OPINION

ʻMind the gapʼ

BY GRAHAM DUSTON

When one of our team members recently applied for parental leave, it was reinforced to me why gender often plays a large part in the different financial retirement outcomes that New Zealanders may receive. Our team member’s happy news was tempered by the realisation that this would have a major cost to them over the long term when it came to their retirement savings. Whilst we were able to resolve this issue, this would not be the case for many other New Zealanders in the same position.

As many of you are aware, when a person takes parental leave, their employer is not legally required to make KiwiSaver contributions from their paid parental leave payment. I’m aware that whilst the parental paid provisions are gender neutral, the application of this legislation tends to impact more on females. In 2017 in New Zealand, 324 males applied for paid parental leave (Stuff August 19, 2018). You might be interested to know that for the same year (2017), 30,000 females applied for paid parental leave! It’s one of the many reasons why gender plays a part in different retirement outcomes between females and males.

A ”deeper dive” on this matter shows that structural labour market, education, time out of the work force, earning rates, child care, and societal issues (to name a few) also impact on this area. These are outside the scope of this article. Statistics NZ calculated that the gender pay gap in the June 2020 quarter was 9.5%. This measure is based on the difference between male and female hourly wage and salary earnings. Also, of concern was a recent report from Strategic Pay on this topic.

Strategic Pay, in 2020, released a report titled, “Understanding Pay Equity and Analysing the Gender Pay Gap in New Zealand”. They arrived at a conclusion that, in fact, the gender pay gap was nearly double of what was reflected in official figures. Their analysis examined what the pay gap looks like when benefits such as vehicles or KiwiSaver (as valued for pay purposes), were analysed, and when variable pay such as bonuses were thrown into the mix. Strategic Pay concluded, using data from a sample of over 187,000 employees from over 950 organisations in New Zealand, that the overall gender pay gap is 17.7% in New Zealand (the pay gap was analysed based on job level and within each sector (private, public and not for profit)).

These issues all translate into a range of different gender outcomes in the area of retirement savings. What I’d like to look at and suggest is that perhaps it’s time to look at how KiwiSaver interacts and intersects with this policy area. The New Zealand retirement industry has recently started to focus on the gender gap and related education issues. This is good news and is to be applauded. This will hopefully assist in adding another dimension to the debate. There clearly is an issue. Just how much this issue can evolve over time can be shown by Australian superannuation savings and gender data. ASFA recently calculated how structural and earning differences translate into different retirement outcomes between the genders in Australia.

The table below shows the average super balances for employed Australian men and women of different ages (excluding those with no super).

Acknowledging issues such as the gender pay gap and structural labour market issues, as well as no provision for KiwiSaver employer payments in the paid parental payment legislation, means that there is no doubt that New Zealand will be moving down the same track as Australia in terms of retirement outcomes unless we take positive action to “close the gap”. Unfortunately, structural labour market and societal issues can take time to resolve or even “shift the dial” a little. The London Underground message of “Mind the Gap” probably should be changed to “close the gap” when it comes to gender outcomes, retirement savings and New Zealand. Perhaps one area that might provide a “quick win” in this area, is to review the remuneration framework for paid parental leave. Should employers have to continue to make employer contributions to KiwiSaver to an employee when they go on paid parental leave? If this had been the case, 30,000 New Zealand females and 324 males in 2017, would have appreciated their employer helping them to “close the gap” in their retirement savings that year! A