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A3 Sample

Business Statistics (Royal Melbourne Institute of Technology)

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Gender Pay Gap in Australia

Executive Summary
This report would delve into the issue of the gender pay gap in Australia using data from 824
full-time Australian workers aged between 20-74 taken from the 2017 Household, Income
and Labour Dynamics in Australia (HILDA) survey. Excel’s Data Analysis Tool Pack would
be utilised to implement descriptive statistics and regression models based on the data to
analyse the extent of gender discrimination on earnings. Figures and Tables would also be
utilised where relevant for further enhancement in the analysis. The final portion of the report
would be a finalised conclusion addressing the existence of gender discrimination in Australia
based on the findings of the analysis.

Introduction
Gender pay gap due to gender discrimination is an ongoing issue that has repeatedly been
faced by female workers in Australia. It has been evident that male workers are guarantee to
always have much higher earnings as compared to female workers when placed in similar
circumstances. Due to the discrimination, their career prospects could be affected which
could potentially have a negative impact on their earning capacity in their lifetime. The
objective of the report is to provide better insights into the issue based on the different factors
that could affect the amount of earnings by the workers besides gender.

Analysis
1.1 Earnings Compared Between Genders

Table 1.1: Analysis of Male and Female workers’ earnings

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From Table 1.1, male workers are observed to have higher average weekly earnings
compared to female workers. Male workers earn an average of AU$1774.865 (3dp) weekly
which is higher than female workers’ average weekly earnings of AU$1449.775 (3dp). This
shows that male workers earn an average of AU$325.09 more than female workers weekly.

1.2 Earnings Compared Between Degree and Non-Degree

Table 1.2: Analysis of Degree and Non-Degree Workers’ Earnings

From Table 1.2, degree holders are observed to have higher average weekly earnings
compared to non-degree holders. Degree holders earn an average of AU$2102.117 (3dp)
weekly which is higher than non-degree holders’ average weekly earnings of AU$1391.690
(3dp). This shows that degree holders earn an average of AU$710.427 more than non-degree
holders weekly.

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1.3 Earnings Compared Between Skilled and Not Highly Skilled

Workers

Table 1.3: Analysis of Highly Skilled and Not Highly Skilled Workers’ Earnings
From Table 1.3, highly skilled workers are observed to have higher average weekly earnings
compared to not highly skilled workers. Highly skilled workers earn an average of
AU$2053.231 (3dp) weekly which is higher than not highly skilled workers’ average weekly
earnings of AU$1439.230 (3dp). This shows that highly skilled workers earn an average of
AU$614.001 more than not highly skilled workers weekly.

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1.4 Relationship Between Experience and Earnings

Figure 1.4: Analysis of Relationship Between Experience and Earnings

As observed from Figure 1.4, the low R-squared value of 0.0413 indicates a weak positive
linear relationship between the workers’ years of experience and the amount of average
earnings earned by the workers weekly. This shows that while workers with higher years of
experience could potentially have a higher chance of having higher average weekly earnings
than workers with lesser years of experience, there is no strong correlation between the
variables.

2. Model A: Simple linear regression of Gender (X) and Earnings (Y)

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Table 2: Simple Linear Regression on Gender (x) and Earnings (y)

From Table 2, the coefficient value of 0.325 (3dp) indicates that earnings will increase at a
rate of 0.325 as gender changes from female to male.
In order to prove that there is a linear relationship between gender and earnings, a two-tailed
hypothesis test will be conducted at 5% significance level.

Estimated regression equation:

Using Yi = β0 + β1X1i + εi
Earnings = 1.44978 + 0.32509 (Gender)

H0: β1 = 0 (there is no linear relationship)

H1: β1  0 (there is a linear relationship)
Degree of Freedom is n - k -1 = 822
As the critical t value is ± 1.96, H₀ would be rejected if t < -1.96 or t > 1.96.
Using =

= 4.3501940 ≈ 4.350 (3dp)

Since t = 4.350 > 1.96, H0 would be rejected as the t value is in the rejection region.

Figure 2: Critical value Two-Tailed Hypothesis test

As H0 is rejected, H1 is therefore not rejected after the hypothesis test. As a result, there is
sufficient evidence to suggest that gender has a significant impact on how much earnings is
earned by the Australian workers at 5% significance level.

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3. Model B: Multiple Regression

Table 3: Multiple Regression on Earnings against Gender, Education, Skill and Experience
Gender: The coefficient value of 0.377 (3dp) indicates that earnings will increase at a rate of
0.377 as gender changes from female to male.
Education: The coefficient value of 0.641 (3dp) indicates that earnings will increase at a rate
of 0.641 with the change from having no degree to having a degree.
Skill: The coefficient value of 0.377 (3dp) indicates that earnings will increase at a rate of
0.377 with the change from having no skill to being highly skilled.
Experience: The coefficient value of 0.012 (3dp) indicates that earnings will increase at a rate
of 0.012 for every additional unit increase in the years of experience.
In order to prove that the variables have a linear relationship with earnings, a two-tailed
hypothesis test would be conducted at 5% significance level using the p-value approach.

Estimated regression equation:

Using Yi = β0 + β1X1i + β2X2i +…. ΒkXki + εi
Earnings = 0.91994 + 0.37684 (Gender) + 0.64069 (Education) + 0.37650 (Skill) + 0.01218
(Experience)

Gender (X1):
H0: β1 = 0 (there is no linear relationship)
H1: β1  0 (there is a linear relationship between gender and earnings)
P-Value = 8.77E-08 = 0.0000000877

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Therefore 0.0000000877 < 5% (α)

H0 is rejected as there is sufficient evidence to suggest that gender has a significant impact
on earnings at 5% significance level.

Education (X2):
H0: β2 = 0 (there is no linear relationship)
H1: β2  0 (there is a linear relationship between education and earnings)
P-Value = 9.41E-17 = 0.0000000000000000941
Therefore 0.0000000000000000941 < 5% (α)
H0 is rejected as there is sufficient evidence to suggest that education has a significant
impact on earnings at 5% significance level.

Skill Level (X3):

H0: β3 = 0 (there is no linear relationship)
H1: β3  0 (there is a linear relationship between skill and earnings)
P-Value = 8.50E-07 = 0.000000850
Therefore 0.000000850 < 5% (α)
H0 is rejected as there is sufficient evidence to suggest that skill level has a significant
impact on earnings at 5% significance level.

Experience (X4):
H0: β4 = 0 (there is no linear relationship)
H1: β4  0 (there is a linear relationship between experience and earnings)
P-Value = 0.000387
Therefore 0.000387 < 5% (α)
H0 is rejected thus there is sufficient evidence to suggest that years of experience have a
significant impact on earnings at 5% significance level.

Overall Significance Test (P-Value Approach):

H0: β1 = β2= β3 = β4 = 0 (all variables have no linear relationship with earnings)
H1: β1 and β2 and β3 and β4  0 (at least one variable has a linear relationship with earnings)
P-Value = 6.46273E-34 = 0.000000000000000000000000000000000646273
Therefore 0.000000000000000000000000000000000646273 < 5% (α)
H0 is rejected thus there is sufficient evidence to suggest that at least one variable has a

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significant impact on earnings at 5% significance level.

As a result, the two-tailed hypothesis test has proven that variables such as gender, education,
skill level and years of experience have a significant impact on how much earnings is earned
by the workers in Australia. The overall significance test has also further proved that at least
one of the variables do have a significant impact on earnings.

4. Model A R-Squared vs Model B Adjusted R-Squared

The adjusted R-Squared in Model B could potentially be better than the R-Squared in Model
A. This is due to the fact that adjusted R-Squared would take into factor of the different
independent variables to calculate a more accurate correlation while R-Squared would only
increase and never decrease regardless of how much significance the independent variables
have against the earnings of the workers.

5. Model A and Model B Gender Coefficient Comparison

As seen from Figure 2.1 and Figure 3.1 previously, the gender coefficient of Model A and
Model B is 0.325 (3dp) and 0.377 (3dp) respectively. As Model B has four variables while
Model A has only one variable to compare earnings against, therefore both values would be
different as Model B would have to factor in the other variables as well to provide more
accurate results in determining the variables’ impact on earnings. As Model B has a much
higher gender coefficient of 0.377 (3dp) after factoring in the other variables, this shows that
even with other variables factored in, gender remains as a variable that has a significant
impact on earnings. As a result, gender discrimination does play a significant part in
determining how much exactly the workers earned in Australia.

6. Comparison of a Male and Female Worker’s Predicted Earnings

In order to predict the earnings of a male and female worker, the estimated regression
equation could be used.
Estimated regression equation:
Using Yi = β0 + β1X1i + β2X2i +…. ΒkXki + εi
Earnings = 0.91994 + 0.37684 (Gender) + 0.64069 (Education) + 0.37650 (Skill) +
0.01218 (Experience)
Male Worker with degree, highly skilled and 10 years of experience:
Earnings = 0.91994 + 0.37684 (1) + 0.64069 (1) + 0.37650 (1) + 0.01218 (10)
= 2.43577
≈ 2.436 (3dp)
Therefore, a male worker would have a predicted earning of AU$2436.
Female Worker with degree, highly skilled and 10 years of experience:
Earnings = 0.91994 + 0.37684 (0) + 0.64069 (1) + 0.37650 (1) + 0.01218 (10)
= 2.05893
≈ 2.059 (3dp)

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Therefore, a female worker would have a predicted earning of AU$2059.

As a result, with the issue of gender discrimination, a male worker would have a higher
predicted earning of AU$2436 as compared to the significantly lower predicted earning of
AU$2059 for the female worker.

7. Additional Potential Factors on Workers’ Earnings?

Besides the factors mentioned previously in the report, some other factors such as inflation
rate and workers’ performance ratings could also be considered as variables that could impact
the overall earnings of the workers. As inflation fluctuates throughout the years, some
organisations would adjust the earnings of their workers accordingly. According to Milligan
(2015), due to inflation, wages have been increasing even if the increase is not much.
Performance ratings also commonly served as a way for employers to decide how much
increment in earnings is deserved by the workers depending on how they perform in their
work. High-performance ratings lead to an increase in pay (Marcellus 2021). As a result, both
inflation rate and performance ratings could be utilised to further explore how much
significant impact the variables could potentially have on earnings.
Using the multiple regression equation of Yi = β0 + β1X1i + β2X2i +…. ΒkXki + εi, the inflation
rate and performance ratings would be X5 and X6 respectively.
Current Variables:
Multiple Regression Equation: Yi = β0 + β1X1i + β2X2i +…. ΒkXki + εi
Y = Earnings
X1 = Gender
X2 = Education
X3 = Skill Level
X4 = Years of Experience
New Additional Variables:
X5 = Inflation Rate
X6 = Performance Ratings
By doing the same hypothesis test where β5  0 and β6  0 in which H0 would be rejected
instead of H1, this would prove the linear relationship of the new variables against the
earnings of the workers.

Conclusions
In conclusion, the statistical analysis done has established the existence of the pay gap
between genders in Australia. Due to the issue of gender discrimination, the potential
earnings of the female workers would be lesser than the male workers when placed in the
same circumstances such as the same level of education, skills level and years of experience.
This issue would continue to hurt the career prospects of women and affect their overall
earning capacity if there is no progress made to address it. Therefore, it is critical that actions
are to be taken promptly to bridge the gap of the earnings between the genders and promote a
better and more inclusive working environment for female workers in Australia.

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References
Milligan, B 2015, ‘How can inflation be good for you?’, BBC News, 13 January, viewed 3
October 2021, <https://www.bbc.com/news/business-30778491>.
Marcellus, S 2021, ‘Pay raises are making a comeback. Here's how to ask for one’, Yahoo!
Finance, 24 July, viewed 3 October 2021, <https://sg.news.yahoo.com/pay-raises-are-
making-a-comeback-heres-how-to-ask-for-one-202331710.html>.

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