Aberdeen Standard Investments (ASI) has urged Australian policy makers to increase paternity leave entitlements and reform tax for family second earners to increase the labour force participation of women and strengthen the performance of the Australian economy.
The call was made by the Aberdeen Standard Investments Research Institute (ASIRI) following the release of a research paper titled ‘A Woman’s Place; Boosting female labour-force participation to lift long-term economic growth’.
The paper is the first of five which look at the drivers of female labour force participation across 31 countries including Australia and New Zealand. It found a one-week rise in paternity leave on average increased female participation by 3%, unlocking greater human capital and improving productivity. While the benefits peaked at seven weeks, net positive effects can continue for months after, the research showed.
Stephanie Kelly, Senior Political Economist at Aberdeen Standard Investments said that similar to many other developed nations, Australia had work ahead of it to solve the problem of gender inequality in the workplace.
“There is an 11 percentage point gap in labour force participation between men and women in Australia. This is in spite of the fact that women rival and even outperform their male counterparts for average years of education, expected years of education and university enrolments,” Stephanie said.
“The stark contrast in educational attainment and participation raises the question: what can be done? Alongside changes to leave policies, we believe tax reform should be considered too. Our research found that systems that put a higher tax burden on second earners are associated with lower female labour force participation rates.
“This makes sense given women tend to be the second earners in dual income households. Australia’s tax system is set up so that second earners face higher net personal average tax rates than single earners – to the tune of about 5%. This is a clear area of opportunity, particularly because tax reform is applied by the government and so does not face the same take-up issues as leave policies.”
Stephanie added: “Women are far more likely than men to face a trade-off between paid work and unpaid work, including caring responsibilities, and when they do work, they do fewer average hours, fuelling the inequality. An employer considering two candidates of different genders may consciously or unconsciously favour the person least likely to leave. If all parents expect to take leave, these barriers to women entering and staying in the workforce should logically decline.
“But higher paternity leave is only part of the solution if men show reluctance to take it. Our research shows raising entitlements won’t close the gender participation divide. Policymakers and companies should consider paternity-leave policies alongside overall workforce policies – for instance, greater workplace flexibility and penalties for discrimination.
“There is clear ethical argument for greater equality in the workforce. However, there is a powerful efficiency argument as well – increasing the diversity and inclusivity of workforces can lift per capita incomes and growth by boosting utilisation rates as well as the productivity of the workforce by making better use of human capital.
“In a world where populations are aging and labour productivity growth sluggish, a stronger diversity and inclusion policy agenda by corporates and government could provide a much-needed shot in the arm for the global economy. By understanding the policy and other constraints that limit women’s full participation in the workforce, governments will be in a stronger position to devise solutions that address long-term growth challenges,” she said.
Danielle Welsh-Rose, ESG Investment Director – Asia Pacific at Aberdeen Standard Investments, commented: “Diversity of gender, cultural background, and ways of thinking, paired with a culture of inclusion, is vital to companies successfully tackling complex challenges. At Aberdeen Standard Investments Australia, we have a clear and industry-leading position on diversity and inclusion within our investee companies, and parental leave arrangements is one part of our assessment of a company’s performance on diversity and inclusion, as part of broader corporate culture and governance analysis.
“We engage with companies on our expectations of greater gender diversity at Board and senior management levels and across the workforce generally in the companies we invest in. We urge company boards and executive teams to be gender balanced, which means at least 40% female and 40% male, with 20% any gender. We expect companies within the ASX100 to achieve this 40:40:20 gender balance on boards by the end of 2023, and companies outside the ASX100 to achieve this by 2025. Additionally, we expect all Australian companies to achieve 40:40:20 on executive leadership teams by 2027, to progress towards reporting on gender pay gaps, and to demonstrate pathways to greater cultural diversity.
“Clearly diverse and inclusive teams make better decisions, which is critical to driving better outcomes. As a responsible business, we are committed to retaining and promoting female talent. For example, our Australian Equities team is female-led and 60% are women.”
Further research instalments will be released on a quarterly basis through to Q1 2022. They focus on taxes, quantity and quality of female work, the benefit of female labour to the overall economy and the need for more data to address the issue.
The first paper titled ‘A Woman’s Place; Boosting female labour-force participation to lift long-term economic growth” can be found on the global ASI website on the designated ‘A Woman’s Place’ research hub that will be updated throughout the year as new papers are released: https://www.aberdeenstandard.com/en/australia/adviser/responsible-investing/a-womans-place