they caution that the employment and wages of Australian workers may be ‘potentially adversely impacted’ by these temporary immigrants, they point to the positive economy-wide effects of immigrants (in the same vein as permanent immigrants). We do not share their optimism.

In terms of future scenarios, the situation of student visas is unclear. Much will depend on the future of changes in the higher education sector. The falling Australian dollar has made educational courses in this country cheaper for international students, but the future level of education fees is uncertain. In the case of 457 and working holiday visas the resumption in growth rates in the wake of the GFC has been solid, suggesting that employers have found this source of labour attractive. Current proposals for weakening ‘labour market testing’ would likely see this source of labour increase even more sharply.

While most of the 457 immigration intake has involved workers in managerial, professional and technical occupations, unions have experienced and reports have regularly surfaced in the media of the system being used to bring in semi-skilled labour, or skilled blue-collar labour, in situations where exploitation has taken place. There is certainly scope for immigrant labour to restrain wages growth. This can happen at least two ways. Firstly, for much of the time the 457 visa program has operated, it has been perfectly legal for employers to pay their 457 visa workers below genuine market wages. This has allowed employers to recruit labour at minimum cost. Not until changes introduced by the previous Labor Government in 2013 has this situation been properly addressed in the regulatory framework, although the evidence from recent 457 visa monitoring reports by the FWO is that large numbers of 457 visa workers are still not being paid what they are meant to be paid. Secondly, in the case of working holiday visas and international student visas, it is rarely a skills question at all: many of these workers have been employed in low wage sectors, particularly agriculture and hospitality. Media reports in recent years have also highlighted exploitative practices in both these sectors. Workers on temporary visas have always been vulnerable to exploitation: unscrupulous employers know that these workers’ knowledge of their workplace rights is often limited and their bargaining position is weakened by their visa status (such as restrictions on the number of hours international students are allowed to work).⁸⁷

The challenges for industrial relations policy posed by foreign labour are twofold: how to protect vulnerable foreign workers from exploitation and how to protect local workers from unfair competition in the labour market. It is also about ensuring employers who do the right thing are not undercut by those employers who exploit and abuse overseas workers. In the case of protection from exploitation, the problem lies not just in regulation but with enforcement. Unions traditionally played an important enforcement role in workplaces, but many of these vulnerable foreign workers are found in non-union workplaces or in various labour market blackspots, particularly in agriculture, construction and hospitality. Moreover, where government regulations impose restrictions on foreigners—such as the limits imposed on international students or refugees—these workers are unlikely to cooperate with officials or agencies charged with maintaining industrial standards. In effect, the lack of coordination between industrial relations policy, education policy and immigration policy makes it more likely that vulnerable foreign workers will collude in their own exploitation by keeping quiet about sub-standard employer practices.
In the 1990s Australia’s exposure to international competition took the form of a large increase in the off-shoring of production. The industrial relations systems struggled to deal with this: workers and unions had got on board the enterprise-bargaining bus and had set about making their workplaces more efficient, only to find that competing with Chinese labour was an impossible goal. In the end, employers—often reluctantly—had made the decision to move off-shore and there was nothing the industrial relations system could do about that.

Off-shoring remains a challenge in the 21st century—facilitated now by the extensive reach of the internet—and has reached into more service industries and (potentially) into more skilled occupations. Competition from international labour now takes two forms: this traditional off-shore competition and the newer on-shore competition from temporary immigrants. Industrial relations regulations struggle to deal with both these kinds of competition. Both bring potentially large efficiencies for employers in the short term, but resolving the problem of fairness for employees has not yet been addressed.