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Finance and Public Administration Legislation Committee
12/10/2015

NOVAK, Dr Mikayla, Senior Fellow, Institute of Public Affairs Australia

[10:23]

Evidenc e was taken via teleconference—

CHAIR: Welcome. Information on parliamentary privilege and the protection of witnesses in giving evidence to Senate committees has been provided to you both. I now invite you to make a short opening statement. At the conclusion of your remarks, I will invite members of the committee to ask questions.

Dr Novak : Thank you. I wish to submit a statement to the inquiry on behalf of the Institute of Public Affairs. One of the landmark developments in Australia—and indeed much of Western civilisation in the main—has been the vast improvements in the economic and social status of women. Consistent with this, submissions to the inquiry have uniformly praised the virtues of gender diversity as an economic value, and nobody should doubt the sincerity of those sentiments.

The representation of women in private and public sector management has been on the long-term improve, though not as fast as many would like. So the question is: what kinds of strategies are most conducive to bolstering diversity? Although the bill would surely effect a change in Commonwealth public sector hiring practices, it is not entirely convincing that the bill will effectively usher in the broader gender diversity improvements that are so widely desired. Evidence that gender quotas lead to a sustained improvement in the gendered composition of firms in other countries, such as Norway, is equivocal thus far.

A 2014 paper by Nina Smith indicates that current research does not justify gender quotas on grounds of economic efficiency and mentions that empirical results are mixed and often negative in this regard. In any case, Smith says, there is still a lack consensus for analysing the impact of gender diversity on firm performance. This is because of issues such as model specification sensitivities and how to control for the effects of different policies in different jurisdictions. Some other studies also question the economic virtues of gender quotas. A 2013 study in the journal Feminist Economicsstated of the Norwegian reform:

The impact of the reform on firm performance is negligible.

Kenneth Ahern and Amy Dittmar went one step further, saying in their Quarterly Journal of Economicsstudy of 2012 that quotas reduced firm valuation. Meanwhile, a study by Marianne Bertrand and others concluded the experience in Norway:

… had very little discernible impact on women in business beyond its direct effect on the newly appointed female board members.

In other words, there is no discernible trickle-down effect of quotas at senior levels filtering down to voluntary increases in female employment at junior levels.

Some of the recent literature on the effect of quotas on internal firm processes is sobering by implication, with worries about whether female beneficiaries of legally enforced quotas would be well integrated in the workforce. Psychological research by Miguel Unzueta and others suggests that quotas could affect women's self-image, detrimentally affecting their boardroom performance. Other studies disconcertingly suggest that under quota regimes women may be ignored or even sidelined in decision-making processes.

It seems that an underlying motivation of the bill is to ensure that government plays a leading role in driving a broader shift in national managerial practices. It is unclear, though, that public sector employment decisions would serve as anything other than a weak signalling effect hinting at what the private sector ought to do. In the broader sense, government does not operate in accordance with relative price signals shaping profits and losses; rather it operates in ways to achieve non-market policy objectives. Firms simply have objectives other than governments, and they fulfil different functions and roles. Therefore, it is not obvious that internal government gender quotas would necessarily translate into the enactment of similar policies by the private sector. Others areas of policy in which labour market activism have been attempted have yielded uninspiring results both here and abroad; for example, wage subsidies for the unemployed or mature age people have not assisted target groups in effective ways.

In closing, it should be noted on the public record that the treatment of women appointed by the Australian government in the past left a lot to be desired in some respects. The marriage bar is only one example of discriminatory treatment deservingly relegated to the dustbin of irrelevance. Reading between the lines, proponents of this bill might be prone to think that there is still a need for government to be more accommodating on gender diversity. Whilst noting that public sector employment decisions ought to reside with the government of the day, one ought to refrain from the sentiment that the blunt instrumentation of gender quotas would necessarily achieve what proponents might hope for.

It remains very questionable whether gender quotas elsewhere have achieved the desired effect. Also, it is doubtful that public sector hiring decisions serve as a strong signal for how other actors in the broader national economy should hire. Quotas have long been seen by economists and increasingly by policy makers in general as a highly ineffective policy to resolve various problems. If quotas do not work in agriculture, natural resources or trade, then why would we expect them to work in the context of promoting gender equity? It would be better for government, in the view of the IPA, to work on the generalist policy, bolstering the long-term prospects for women in employment, and everyone else for that matter, such as more competitive education systems and greater market flexibilities in the labour market.

Senator XENOPHON: Thank you very much for your opening statement. The bill does not talk about quotas; it does not seek to impose a quota. Can I respectfully suggest that you look at the bill carefully, because the bill talks about a board that does not achieve the 40 per cent giving reasons why it has not done so. It actually requires a process which has some more rigour in it than at the moment, where there is no such requirement to give an explanation as to why that 40-40-20 target is not being reached. I would invite you to look closely at the wording of the bill, because it does not mandate a quota as such.

Dr Novak : Is interesting reading the outline of the bill, which I have before me, because it does say the existing policy provides for a gender diversity target, whereas the bill 'seeks to move from the current aspirational target to a positive obligation' with regard to employment on government boards. On the website for the bill itself it does refer to the concept of a target as well. It seems to me that the direction of this bill is edging towards more the hard target which I think could have a range of deleterious consequences.

Senator XENOPHON: But it is not actually a quota. If you look at the wording carefully, it is just seeking to put some context and rigor around the bipartisan 40-40-20 target. Does the IPA, as a matter of principle, support the current government policy, instigated by the former Gillard government, that there be on government boards a target, an aspiration, of having at least 40 per cent women and at least 40 per cent men on government boards?

Dr Novak : I will not speak on behalf of the IPA, but I would have thought that the general principle would be employment on the basis of merit. Indeed, I would basically argue that the general trajectory for economic improvement for women in terms of representation on boards has been on a dramatic long-term improve and you would expect that trend to continue in as much as human capital accumulation continues and in as much as there is continuing openness within the labour market. My concern about this is that it is basically the thin end of the wedge in one respect because if you mandate an agenda quota or target it could be a prospect for future policies in other directions, such as racial quotas and the like. One has to bear in mind the fact that although there are certain intentions behind this policy one has to note potentially unintended side-effects of such legislation.

Senator XENOPHON: Dr Novak, there is nothing here about racial or other quotas—

Dr Novak : No, of course not. We are talking about precedent; we are talking about the tendency for policy precedent. There is no doubt in my mind that if we edge towards hard quotas, if that kind of policy is implemented and becomes a part of the policy firmament, there will naturally be demands for similar actions in similar areas. I do not think there is much doubt about that.

Senator XENOPHON: I think we will have to agree to disagree. But you said the current government's policy—indeed instigated by the Gillard government—of having at least 40 per cent women and at least 40 per cent men on government boards is something you personally favour. But you are here as a witness for the Institute of Public Affairs. What is the position of the Institute of Public Affairs in relation to that government policy?

Dr Novak : I do not think the IPA has a particular view.

Senator XENOPHON: It has a particular view in relation to this bill, though.

Dr Novak : I am stating a position in regard to the bill, in opposition to the general direction towards gender quotas.

Senator XENOPHON: I do not want this to be like a Clarke and Dawe interview. Don't take that in a bad way—they are very interesting interviews. There is actually no quota required in this bill. It is about a reporting requirement such that, if the 40 per cent target has not been reached—for men or women but particularly for women—there must be a reason given as to why that 40 per cent target has not been reached. It also has a clause that allows for exceptional circumstances. How can you or the IPA say that that is in any way a quota?

Dr Novak : We are just going to agree to disagree about it, I think.

Senator XENOPHON: So you maintain that this bill has a quota, even though on the face of it there is nothing in the bill that makes reference to—

Dr Novak : There is a transition towards a quota process.

Senator XENOPHON: Where is that transition? Usually a transitional provision is one that leads to a final position. I am just trying to understand in what way it is transitional.

Dr Novak : I will repeat the first paragraph of the outline. I will read it out to you again, if you wish.

Senator XENOPHON: No—

Dr Novak : No? Okay.

Senator XENOPHON: No, you can if you want to.

Dr Novak : No, that is fine. I will not.

Senator XENOPHON: All right. But there has been a downward trend in numbers on government boards over two years. How would you explain that, given the optimism in your opening statement? You mentioned a welcome trend and increasing numbers of women on boards—not just government boards. But there has been a downward trend. How would you explain that?

Dr Novak : Obviously you have nominated a very, very short time frame of only two years. I cannot give you any definitive explanation as to why there would be a very short-run turnover. Perhaps the Australian Public Service Commission or similar might give you a more precise answer as to why, but I would just note the broad trends in the wider economy. If you look at the situation even as late as the mid-1980s, there were virtually no women on private sector boards or in senior management positions at all. The only exception I could think of would be Dame Leonie Kramer in the mid-1980s. If you look at some of the ASX statistics, it is now getting towards 20 per cent representation at senior levels of corporations. Looking at the private sector, it seems to me that the long run trajectory is in a direction that I think most fair-minded people would support. That trajectory has been conducted and ushered under a process in which there are no targets, quotas or similar.

Senator XENOPHON: Could we go to the Department of Veterans' Affairs. There are eight Veterans' Affairs boards with 76 positions and 18 women on those boards, which is 23.7 per cent. What this bill would require is not a quota. It would require details of what they are doing to try to get up to the 40 per cent, why they have not been able to reach 40 per cent. If they simply cannot find suitably qualified women to make up that 40 per cent, they can claim extraordinary circumstances and explain the reasons for those extraordinary circumstances. How would you or the IPA say that that, on any reasonable interpretation of the bill, can be seen as either a quota or a transition to a quota? It is basically about an explanation of processes and the conduct of that particular department.

Dr Novak : It seems to me to be implied conditionality for these boards to hire additional numbers of women and to provide written explanations to the extent that they do not.

Senator XENOPHON: I am just trying to understand the position of the IPA in respect of this. Simply requiring reporting, which is the current government's position, is something that you or the IPA do not have a problem with?

Dr Novak : I think the entire issue is one of potential policy precedent. Certainly reporting is one matter, but to transition towards numerical quotas would be of concern. It strikes me as puzzling that, for example, the bill mandates or calls for a gender diversity target of 40 per cent without a credible basis for establishing why that 40 per cent should be the case, aside from the fact that 40 per cent may be numerically higher on average than what has been achieved now. What is to stop the target from being 50, 60 or 70 per cent? I think the answer is that that situation would be inconsistent with the general notion of merit and could potentially crowd out of human capital. Just hire the best person for the role.

Senator XENOPHON: So you think that this bill could crowd out human capital?

Dr Novak : It is essentially a policy move or a transition towards potentially a gender quota system, and that would be—

Senator XENOPHON: How is it a transition?

Dr Novak : If you have a quota system in place rather than a meritorious selection criteria basis for employment, what you are basically doing is hiring a cohort of people on the basis of that gender identity, as opposed to their capacity to fulfil the roles. If you look at the empirical evidence from Norway and the like, or if you look closely at the private sector, there are some risks that imposing gender quotas tends to diminish firm value. Sure, there are complexities around the empirical literature. The issue is that, lacking consensus, the onus is probably upon those who advocate change to be able to demonstrate that there is empirical evidence available. But certainly a position where policy moves in the direction of a numerical target or a quota does risk crowding out human capital, to the extent that those who are not preferred on a gender basis are not hired.

Senator XENOPHON: But doesn't this bill, with the 20 per cent latitude, simply require appointers to think about the talent pool and to be accountable for those decisions, and also to learn about the challenges as to why they are not meeting their target, given that women make up 51 per cent of the population and the bill requires 40 per cent of board appointments to be women? The bill suggests that it be 40 per cent, without a quota, saying, 'If you can't do it, explain to us why—what your challenges are.' First, how is that transitional? Second, how is it a quota? Third, do you acknowledge that in previous years there have been many capable women who may have missed out because of an inherent bias in the selection process?

Dr Novak : I do not doubt there may be conceptions of bias among those who are hiring, but the issue in the long run seem so to be—and I do not think this is necessarily an issue pointed or directed to the public sector because it has a whole different set of incentives to the private sector. Certainly, at least in the private sector, to the extent that firms discriminate against people with valuable skills, capabilities, embodiments of human capital, the costs are borne by them, the discriminator in the first and foremost instances. I tend to think that the direction in which the labour market trends is going is that women are doing fantastically well—in fact, in the higher education process and also in schooling, they are accessing quite openly some skilled elements of human capital for themselves. I think it would just be in the long run quite compelling for any employer, regardless of sector, to not employ valuable, capable women. The objective that we would all want to see are that the composition of boards and employment is reflective of the talents that are valuable in society and will eventually be borne out by general economic processes of hiring.

CHAIR: Your final question, Senator Xenophon, before I go to someone else—or we can come back to you.

Senator XENOPHON: Just a final question and, if there is more time at the end—isn't it the case that men are largely receiving positive discrimination right now and the question is: do you concede that there would probably be some unqualified or incompetent men being appointed to some of these boards.

Dr Novak : It is quite a difficult question to answer without knowing the specifics, although it could be said that the imposition of targets and/or quotas could yield some unintended adverse consequences. If you look at some of the workplace psychology literature, you will see that women who, for example, perceive themselves to be beneficiaries of quota systems tend to probably contribute less to the decision-making processes of boards. There is probably the very unseemly and untoward situation in which perhaps, if women are beneficiaries of positive affirmative action-type policies, their views might be discounted in the workplace. I see those as being very serious problems. The processes which do not seem to be adequately addressed or dealt with in this kind of bill are those of hiring and decision making, which actually matter in ensuring the most capable people are able to positively contribute. I do not see how a numerical target or a system that is transitioning towards quotas are going to necessarily deal with those issues, unless you observe from such polices and just allow the employment's labour market processes to work so that it is too compelling for employers not to hire capable women in the absence of such targets and quotes.

Senator XENOPHON: Can I just quote Annabel Crabb and then—

CHAIR: No. We will come back to you, Senator Xenophon.

Senator XENOPHON: You don't want me to quote Annabel Crabb?

CHAIR: Dr Novak, during your evidence just then—I am not sure if you had the benefit of listening to the two previous witnesses—you—

Dr Novak : No.

CHAIR: introduced a notion about diversity and how far targets for gender diversity might lead into other targets for other diversity of which Senator Xenophon said it does not reflect on or have anything to do with this bill. To be fair to you, yes, it does not have relevance to this specific bill but it was information that was introduced by both of the previous witnesses in response to a question from Senator Smith, who I am now going to go to. If that is a line of response that you want to continue with, that is entirely up to you, because it is now relevant to this inquiry.

Senator SMITH: Thank you very much and thank you, Dr Novak, for your contribution this morning. One of the points I was trying to tease out in discussion with earlier witnesses this morning is that gender is just a subset of the larger diversity issue.

Dr Novak : Correct.

Senator SMITH: I cannot help but think that we get a little bit sidetracked or hooked on gender when in actual fact we know that women are not homogenous—neither are men—and women have certain virtues and vices and men have certain virtues and vices in the corporate workplace. I was interested in exploring what were the barriers to this gender diversity, and when we explore the barriers of course the first barrier that was identified was networks—men's clubs, boys clubs et cetera. I think it is important to constantly keep in mind that networks exist for all sorts of people, irrespective of one gender class. Do you have a general comment around this debate between gender diversity, specifically, as opposed to diversity more generally?

Dr Novak : I think that is a point that is very well made because diversity and the equality debates that often derive from it, because there is essentially a notion that—to the extent that there is a numerical average phenomenon of the extent of women in the workforce—implies some sort of inequality between men and women. This has to be teased out and refined because, as you suggest, there is heterogeneity in terms of the skills and capabilities, characteristics and attributes of all human beings in fact. Thinking more in a general sense that a prime focus on gender targets—and I still maintain the view that this kind of legislation will possibly eventually lead to harder targets. If, for example, the intent of the policy does not work out as originally envisaged, that what we need to think about is the fact that it is not so much the background characteristics that matter; it is actually the human capital embodiments that really matter, because you want workplaces which are open to all the talent, that are open to all minds.

A focus on the gender identity aspect of prospective employees with regards to this bill overlooks that general notion that what firms and the public and private sector want are the best minds. Minds are heterogeneous and they embody with them different skills and capabilities, both technical skills and capabilities, and also the soft attributes that we think about in terms of people management. These are not very easy questions to tease out, and I do not decry the suggestions made that there are tight networks—I do not doubt that for a second; as a woman, I do not doubt that myself. But, in the end, what you really want is generally a more open set of labour markets which will allow employment on the basis of talent to be the most compelling idea in terms of hiring. To be sure, public sector decision making is not the same as private sector, but you would think, all else being equal, that you would want a labour market open to talents and the best available minds that are available on the labour market as the compelling attribute, regardless of what sector of the economy we are talking about.

Senator SMITH: I thought I missed it, but towards the end of your opening statement, if I heard it correctly— and you might like to re-read it into the Hansard if you wouldn't mind, just for my benefit. I think you were talking about alternative ways of getting similar outcomes.

Dr Novak : Yes, and I will briefly repeat that statement: it would be better for governments to work on general policy, bolstering the long-term employment prospects for women, and everyone else for that matter, such as more competitive education systems and greater labour market flexibilities.

Senator XENOPHON: So if the outcome that this bill seeks to achieve is regarded as desirable, this is not actually the only way to achieve that outcome.

Dr Novak : Of course.

Senator XENOPHON: Yes. It is interesting because, in previous evidence, people have touched on how the hiring and decision-making processes can actually come to have significant bearing on that outcome.

Dr Novak : Look, I think that is quite right. There are a whole range of factors which, obviously, must be considered when hiring a prospective employee, and I think one of the more important categories of consideration has to be the level and the relevance of human capital—the education, the skills, and the training that are embodied in people. And the statistics are incontrovertible in this regard: women are actually participating now very heavily in our education systems, and they are performing very well. So I would fully anticipate, all else being equal, that women will continue to succeed in the workplace, and we will actually see these desirable numerical outcomes that we wish to see, without recourse to legislation. I just tend to think that this kind of legislation is superfluous and unnecessary from a long-run perspective.

Senator XENOPHON: You are quite right: if you use a different starting point, you get a very different view of success or failure. And in this case, I think reference to 'the trend' over what is just three years does not tell the full story, and it can unnecessarily put a negative lens over what is actually a very, very positive achievement for our community. When you are using, for example, Dame Leonie Kramer as a starting point, and then measuring success that way, you can see that there have been sizable improvements.

Dr Novak : Well, I tend to think so. From an economic perspective, it actually helps to think about phenomena and trends from a long-run perspective rather than from a very short-term perspective. My concern would be that an inordinate focus on short-run phenomena—and I am not saying that it is not at all important, but an inordinate focus upon that—actually leads you to overlook the general propensities of what occurs when you basically have, generally, a freer economy, in general, that is becoming more open to the talents. I do happen to think that there is some residual, gender-based discrimination in the labour market. I do not doubt that. That is all important. But it seems to me, by the same token, that a lot of those sorts of malignant effects have been progressively wiped out, just by the fact that it is actually far too compelling now to not engage women in a workforce role or a capacity.

Senator WATERS: Dr Novak, we appreciate your attendance today. Just on your last point: you said you accepted that there was, in your words, residual gender discrimination, but that it was being progressively wiped out. How long do you think women have to wait for it to be wiped out?

Dr Novak : Yes. Look, that is a very, very fair question; I grant you that, Senator. In fact, I think that one of the most effective salves against any residual discrimination in the workforce is not through legislative means. I actually think that one of the most effective sorts of salves or remedies against residual discrimination is basically through non-governmental, social approaches: it is basically highlighting any impacts of residual discrimination. The fact that we are actually having these sorts of discussions today, in parliament and elsewhere in society, I think has proven to be very helpful. And just putting out the hard evidence that women are now embodied with much more human capital, skills, and capabilities than ever before, in a formal sense, and really, when you think about it, most people have a gender identity as it is, and so it really costs people in the long run to overly discriminate on the basis of those background characteristics rather than their inherent talents and capabilities. I agree that there is some residual discrimination but it can be wiped out and the best way to wipe it out is through those social processes that emphasis the value that women can actually play in the economic processes. It is happening each and every day, and I am very sure that those kinds of processes are having a beneficial effect in the long run.

Senator WATERS: I do not quite understand what you mean, to be perfectly honest, when you say we are having a discussion here in parliament about these issues and yet we do not need a legislative response. What social processes precisely are you referring to?

Dr Novak : I am talking about the social practices of the general observed economic improvement that has been accorded to women in the main without recourse to any legislative mandates to ensure favouritism on the basis of gender identity. You and I should know full well that women, on the whole, have improved dramatically in our economic and social status over time, and we have not required gender based targets, quotas, or anything like that in order to get through. You want open economic processes and free-flowing discussion in society to convince people of the imperative of opening up your consideration for all the talents, and that includes the talents that are embodied in women.

Senator WATERS: Thank you. I do not accept that we have made enough progress to date, and I think the pace of change towards gender equality has been painfully slow. I do not accept that we should remain on that trajectory of change.

Dr Novak : We have a disagreement; that is fine.

Senator WATERS: Sure, thank you. I am interested to tease out: you have made some statements about believing the progress is occurring already and we do not effectively need any legislative intervention to hurry it along. If your arguments held, why do we not have equality already?

Dr Novak : Equality in terms of what though? We have to bear in mind that the numerical notions of equality intersect with the very facts of choice, because it is not the case that all women would want to vie for senior roles in major corporations or major government bodies. We cannot assume that people are homogenous in terms of preferences and tastes. I know for one, I am not interested in those roles so a marked emphasis on numerical ambitions, targets, or objectives will not include people like me anyway, because I am not interested in senior roles like that.

Senator WATERS: Right, so you think if women were choosing to be in those senior roles, they could effective click their fingers and be in them? Is that what you are contending—that there are no barriers to women other than their own choosing?

Dr Novak : I thought my evidence about two or three minutes ago stated that there was—in my belief—some instances of residual discrimination against women. It has been a historical fact, obviously, that there has been discrimination against women and that has been legally entrenched, for example, through the marriage bar, which operated in the APS until the mid- to late-1960s. It is quite clear that there has been historical discrimination against women on the basis of many variables and factors. That is not to say that it is has not been on the improve.

Senator WATERS: Just to follow up on that point: you mentioned earlier that you accepted there was a hiring bias—I think I have jotted down the right phrase that you used—and we have had a lot of discussion about unconscious bias in this space and that the folk doing the hiring subconsciously select people who are like them. Then, inevitably, when you have a predominance of men making these appointments, they are more likely to select other men. I think you have said you accept there is that hiring bias and you have also said that you accept that there is residual discrimination. What then do you propose to do to fix that?

Dr Novak : I essentially argue for an openness of the economic process. By and large, the economic process is not open. We have extensive regulations and governmental interference in the economy as a whole, which actually prevent women from accumulating even more human capital, skills and capabilities—particularly at the lower rungs of the income distribution; issues like occupational licensing and the like. These sorts of factors are pretty important. I maintain the notion that I have expressed before: if you have a more competitive and open economic process—and a more dynamic social process too, I should add—then basically the costs of discrimination become more apparent over time. It just does not make any sense for firms and organisations to be, in the long term, discriminating against women who can provide sufficient economic value to production processes. We want more economic freedom to make sure that the costs of those sorts of discrimination are exposed—in particular, to the discriminators.

Senator WATERS: You are talking about the costs of not giving women the fair go that they deserve. Pardon me as I was a minute or so late to your evidence, but I thought that you were saying that you rejected the findings that boards with more women on them led to better performance. So there seems to be a little bit of an inconsistency there. Could you clarify that for me please?

Dr Novak : I do not think that there is any inconsistency really. It is quite clear that the empirical evidence is mixed. In fact, I would argue that the mixture of findings in the empirical evidence would probably dictate against any action bias on the part of the parliament or the government of the day to act in favour of this issue, one way or the other, until there is more compelling evidence. You really want a consensus of evidence which actually suggests that greater gender-based diversity in boards actually does improve board performance, and it seems to me that there is sufficient weight of evidence to say that that is actually not clear at all. The point of the evidence that I brought to bear this morning was that there is no consensus in the empirical literature about the broader effects of gender quotas and that, in fact, there are a number of studies which actually say that the application of gender quotas, targets and the like may be detrimental to the interests of firms as well as, perhaps, very unseemly to the interests of women themselves, and obviously we do not want that.

Senator WATERS: The Centre for Gender Economics and Innovation gender index, which was launched in April this year, found that ASX200 companies where boards had at least one-quarter women exceeded the performance of companies generally by two per cent and that they out performed all-male boards by more than seven per cent per annum. What say you to that evidence?

Dr Novak : I have not seen that particular study, but I will certainly be very interested to look at that study at another time. I would be first and foremost interested to look at the methodology of those kinds of studies. I would be very interested to see what kinds of control factors are put in place when thinking about the empirical implications of the effect of gender composition on firm or board performance in particular. Just looking at a simple relationship between the two variables does not really tell you a fulsome story. There are many complex factors which inform firm performance. Interestingly enough, if you look at some of the studies about the Norwegian gender quota experience, there is a debate about how you actually control for the effect of business cycles, for example, which are obviously one important additional factor when thinking about firm performance. I would probably be wanting to look very closely at the methodology of that study before making any sort of definitive statement as to whether I am in agreement with it or not to be frank with you.

Senator WATERS: How do you propose that we redress gender inequality without affirmative action?

Dr Novak : As I have said before, the process of gender discrimination is given succour in an environment where there is less economic openness and less economic freedom. If you take the ideas of Gary Becker and other economists to hand, you would understand that there is a cost of discrimination to discriminators, to the extent that they choose not to employ a person who could provide compelling value to a firm. That is certainly in the immediate sense a problem for the person who is discriminated against but it is, by the same token, a problem for the discriminator. So you really want an open situation in which the cost of discrimination is exposed more fully in a more competitive marketplace.

One thing I might add to my statement is that we tend to ignore the important roles of women in self-made businesses as part of the broader gender equality in the economy story. We know there are over 400,000 women running their own businesses. They are their own self-made bosses, and this is an issue that is not duly considered in these sorts of debates, which seem to be inordinately focused on numerical averages, say, within the public sector or the private sector or in certain classes of firms. I think the key ingredient, the key answer, to wiping away gender based discrimination is through more economic freedom, more labour market openness and continuation of a discussion highlighting the extent to which any residual discrimination is occurring in the workforce and addressing the means to respond to those. After all, in the private sector, firms still have opportunities to rectify the costs of discrimination which harm them for employing more women. That, to be sure, has been a long-run trend. Look at the improvements in female labour market participation. Look at the long-run trends in female employment. Look at the trends in female representation in senior boards and management echelons within companies. Look at the number of women in business, the number of women participating in education. There have been long-run improvements. That is incontrovertible.

Senator WATERS: It is too slow. Thank you.

CHAIR: With that, Dr Novak, I thank you for your time today and for the evidence you have provided. Thank you, Dr Novak.