Australian women are more likely to work part-time compared to full-time than women in other OECD countries – and this can put them in a vulnerable financial position long-term.
The Government’s Workplace Gender Equality Agency says 44% of female employees in Australia are part-time, almost double the OECD average of 26.4% and comparing with only 16% of male employees.
One of the biggest reasons for going part-time is to raise children and, in principle, there’s nothing wrong with this – after all, to quote Bert in the childhood classic Mary Poppins: “Childhood slips like sand through a sieve…”
But few mothers recognise just how significant the long-term financial ramifications of years spent working part-time can be for them personally.
Worse still, even mums who do go back full-time are being financially penalised. The Workplace Gender Equality Agency reports a 17% loss in lifetime wages for mums (including full time workers) and says earnings decrease with each additional child.
The Agency’s ‘Parenting, work and the gender pay gap,’ paper, which was released this month, said Australian mums returning to work after 12 months parental leave suffer a 7% wage penalty and a 12% penalty over the following year.
It’s an issue that only affects women, with the paper stating that men who become fathers often experience stronger career growth and higher pay compared to childless men.
Being a mother is a privilege. But it is can also be a sacrifice. So, here are some suggestions on how women can help themselves to overcome what has been dubbed the ‘motherhood penalty’.
1. Look after your superannuation
Working part-time means you have far less money going into superannuation than an equivalent full timer. It might not seem like such a big deal when you’re young and earning, but the reality hits most people as they near retirement. Calculate the difference part-time earnings will make to your position at retirement compared to full time and most people would be shocked.
Here’s an example. Sally is 35, earns $70,000 a year and so far has saved $55,000 in superannuation. She then has a baby and after taking four months maternity leave at full pay she returns to work three days a week. She makes no extra payments into super and decides she likes the flexibility of part-time so much that she continues as a part-time worker through to retirement.
Sally may face living close to poverty in retirement if she find herself facing retirement as single women and don’t boost her super every year.
The Government’s compulsory superannuation guarantee, which is currently at 9.25% and is set to rise to 12% by 2019, is still not good enough for women who are already halfway through their working lives.
If Sally injects an extra $50 a week into superannuation via salary sacrifice she ends up far better off in retirement – to the tune of $100,000 extra.
2. Ask your partner to share his super love
Women whose income is low can ask their partners to share their super contributions.
Their partner may be able to claim an 18% tax offset on super contributions of up to $3,000 when they make a contribution on behalf of a spouse who earns less than $13,800 each year. More information on the rules of the superannuation spouse contribution tax offset can be found here.
A person’s partner can also split up to 85% of their employer super contributions with their spouse after the end of the financial year. Check out more on contributions splitting.
3. Recognise that a man is not a retirement plan
For woman in defacto relationships, this issue is even more important. That’s because in some states, such as Western Australia, if a relationship ends superannuation is not counted as an asset that may be divided in a settlement. It is extremely important to keep an eye on your own interests, which may just end up being separate to your partner’s down the track.
4. Keep your skills up-to-date
If you want to overcome discrimination and command better pay, you’ll have to prove that you’re up-to-date with your skills and this means making ongoing professional development a priority.
Finding the time is hard for all of us, but the flexibility offered by online studies is a great way around the logistical nightmare that studying on campus can be for parents. Open Universities Australia is one place to consider as it offers courses from numerous tertiary centres around the country.
5. Ask for a pay rise or price yourself correctly
Ironically, although being a mother usually makes women more efficient with their time, more productive and more creative – overall assets which would make for a more valuable employee – many workplaces overlook this.
It’s not unusual for mums to suffer a crisis of confidence when they have children – some of this can be self-created but some of it can be induced by what is often very subtle discrimination in the workplace. Either way, mums must take responsibility for enhancing their self-esteem and confidence.
We need to not only know our own worth but actively work at believing in ourselves and blowing our own trumpets – nobody else is going to do this for us. This includes knowing when we deserve a pay rise and being able to confidently ask for one (and looking for a new job if it is denied without good reason) or to charge adequately if we are working for ourselves.
One of the best ways to bolster self-esteem is to write a list of all achievements made to date – think laterally and include absolutely everything – and spend time reflecting on this and reminding yourself of what you’re capable of.
Remember, you need to impress yourself before you can impress others. Reflect on what you’ve achieved in the past and use those experiences as the foundation from which to hold your own and have the confidence to shine.
*Claire Esmond is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.
Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.