What's driving the gender pay gap?

New research suggests that around two-thirds of the gender pay gap is ‘unexplained’. 

The Ministry for Women understands the primary contributors to the gender pay gap to be a mixture of ‘explained’ factors and an ‘unexplained’ portion.

 The explained factors include occupational and industry segregation (female-dominated occupations and industries tend to be lower paid than those dominated by male employees), vertical segregation (where there are a higher proportion of men than women in senior higher-paid positions), and part-time career choices principally based on the amount of unpaid and caring work undertaken by women.

The ‘unexplained’ portion is generally considered to include unconscious bias, unobservable information not captured in official data sources, and discrimination.

The research, by Associate Professor Gail Pacheco (AUT) and Dr Bill Cochrane (University of Waikato), indicates that roughly two-thirds of the gender pay gap is ‘unexplained’ when measurable individual and job characteristics were controlled for (as measured by average hourly earnings using 2012 data).

The ‘unexplained’ portion of the gap appears to have increased in importance since the last major analysis of New Zealand’s gap by Sylvia Dixon in 2000, which estimated that 20 to 60 percent of the gender pay gap was ‘unexplained’. The Ministry expects that this increased proportion is due to a reduction over time of the 'explained' factors and is probably partly due to women’s increasing level of skills (as measured by qualifications) and time in the workforce relative to men.

The Ministry has commissioned further research (with more recent data) to explore this finding, and also explore the contributors of the gap for different groups of women. This should improve understanding of potential further actions to reduce the gender pay gap.

Increasing monitoring and reporting on diversity is one way to target gender pay gaps inside organisations. The Ministry for Women is currently working with the State Services Commission (SSC) to address gender pay gap issues in the public service. SSC now asks public service organisations to report on their gender pay gaps and include information on the action they are taking to address them in their four-year strategic plans.

Hon Louise Upston, Minister for Women, said organisations needed to do more to address pay disparities between their male and female staff.

“Closing the gender pay gap requires making conscious, measured and reported efforts to tackle pay differences between men and women,” she said.