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This is how to win the productivity prize

7 March 2024

If a country used only half its factories it would waste a lot of its productive potential. The same is true if we tap into only half of society’s brainpower.

As head of the Productivity Commission, I spend a lot of time thinking about what governments can do to improve Australia’s living standards. While many jump to the “usual suspects” of tax and IR reforms, there are many changes that could help shift the dial. One close to my heart, especially on International Women’s Day, is empowering women to fully participate in the economy.

Women’s workforce participation has been rising steadily since the mid-1960s. More than three-quarters of Australian women of working age now do some paid work each week, compared to less than 50 per cent in the early 1980s.

This extraordinary shift has contributed to a rise in economic prosperity for women but also for the country. This economic dividend has not just been through the increase in hours worked: rising women’s workforce participation has improved productivity, particularly in those sectors where people’s skills – what economists call “human capital” – matter to performance.

A 2019 study by economists at the University of Chicago and Stanford University shows how significant this shift has been. They estimate that 20 per cent to 40 per cent of the growth in US living standards between 1960 and 2010 was due to “better allocation of talent” as more women and members of minority groups participated in the workforce, including in roles previously closed to them.

The logic is simple: if a country used only half its factories or fertile land it would waste a lot of its productive potential. The same is true if we tap into only half of society’s brainpower. Removing barriers to participation deepens the talent pool and makes better use of human capital.

This is even more true in countries like Australia where this human capital is significant. In 2020, 38 per cent of Australian females aged between 15 and 64 had attained a bachelor’s degree or higher, the fourth highest in the OECD, compared to 29 per cent of Australian males.

But despite their formidable skills and knowledge, Australian women still participate in the paid economy less than women in many other nations.

The trouble with entrenched gender norms

In 2021, Australian women worked on average eight hours less a week than Australian men, one of the highest gaps in the OECD. This reflects much higher rates of part-time work: 36 per cent of employed Australian women work less than 30 hours a week compared to 25 per cent for Canada, 28 per cent for New Zealand, and the OECD average of 24 per cent.

This is mostly due to ongoing barriers to women’s participation, both economic and socially prescribed.

First, entrenched gender norms about work and care continue to box in choices for both women and men.

Australian women spend less time in paid work and more time undertaking unpaid care than women in many OECD nations. The reverse is true for Australian men. Unpaid work is valuable and necessary, but Australia’s very gendered division is notable. Surveys suggest that Australian women are far from satisfied with this division, but households still tend to default to traditional norms.

Government and some businesses have taken steps to encourage and normalise men taking a more active role in caring for children, including through supporting dads to take parental leave. But we are well behind many nations where men taking a period of leave as the primary carer – something the research highlights is good for men, children and women’s workforce participation – is standard.

Second is the challenge created by what Nobel Prize-winning economist Claudia Goldin calls “greedy jobs” – the well-paid professional jobs in which long hours and around the clock availability are prized. More Australian businesses are setting targets of reaching at least 40 per cent women in executive roles. But these targets will be hard to meet if they do not make these roles more hospitable to those with caring responsibilities.

Third, are difficulties accessing childcare. The challenges some families face in finding affordable and appropriate childcare have been well documented, recently by the Productivity Commission and the ACCC. Governments have made some headway on this problem – recent increases in the subsidy have improved affordability and more families than ever are accessing care.

But accessibility remains a challenge in some areas, particularly in regional Australia. And there still remain sizeable disincentives for mums to take on additional days of work, because care becomes more expensive as working hours increase.

Looking back, it’s hard not to be delighted with progress on gender equality. And while the case for change focused on improving choice and economic outcomes for women, the upshot has been an economic dividend shared by all Australians.

But there is still further to go. Australia will need changes in policy, business and society if we are to “have it all” and realise the full potential of our people. And all would-be economic reformers should be able to get excited about that vision.

This article written by Chair Danielle Wood was first published in the Australian Financial Review on 7 March 2024.