Why financial literacy is key to closing gender pay gap

Why financial literacy is key to closing gender pay gap

Despite more women than ever in the workforce, the gender pay gap stubbornly remains, with far-reaching implications. Empowering women with financial literacy skills is key to bridging this gap – now and for good.

As of May 2023, the gender pay gap in Australia sat at 13 per cent, according to the Workplace Gender Equality Agency (WGEA).

Indeed, latest ABS figures show average full-time ordinary earnings for men of $1,982.80 per week, compared to $1,744.80 for women. That’s $238 less per week for women – or $12,376 per year – for the same number of working hours.

Add in all, employees’ average total weekly earnings, which includes casual and part-time roles (dominated by women), and the difference is even more pronounced – $1,672.70 for men versus $1,204.40 for women. That equates to $468.30 less per week for women or a whopping $24,351.60 per year.

This difference is despite more women in the workforce than ever before, with the participation rate for women sitting at a near record high of 62.6 per cent (compared to 71.1 per cent for men).

Why highlighting the gender pay gap matters

The gender pay gap has numerous implications for Aussie women:

Financial literacy is key

With the gender pay gap so ingrained and pervasive, what can we do about it?

As individuals, we can’t solve the problem. What is within the control of each and every woman, however, is how she responds to protect herself and her own wellbeing. Collectively, this approach can deliver meaningful change.

This is why financial literacy is key to closing the gender pay gap.

Financial literacy, the Reserve Bank explains, refers to “a set of skills that allow people to manage their money wisely”.

Like all skills though, financial literacy skills aren’t inherited or automatic. They are learned.

Among the most crucial are:

  • Career choices: choosing careers where skills shortages and future growth opportunities present the greatest earning potential. Avoiding tertiary studies with large student debts and limited employment/income prospects. Hybrid working post-pandemic presents greater flexibility for women with caregiving responsibilities.
  • Budgeting: how to devise and update a savings and investment plan – tracking earnings, outgoings and wealth accrual; maintain visibility over progress towards long-term financial goals.
  • Equal decision-making: many women leave financial decisions to their partner, exposing them to losses from poor oversight (e.g. gambling addiction), unwise investments, or weak negotiating power during a relationship breakdown.
  • Professional self-awareness: knowing what skills and qualifications are really worth and pushing to be paid accordingly.
  • Developing safeguards: an emergency fund, adequate insurances, investment protections, contingency plans.
  • Investing: how to deliver optimal returns, balance risk, growth wealth.
  • Debt management: the difference between good and bad debts, cash flow management strategies,
  • Seeking proper advice: you don’t know what you don’t know, so advice is crucial. Yet the wrong advice can lead to lost earnings, bigger liabilities and greater risk. Well-meaning family and friends speak from their own unique circumstances; social media ‘finfluencers’ and self-styled ‘experts’ peddle misinformation or ideas that benefit themselves first. Qualified, independent tax, legal and financial advice is worth its weight in gold.

Problems can’t be addressed if they aren’t known about in the first place, or the available mitigation strategies remain elusive.

Given the long-term impacts of the gender pay gap, women can’t afford not to understand its role in her own life and learn how best to address it.

Helen Baker, financial adviser

This article was written by Helen Baker, a licensed Australian financial adviser and author of On Your Own Two Feet: The Essential Guide to Financial Independence for all Women.

Helen is among the 1 per cent of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children.

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