A plan to reduce the pay gap between men and women has stalled and appears likely to be diluted or cancelled.

A mandatory pay gap reporting regime was announced but unfunded by the last Government, and the scheme is notably unloved by some ministers in the new one, which was elected with a mandate to curb public spending and reduce cumbersome regulation.

In its dying days, the Labour Government announced it would introduce legislation to require all employers with more than 250 staff to publicly report their entity’s gender pay gap. Four years after its introduction, the rule was broadened to cover all employers with 100 or more staff. Ultimately, it was expected to cover close to 3000 employers.

The mooted plan was for employers’ pay gap “action plans” to be voluntary, at least initially.

However, despite the last Government’s August 2023 announcement that it would pursue both policy development and legislation to usher in the new regime, the plan was never funded.

In a Treasury report of July 28, released under the provisions of the Official Information Act, the agency warned then Minister of Finance, Grant Robertson, against allowing the announcement of the policy ahead of confirming the funding required both to formulate policy and legislation and to enforce the new regulatory regime.

The document stated that the full amount of the funding required was not established and that a source of funds had not been identified.

“We are concerned that [Cabinet] ... proposes to announce the policy decision without funding being secured for this work. It is not clear there is a compelling reason to announce the policy at this stage. The Treasury recommends against announcing the policy decision ahead of the funding being confirmed for this policy,” the agency warned.

The work spans both the Ministry for Women and the Ministry of Business, Innovation and Employment (MBIE).

Then Minister for Women Jan Tinetti and Associate Minister for Workplace Relations and Safety Priyanca Radhakrishnan announced the gender pay gap plan on August 11, two months before last year’s election.

Without funding, the announcement appears to have been a ploy to woo women voters.

Tinetti, now Labour’s spokesperson for women, refuted this suggestion. She said that “closing pay gaps” is among her long-standing goals, and that the announcement was made on the back of two years of policy work, “timed to allow businesses time to lead in, and partake in the next phase of policy work".

She said the work was “designed to be funded from a future budget” and “compliance, enforcement, and regulatory guidelines were still to be developed”.

“This process is standard for budget and policy development,” Tinetti said.

However, Treasury’s objection was more particular than this. It agreed that the work should progress, but it argued that an announcement, before the costs were clear and funding decided, would lock the Government into a course of action prematurely. This, it suggested, ran contrary to good fiscal management.

At the time, Tinetti said the intention was to introduce legislation in early 2024.

It’s not clear whether the new coalition Government – largely elected on the promise of taming public spending – plans to take up that torch.

The Minister for Women is now the National Party’s Nicola Grigg, currently on maternity leave. Grigg said, last year, that she supported Labour’s pay gap plan.

The Act Party’s Brooke van Velden is the Minister for Workplace Relations and Safety. A spokesperson said Cabinet has yet to decide on whether to pursue mandatory pay gap reporting.

Last year, Act leader David Seymour criticised the plan as more “red tape”. Van Velden is understood to share at least some of Seymour’s scepticism that the benefits of the increased regulation would outweigh the costs.

National’s Louise Upston is Acting Minister for Women. She said the coalition Government has made no decisions about progressing pay transparency plans, and that she will meet with officials to discuss the matter.

“The coalition Government is committed to reducing the gender pay gap across both the public and private sector. Finding effective, sustainable ways to do this remains a focus of the Ministry for Women,” Upton told ZP Plus.

She added that the Government is mindful that rebuilding the economy will take “a consistent regulatory environment”.

Officials waiting for direction

Beth Goodwin, manager of employment relations policy at MBIE, said that early work on a pay gap reporting system – including stakeholder engagement, cross-agency engagement and initial advice to ministers – was paid through the department’s baseline funding.

Goodwin was unable to give a cost estimate to date. She said it was “absorbed into existing teams’ work”.

“Decisions on whether to progress proposed pay gap reporting will be made by the new Government in due course,” she said.

Similarly, a spokesperson for the Ministry for Women said “exploratory work”, including policy work and consultation of the National Advisory Council on the Employment of Women, which advises the Minister for Women, was completed out of the ministry’s baseline funding.

Officials are no longer working on the plan and are awaiting instruction from the new Government.

What accounts for the gender pay gap?

The gender pay gap is notably different from pay parity (equal pay for equal work) and pay equity (similar or equal pay for work deemed to be of equal value). Both are legal requirements under the Equal Pay Act.

Stats NZ calculates New Zealand’s gender pay gap as the difference between the median hourly earnings of women and men in full-time and part-time work. In 2023, men made 8.6 per cent more than women.

The Public Service, which does the core work of government, already reports its gender pay gap: 7 per cent in 2023. Roughly 200 private companies, including Air New Zealand and Spark, also voluntarily report this data.

It’s not clear that the gender pay gap is simply unfair, though unfairness likely plays some part in it. Research done for the Ministry of Women in 2017 found that some 20 to 35 per cent of the gap (depending on the evaluation method) is explained by factors such as the kind of work women pursue and the industries they favour.

It found that the balance of the gap is unexplained, and is likely affected to some degree by both discrimination and the “unconscious bias” of employers, and by the different choices that men and women make – for example, women may favour work flexibility over monetary increases. In addition, personality, motivation and ambition may all be at play.

Gail Pacheco, professor of economics and director of the NZ Work Research Institute at the Auckland University of Technology, co-authored the research.

She said she favours a mandatory reporting regime in New Zealand, so long as the cost of implementing it is not unduly high.

Pacheco said that, where such mandatory regimes have been introduced abroad, they have helped to narrow pay gaps, “noting that this isn’t necessarily driven by a rise in female wages per se, but by men’s wages growing more slowly".

Ethnic pay gap

In August, the Labour Government also indicated that a second phase of its pay gap plan would include so-called ethnic pay gap reporting. The details remained undecided when it left office.

Considerable pay gaps exist between different ethnic groups. A 2022 report commissioned by the New Zealand Human Rights Commission, also co-authored by Pacheco, indicated significant differences in the extent to which pay gaps for different racial groups can be explained.

It found that 70 to 73 per cent of the pay gap for Māori workers (relative to those of European descent) was explained by factors including job-related characteristics such as industry, region, and educational attainment.

The balance of the gap was “unexplained”, and possibly the result of factors ranging from employer discrimination and biases to ethnic group preferences and literacy levels.

The unexplained portion of the pay gaps for Pacific and Asian workers (relative to those of European descent) was considerably larger, the report found.