Being carers costs women more than $500,000 over a lifetime, leaving them with less in retirement than men
- Written by Myra Hamilton, Associate Professor, gender, ageing and care, University of Sydney
This article is part of The Conversation’s “Retirement” series where experts examine issues including how much money we need to retire, retiring with debt, the psychological impact of retiring and the benefits of getting financial advice.
By the time they retire, women typically have about one third less superannuation than men.
This can amount to more than $500,000 when wages and super are combined over their lifetime.
The gendered super gap has narrowed over the last few decades, as women have joined the workforce in increasing numbers and the superannuation system has matured.
But progress is too slow. If we keep tracking as we are, we can’t expect parity until 2070. So why is the gap so persistent?
Making super compulsory
For most of the 20th century, Australia’s retirement incomes system produced more equal outcomes because the age pension is not linked to a person’s lifetime earnings.
But the introduction of compulsory super in 1992 linked lifetime earnings and retirement income.
The gender super gap arises because women and men have different patterns of paid work and earning over their lifetimes. Women have 14% lower average weekly earnings than men. This is due to three factors:
women are much more likely to have unpaid care responsibilities. As a result, they take career breaks, work fewer hours, or work in jobs incommensurate with their skills
discrimination, bias and lack of workplace flexibility mean better pay and career outcomes for men and fewer opportunities for people to combine work and career with care responsibilities
occupational segregation means women are concentrated in female-dominated industries, which tend to attract lower wages than male-dominated ones.
Over a lifetime, these factors limit women’s capacity to earn and to accumulate super.
On average, a woman in full-time permanent employment accumulates 17.7% less superannuation per year than a man in an equivalent role. That amounts to A$1,540 less per year. This annual shortfall compounds over time resulting in a wide gender super gap by the time women retire.
How does this work in practice?
The interruptions to work caused by providing unpaid care reduces people’s opportunities for accumulating superannuation. For example, having a child leads to substantial reductions in mothers’ workforce participation and earnings. Women’s earnings fall by an average of 55% in the first five years after entry into parenthood.
In contrast, research suggests men’s earnings are unchanged, or even increase, after they become parents. So parenthood has a much greater impact on a mothers’ super than a fathers’. One estimate suggests having a child reduces a woman’s superannuation balance at age 60 by about $50,000 and a man’s by $5,000.
It’s not just parenthood. One in 10 Australians provide care for an ageing relative or person with a disability or chronic illness. Women do most of this unpaid care. Unpaid carers often reduce their working hours, withdraw from work, or put their careers on hold. Among primary carers only 58% are in paid work.
According to a recent study, on average, by age 67, primary carers have lost $392,500 in lifetime earnings and $175,000 in super.
Some older workers, especially women, also care for their grandchildren. More than a quarter of grandparents of a child aged 13 or under provide care for the child in a typical week, usually while the parents work.
In a recent study, 70% of grandparents, mostly grandmothers, providing regular childcare reported they adjusted their work to accommodate it. One in three reported it had negative impacts on their financial security as they aged.
These factors compound over a lifetime. Many Australians provide care for multiple family members simultaneously, or at different times throughout their lives.
Women in employment are more likely to be in lower paid positions, and lower paid industries and occupations. Employees in feminised industries such as community services (including paid care workers) and retail have among the lowest median super balances, less than half of those of managers and professionals.
What is the solution?
The gender super gap reflects deep inequalities in the distribution of work, incomes and care responsibilities between women and men across their lives. How do we fix it?
Policy and public debate has focused on boosting women’s workforce participation. More women in work, means higher incomes and more saving, reducing the gender super gap, right?
More women in the workforce means higher incomes but isn’t enough to close the gender gap.
Stock photo/Shutterstock
Yes, up to a point and rates of women’s workforce participation are increasing.
But we also know in Australia, we have a preference for some family care of young children, and for care of adults with disability and older people in the community. This means many parents and carers will continue to have at least some interruptions to paid work, reducing their super contributions.
We also know when women are encouraged to enter paid work, care responsibilities are often “redistributed” to other women. When mothers enter or re-enter paid work it’s often grandmothers who step in, frequently reducing their incomes and super. For care of ageing parents it is often non-working female siblings that step in.
As the savings potential of one group of women increases, the savings potential of another decreases.
Where care can’t be redistributed to other women within the family, it is redistributed to paid early childhood education and care, disability support, and aged care services. All of these services are dominated by women. As a highly feminised industry, the caring roles are poorly remunerated, so those doing the care, while paid, are themselves limited to save enough super.
Boosting women’s workforce participation is an important step. But another is to pay super contributions to parents during the time they are off work providing childcare, as recently agreed by the federal government.
But we need an equivalent for other kinds of unpaid carers.
Even so, as long as care continues to circulate between different groups of women – older women, low paid women – and as long as care isn’t valued for the large social and economic contribution it makes, the gender super gap will persist.
To close the persistent gender gap, we need to go further, encouraging greater men’s involvement in care, and providing better recognition and remuneration of unpaid and paid care.
Authors: Myra Hamilton, Associate Professor, gender, ageing and care, University of Sydney
