Understanding the drivers of the gender pay gap is critical to designing interventions which will enable organisations to close the gap. This report, prepared for Diversity Council Australia (DCA) and the Workplace Gender Equality Agency (WGEA), aims to do just that.

The report uses structured econometric modelling to determine the factors that underpin the gender pay gap, and to what extent they contribute. The report is partnered with an Executive Companion document highlighting a range of tactical improvement opportunities for every size of business in Australia, and supported by case studies from some of Australia’s leading companies.

Key findings:

• Sex discrimination continues to account for the single largest component of the gap. This component of the gap is increasing over time (from 35 percent in 2009 to 38 percent in 2016). The research shows that systemic discrimination remains a persistent feature of the workforce, while the proportion of the pay gap that can be attributed to differences in skills, tenure and education between men and women decreases each year, as women continue to close the gap in terms of education and labour participation.
• The proportion of the gap attributable to part-time employment has decreased from 14 percent in 2009, to 4 percent. Women are still over-represented in part-time employment, making up 71.6 percent of this workforce. Of women working part-time, the proportion of those who fall into higher income brackets has increased since 2009. These changes are significant when considered against the efforts undertaken by Australian businesses in the last several years to normalise cultures of working part-time and flexibly.
• One of the most significant contributors to the gap is the influence of ‘traditional’ roles and industries for women and men, which accounts for almost one third of the total wage gap. Jointly, industrial and occupational segregation accounts for 30 percent of the gap. While significant gains have been made in occupational segregation in the last seven years for women (reducing from 18 percent in 2009 to 11 percent in 2016), these are countered by increases in industry segregation. In the period under review, the proportion of men in male-dominated, higher paid industries such as mining and construction has grown – as has the proportion of women in female-dominated, lower paid industries such as healthcare and social assistance.
• The proportion of the gap attributable to years out of the workforce has increased from 9 percent to 21 percent. This reflects the criticality of businesses continuing to identify and address the structural barriers that prohibit women from returning to the workforce. Recent research continues to highlight the additional pressures on women in this respect, in particular in relation to the compounding effect on lifetime wealth accumulation and superannuation. Notably the 2007 HILDA survey included 'access to unpaid maternity leave' as a factor, which was subsequently omitted in 2014 as a result of the introduction of a Government funded Paid Parental Leave scheme. However, in both reports it is clear that interruptions in work history continue to play a role in explaining the gender pay gap.