By Eleanor Wilson and Abe Maddison

Systemic racism is to blame for a glaring indigenous pay gap that is costing Aboriginal and Torres Strait Islander Peoples billions of dollars a year, a landmark study has found.

The Australian-first Towards Indigenous Pay Parity report released on Thursday revealed indigenous employees earn 16 cents less for every dollar compared with the average Australian worker, culminating in an average $15,000 discrepancy each year.

That figure climbs to 21 cents for Aboriginal and Torres Strait Islander women, who earn an average $41 per hour, compared with $52 for men overall.

Social activist and business executive Tanya Hosch said she had a surprising experience when she was elevated to joint campaign director of the Recognise campaign, which aimed to get indigenous people recognised in the Constitution.

“I didn’t expect that I would earn the same salary as my counterpart because of how much more experienced he was,” she said.

“It was actually our board that insisted that I be paid equal to him.

“In hindsight, I think, ‘Why did I ever think I shouldn’t be?’ It just goes to show how important principled leadership is, and the proper reflection of valuing what I had to bring to the work.”

Racism and structural discrimination made it extremely hard for people to secure equal opportunities in the workplace, she said.

“Actually enabling First Nations people to have all their varied attributes taken seriously and rewarded appropriately is one of the challenges,” she said.

The UTS Centre for Indigenous People and Work report analysed Australian Tax Office and Australian Bureau of Statistics data from almost 230 occupations, identifying wage gaps in three quarters of sectors.

The pay gap cost indigenous Australians a combined $3 billion in 2022-23 and threatens to reach $170 billion in losses by 2050, warned the centre’s director Professor Nareen Young.

Exploring factors including education, age, job type and hours worked, the study found those elements accounted for less than one third of the average hourly pay gap.

“Having examined all of the usual things that explain a pay parity gap we can only put it down to systemic racism,” Prof Young told ABC News Breakfast.

“When it’s up to the discretion of the employer or manager or a REM (remuneration) process or an HR process, the gap is wider, which is of real concern.”

For individual workers, it was comparable to losing a lifetime of super payments, or working two months of each year for free, she said.

The gap has widened in the past decade, rising from an estimated 10 per cent in 2014, according to the Melbourne Institute’s Household, Income and Labour Dynamics in Australia dataset.

Economists are sounding the alarm in response to the Indigenous-led report, warning the disparity undercuts investments in indigenous welfare and has serious implication for Australia’s economy.

“Lower wages across a working life mean lower superannuation balances and heavier reliance on the age pension,” Indigenous Business Australia chief economist Siddarth Shirodkar said.

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