Gender-based gaps are so normalised in the developed world, we are almost immune to the shock of data which shows some women – who statistically speaking live longer than men – are actually facing poverty in retirement because of the state of their savings.
On average, women end up with around $150,000 less in superannuation upon retirement than men. According to ASFA’s research, average super balances at retirement today are $138,150 for women compared to $292,500 for men.
To create the right fixes, we need to be clear about what overwhelmingly contributes to these figures – the structural inequities that mean, on average, women earn substantially less than men in like for like roles. This is based on indisputable ATO data.
Women are also not afforded the luxury from a government policy perspective or from an Australian business culture perspective of having a family without it significantly disrupting their career. There are exceptions, many in the SMSF and accounting professions are, but this is the rule. Again, hard facts, not hysteria or bias, inform this view. The latest figures from the Australian Institute of Company Directors show that only 25.4 per cent of directors across the ASX 200 are female.
Armed with those facts, and immeasurable anecdotal evidence, I fundamentally reject any suggestion that Australian women are in this position because of their own knowledge level, capacity to save or a lack of desire for financial independence. In short: women in 2017 know they need money. Financial co-dependence is a problem for women overwhelmingly because of structural inequities, not because their attitudes created this situation.
Yes, engagement, particularly with superannuation, is a problem. This is a pervasive national issue for men and women alike.
Yes, women have historically not been the keeper of household finances, and may lack experience on this front. No doubt this is still the case for a lot of clients. First, that is changing – for example, NAB recently found women make the lead decision in purchasing a property in 91 per cent of cases. Also, many of you joke about clients needing to run a financial decision past “the boss” – in reference to a wife or female partner. Jokes are only funny when they’re true.
Still, much of the material created to address the gender savings gap is focused on correcting women’s attitudes to money. We can’t create the right products, implement the right strategies, and get those superannuation balances boosted for women if we are dealing with the wrong problems.
I see well-meaning examples of this everywhere. With that in mind, I recently got in touch with FPA chief executive Dante De Gori about one of the FPA’s articles which pedalled some problematic messages. To his and the FPA’s credit, the article was amended following my email, and Mr De Gori has agreed to chat further about the issue with me.
The introduction to this article reads: “Divorce is the leading cause of financial hardship for women. So it’s important to take control of your money and plan for a time when you may become financially independent.” You realise how deeply stereotyped optional independence for women is when you reverse the genders in that statement. In this context, you would simply never read that statement about a man.
Most importantly, the article also had “a man is not a financial plan” in its headline. Here’s what I said to Mr De Gori about that:
It’s well intended and great to see associations backing female participation in wealth planning.
However, it also shows adherence to a pervasive and flawed view of what is motivating the savings gap.
Financial literacy might be an issue for a mass consumer audience – ie members’ clients – but there is no compelling evidence to suggest that it is the primary motivator of the wealth gap.
A financially illiterate man is still statistically ahead in earning capacity to a woman in the same position.
Most professionals and leaders in this industry are well meaning, and my correspondence with the FPA confirms the good intentions of its leader. But in 2017, when women in a developed country can’t independently sustain a basic retirement, it’s not the answer.
This is an issue with deep roots that requires more understanding than most in financial services and professional services realise. We can’t create the right solutions and tailored advice services if we are giving a disproportionate level of attention to the wrong offenders. By and large, the SMSF and accounting professions mean well. Let’s get this right.
Katarina Taurian, managing editor, SMSF and accounting, Momentum Media
It is easily provable (one of those “hard facts” I suppose) that earning less, and saving less need not automatically translate to less money at the point of retirement and because of that, the more reasonable conclusion you could have drawn to explain the gender wealth gap at retirement is that there must be more to this issue than just wage disparity.
The “indisputable” ATO data you refer to simply adds-up the salaries of men and women, creating an average for each and then compares those averages (across and within occupations). The maths is certainly “indisputable” but to draw such a narrow conclusion from such averages that this must be the source of the gender wealth gap at retirement is certainly disputable.
Inequality of wealth outcomes are widespread – from wages, to superannuation and property ownership to name but a few. For this reason, you could place (i) government policy, and (ii) personal preference ahead of (iii) wage gaps as the more “overwhelming contributors” in this issue.
Take “negative gearing” as an example of government policy; two-thirds of the benefit goes to the one-fifth of taxpayers who have the highest incomes. Women disproportionately occupy lower income jobs (for a wide variety of reasons as we’ll see), thus commanding lower incomes, which very likely means they also disproportionately occupy the 4/5ths of taxpayers for whom the negative gearing advantage is unavailable.
Consider also child custody rates. In 1998, 87% of sole parent households were headed by a female; by 2008 this had increased to 88.5%. The Australian court’s clear and overwhelming preference to hand custody to the mother of children also hands the bulk of the costs of raising children to the mother too and this clearly must contribute to the gender wealth gap at the point of retirement.
Personal subjective value judgments characterise every single decision we make, every single day. It is the uncountable number of individual choices (i.e. personal preferences) of billions of people that ultimately determines market phenomena; from supply and demand of goods and services, to prices, patterns of production, profits/losses, welfare and development of children, relationships, choice of occupation and all of these things impact on wealth outcomes at the point of retirement.
Other factors are relevant too: the “indisputable” ATO data does not factor in ‘hours worked’ and thus comparing men and women in the way the ATO does is flawed from the outset because other data, (e.g. ABS data) reveals that men work on average 43.7hrs per week, while women on average work 39.7. That disparity is similar in other nations. In the U.S for example (a larger dataset), after correcting for hours worked the so-called “gender pay gap” fell from 28% to just 10%. And what explained that last 10%? It appears men and women do ‘different work’. At least that’s how President Obama explained away the White House’s own 12% gender pay gap.
Women do ‘different work’ even within similar roles. We all do. This happens because people exercise (generally speaking) different preferences. Women know for example that if they want to start a family, they may well have to leave the workforce for a significant period of time. Investing in the knowledge and skills required to occupy high-paying roles that also demand continuity of employment, is an uncommon ‘preference’ amongst women it seems because they understand a large portion of their skills and knowledge would eventually be rendered worthless upon their return. It appears women overwhelmingly exercise a preference for lower pay (even within similar occupations and roles) in exchange for greater flexibility (within their occupations) and possibly, ‘job security’ down the track; the kind of job security that is more widely available in lower paying roles.
Wealth at retirement is a critical issue and it deserves so much better than the virtue-signalling, political grandstanding and strawman arguments that it is given. Each of us holds a unique value system that helps us make countless ‘trade-off’ decisions every day across a huge number of variables and that is the real reason “inequality” exists in all spheres. To suggest these decisions and unequal outcomes come down to a person’s gender is simplistic, insulting and an unhelpful contribution to this important issue, not to mention that it (ironically) gives disproportionate airtime to the wrong problem.
Interested to know what you think will help. I agree many of the policies to date have failed and often been condescending. Is it a superannuation policy issue or a sociatal issue to do with equal pay and equal child rearing?