The Real Cost of the Gender Pay Gap
Why are we still battling against a 13% national gender pay gap, costing women over $13,000 in lost income per year? Let’s unpack it.
Contents
- The Gender Pay Gap
- The Opportunity Cost
- The Impact by Industry
- Equal Pay Day
- The Impact for Women in Consulting and Freelancing
Women in Australia won the right to equal pay 54 years ago. This meant that a woman performing the same role as a man must legally receive the same remuneration. That’s equal pay, but it’s not the same as the gender pay gap, which is still a major concern for economies all over the world.
The Gender Pay Gap
The Workplace Gender Equality Agency describes the gender pay gap as “the difference between the average earnings for men and women, expressed as a percentage of men’s average earnings.“
“The gap between women and men’s average earnings is the result of social and economic factors that combine to reduce women’s earning capacity over their lifetime.”
In Australia, the gender pay gap costs the economy $51.8 billion per year. And at the recent Gender Equality Symposium in Brisbane, Senator Penny Wong referenced research suggesting that closing the economic gender gap would add $12-28 trillion to the world’s GDP.
Yes, $12-18 trillion.
So why, 54 years on, are we still battling against a 13% national gender pay gap, costing women over $13,000 in lost income per year? Sure, it’s improved by 0.3 of a percentage point over the past year, but that’s not enough progress to celebrate. We can expect more and should experience more. At that rate of change, it will take around 30 years to close the gap.
The Opportunity Cost
Let’s unpack the opportunity cost of $13,000 in lost income over 30 years.
Firstly, the opportunity cost to your superannuation balance.
Women typically retire with 23% less super than men. Imagine having at least 10 per cent of that lost income landing in your super fund each year, then add compounding interest. Over 30 years, you would have an extra $86,000 to retire with.
Now, what if you invested some of that money too?
Say you invested $5,000 each year in stocks for 30 years at an effective interest rate of 8 per cent. You would have an extra $566,000
Now after adding to your super fund and investing in the stock market, you’re still left with $6,700. Does that cover extra hours of childcare or a much-needed annual holiday, do you invest that as well, or add it to your super balance? It’s your money that’s owed to you.
The Impact by Industry
But if you’re in the media, administration, finance or professional services industries, the opportunity cost is even larger. Let’s look at the breakdown of the gender pay gap by industry:
Gender pay gap (by industry)
Women in professional, science and technology services experience the largest gender pay gap, having to work an extra 99 days to earn the same annual salary as men – 43 days more than the national average of 56 days. That equates to over $30,600 in lost annual income. Pop that number into a compounding interest calculator and you might fall off your chair.
“The data shows that all industries and in every State and Territory in Australia, women are earning on average less than men. The gender pay gap increased in 10 out of 18 industries over the last six months, but we saw significant decreases in some sectors, particularly construction which had a 3.4 percentage point decrease. Information, media and telecommunications, and education and training also had notable decreases, showing that when industries work to improve gender equality it is possible to make gains.” Workplace Gender Equality Agency.
Equal Pay Day
Friday 25 August marks Equal Pay Day in Australia and represents the extra 56 days that women must work after the end of the financial year to earn the same annual income as men.
This year, the Workplace Gender Equality Agency is calling on employers “to recognise that ‘what’s missing matters’ in a whole range of situations, and particularly the missing pay for women matters. And we are asking employers to do something about it.” Mary Wooldridge, WGEA CEO.
“Employers have a key role to play in addressing the entrenched gender norms and stereotypes that are a barrier to women’s progression or full participation in the workplace.
“With dedicated, intentional action to address the gender pay gap in their organisation, Australian employers will contribute to accelerating progress to close the national gender pay gap,” she said.
Here are some practical strategies that employers can implement to do something about the gender pay gap in their organisations.
- Regular gender pay gap audits
- Salary benchmarking and
- Employing more diverse candidates
- Recruiting from diverse job boards
- An employer brand audit to ensure your business is attracting and speaking to diverse candidates
We live and breathe these key focus areas every day at Freelancing Gems and are passionate about guiding and supporting employers to build diverse workforces where everyone belongs.
The Impact for Women in Consulting and Freelancing
While all of this data focuses only on full-time workers, studies conducted on women in freelancing and consulting tell us that the state of the gender pay gap is much worse for them.
In the US, a study conducted by Austin-based business formation services provider, ZenBusiness, found that the gender pay gap for self-employed women is almost three times more than professionals who are employed in full-time jobs.
The study looked at the combined hourly rates of around 6000 freelance workers who had charged for 100 hours of work on Upwork. After accounting for the specialities and job categories, men were found to charge on average 48 per cent more than women for the same work.
Here in Australia, we recently surveyed over 8000 workers and employers across Australia and discovered that 33 per cent of freelancers do not believe they’re charging what they’re worth.
The New Work Order report, commissioned by Freelancing Gems, examined the greater needs and motivations of people when it comes to how they work and who they choose to work for and with.
The study found that when asked why they started freelancing, over 60% stated for flexibility or to earn more money.
So why, when we’re in charge of setting our own rates, won’t women give themselves the pay rise they deserve? And with so many women ditching the toxicity, inflexibility, and monotony of their 9-to-5 to become their own boss, how can they ensure this move is a financially sustainable one?
Here are our top three tips for freelancers to start owning their worth and charging more for the value they bring.
#1 Discount with value
Set a non-negotiable ‘floor price’.
No one likes talking price. It’s uncomfortable, we get it.
And while there are bills to pay and financial goals to reach, your sanity and mental health come first. This is why we recommend setting a non-negotiable minimum rate you’ll accept for any job. Setting a minimum means when faced with an extra frugal client, you’ll become a better negotiator than Miranda Priestly, and maintain an outcome that favours both your and the client’s needs. Time to get that calculator out and find a rate that delivers value to any ‘bargain-hunting’ client while ensuring a substantial profit for you.
And if that’s not your style, instead of shaving dollars off, add value on. This could be in the form of a free downloadable resource (you’d typically charge for) or jumping on a complimentary 30-minute strategy call.
These are two great ways to navigate the awkward topic of discounts, without devaluing your work or stripping your paycheck!
Tip #2 Know your rates
If you don’t know your industry landscape, how can you know what to charge? Stalk your competitors, dig up some data and review what you’re currently charging to give your rate card the ultimate glow-up. This could include a review of how you charge. Depending on your industry and workflow, this could be a combination of the following structures:
- Day rate
- Week rate
- Hourly rate
- Package-based
- Monthly retainer
When it comes to any of these rates, the saying, “a builder charges $5 for hammering, $95 for knowing where to hit” is all too true. Every freelancer is different when it comes to how they price themselves, and so will every project. Having in-built flexibility to change the way you charge to best suit you and your client is ideal. Some great questions to ask include:
- How much do I want to work with this client?
- How much is the work worth to me (will I enjoy it)?
- How much is the work worth to the client?
Sometimes, the answers to those questions will guide you to a package, others will necessitate an hourly or day rate. A good rule of thumb is:
- Charge hourly: When the scope of work is loosely defined and the client has ongoing needs.
- Charge package-based: When the scope of work and timeline are clearly defined.
The most important thing is to find the ‘sweet spot’ between remaining competitive, sticking to the client’s budget, and ensuring a good kickback for you. Our Freelancer Rate Guide can be a great place to find that spot!
Tip #3 Showcase your worth
According to our Women on the Rise survey, 1 in 5 freelancers struggle with imposter syndrome, despite being highly educated and experienced. This lack of confidence translates into self-imposed earning limitations (to which we say nuh-uh honey!). To navigate this, back yourself with an authority-building portfolio of work experience, projects, numbers, references, and testimonials.
Value-adding in the lead generation and onboarding stage can also add to a client’s investment in you, and encourage them to pay you more. Mastering simple things like prompt replies, professional templates, and even a complimentary initial consult can go a long way to boost your credibility and have prospective clients opening their wallets willing to honour your worth.
Better yet, there’s no better confidence boost than learning a new skill or tool to add value to your existing product or service. Investing in a business coaching course or upskilling in a new area of your industry can help you feel more knowledgeable, and equipped to charge more. Our 6-month Mastermind Mentoring Program might be just what you need.
Take Action This Equal Pay Day
Use this Friday, Equal Pay Day, to have important conversations in your networks and around your dinner table. Use the strategies outlined here to turn those conversations into action for yourself and for the women who will follow in your footsteps.
