Income inequality

A recently published summary of the HILDA survey got a fair bit of press – the AFR and the SMH both did front page stories on Wednesday, and both picked completely different angles. So I had to go back to the source, to see what interesting nuggets I could pick out.

The Household, Income and Labour Dynamics in Australia (HILDA) Survey is a household-based panel study which began in 2001. It collects a stack of information about people – their income, wealth, families, whether they are in the labour market etc. etc, and it follows people – a longitudinal survey – so you can see what happens to them in successive years. They’ve done it three years in a row now.

There is a very interesting section on income and wealth mobility over what is quite a short period. The survey looked at household’s income rankings (after tax and government benefits, and adjusted for household size). Over the three annual surveys, 10% of the top two deciles of income moved to the bottom half of the income distribution, and 8% of the bottom two deciles moved to the top half of the income distribution. Single mothers, though, even though they pretty much started at the bottom of the distribution, were very unlikely to move up in the period.

Using similar measure, the survey goes on to look at households in poverty (defined as income 50% below the median income – a generally used international standard – and even though it is relative, it can still vary substantially – depends on the level of inequality in incomes). Incidentally, this poverty level is $12,362 per equivalent person in a household, with first adults counting as 1, second adults as 0.5 and children under 15 counting as 0.3 of a person. So in my household (two adults, two small children), the total household income poverty line would be $25,960, or just under $500 a week.

Although 20% of the population was poor during at least one of the three years surveyed, only 3% was poor during the entire period. Around 12% were poor at any one time. This implies better mobility than I would have expected (although still a high rate of poverty, given that this includes government benefits, which are the current government’s answer to the problems of big income ranges in the work force). Single mothers are the least mobile group of poor people, being less likely to move up the ladder, and more likely to be in the bottom deciles to start with.

The person most likely to be poor is a single elderly person (40 – 50% chance). Then after that is the single mother household (25%) and the lone person household. Elderly couples are about as likely as the population to be poor. Given that elderly couples, single mothers and single elderly people are all supported by government benefits, it says some interesting things about how benefits are targeted. Personally, I would rather that households with children in them were targeted than elderly couples, but then I’m not that likely to end up a poor elderly person, so it’s easy for me to say.

I may pick some more out of this survey later – it’s got all sorts of interesting snippets in it.

  1 comment for “Income inequality

  1. May 4, 2006 at 3:19 am

    Interesting. In the US, single parents and their children are far more likely to be poor than the elderly. Social Security isn’t hugely generous, but even the minimum benefit is usually enough to get you just over the poverty line. Welfare benefits for single parents don’t come close.

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