Economist Warwick Smith calls Australia’s mandatory superannuation laws “systematically biased” against women and urges gutsy social reforms.
“One of the things I really want to emphasise is that we can’t fix the super gap by modifying super − at least not without completely undermining the point of having it,” says Smith, the senior economist at Melbourne-based think tank Per Capita. “To fix the super gap, we have to change how we think about work and family.”
He argues that the most effective way to fix this gap, and the gender pay gap, would be to reduce standard full-time work hours to six a day, similar to school hours.
“Aligning work with school would eliminate the need to have a ‘lead parent’ and would allow for more time for caring for elderly and disabled relatives,” Smith says. We believe this is easier than the alternative, which is to use other incentives and changes to balance gender roles in terms of parenting and care within current work hours and culture. The problem isn’t so much with super as it is with systemic social and cultural issues.
“To quote Richard Denniss from The Australia Institute, ‘If you want economic security in retirement, don’t be a mother, nurse, teacher, carer…in fact, don’t be a woman,’ ” Smith says.
He prefaced his case by noting that in Australia today the gender gap in super savings is 47 per cent, women are more dependent on the Age Pension than men, and the fastest-growing group of homeless people in is older single women.
Smith spoke to Investment Magazine ahead of participating in a panel session titled “Make super fair” at the Conference of Major Superannuation Funds (CMSF 2018), in Brisbane on Wednesday, March 14.
The session, led by Women in Super chair Cate Wood, aimed to air fresh thinking on policies to help close the gender gap in pay and savings and examine ways super funds can help women achieve better retirement outcomes. Also participating in the session was Queensland Council of Unions general secretary Ros McLennan.
Super built on an outdated assumption
Smith warns that addressing the inadequacy of Australia’s compulsory retirement savings system for average women is a “wicked problem” due to the confluence of contributing factors.
In a recent Per Capital report titled Not so Super, for Women: Superannuation and women’s retirement outcomes, Smith and co-author David Hetherington listed those factors as: “An inadequate age pension, over-representation of women in lower-paid occupations, the (increasing) gender pay gap, no super at low pay levels, high effective marginal tax rates, carer responsibilities, unpaid domestic work, the complexity of the super system and frequency of changes to it, age discrimination, unaffordable housing, longer lives, poor financial literacy, cost and availability of childcare, relationship breakdowns and casualised work.”
Basically, Australia’s 25-year-old universal superannuation system is predicated on the increasingly incorrect assumption that every worker is an employee.
Per Capita’s research also finds that parenthood exacerbates gender disparity in average retirement savings, citing a motherhood gap and a fatherhood premium.
“In almost every aspect of the gender pay gap and the superannuation gap, we find that being a parent is negatively associated with women’s pay and super, while it is positively associated with men’s pay and super,” Smith says. “Australia remains a profoundly gendered society, both professionally and domestically. If we are to reform superannuation so that it serves both genders equally, then we must either fundamentally change society to remove gender discrimination and equalise unpaid domestic and care work and the raising of children, or we have to create targeted interventions that assist those affected by those factors.”
Per Capita does not advocate targeting interventions for all women, as this would direct public resources to some who do not need them and create a perverse disincentive for fathers.
“Given that many of the causes of the gender superannuation gap are a result of parenting commitments, targeting women specifically would also create a disincentive for fathers to take on the role of primary carer,” Smith explains.
Instead, Per Capita recommends monitoring superannuation balances to identify those people who are tracking below a pathway that would result in a reasonable standard of living in retirement.
“This ‘accumulation pathway’ can be used as a guide for the implementation of progressive superannuation measures and interventions throughout the life course, including top-up payments, fee concessions, and tax concessions,” Smith says. “In addition, superannuation guarantee payments should be extended to all paid parental leave schemes provided by employers and governments, and caring payments, including Family Tax Benefit Part B.”
These measures would make superannuation tax concessions, the benefits of which are currently skewed towards wealthy men, available to more women and lower income earners, Smith says.
Per Capita also argues that reform is needed in the broader tax and transfer system to reduce the excessive effective marginal tax rates earners face when returning to work after having children.
“The effective marginal tax rate of 70 per cent is unacceptable and ultimately unsustainable if superannuation equality is to become a reality,” Smith says.
READ MORE: All the coverage from CMSF 2018