Changing families, challenging futures
6th Australian Institute of Family Studies Conference
Melbourne 25-27 November 1998


© Jocelyn Pech and Frances McCoull, 1998. One copy of this paper can be made for the purpose of personal, non-commercial use, subject to proper attribution to the authors.


Intergenerational Poverty and Welfare Dependence: Is there an Australian problem?

Jocelyn Pech and Frances McCoull
Strategic Projects Section
Commonwealth Department of Family and Community Services


Any opinions expressed in this paper are those of the authors and should not be taken to represent the views of either the Minister for Family and Community Services or the Department of Family and Community Services. The authors wish to thank the Australian National University for providing data from the Negotiating the Life Course survey and Jane Boke for her help in analysing those data.

Introduction

Once a year or so in Australia, there is a flurry of media attention over a particular family that has been identified as representing the phenomenon of intergenerational welfare dependency. Typically in such stories, a number of family members across two or more generations are receiving social security payments, usually those associated with unemployment or lone parenthood. Often, the family is shown or simply assumed to have been dependent on income support for an extended period of time.

Community reaction to these stories is inevitably polarised. Some people believe firmly in the culture of welfare dependency and that parents transmit undesirable attitudes about education, employment and income support to their children. Others argue that such cases are the exception rather than the rule and that it is unfair to blame the victims of poor labour markets, economic restructuring or family breakdown for their circumstances. These arguments go round and round for some time without resolution and then die down, only to resurface when the next case is discovered.

These stories raise a number of important issues for policy makers and governments. Obviously there are families in Australia who suffer more than their fair share of joblessness and consequently receive more income support than average. But how numerous are they? Is the size of the problem growing? How do families who are long-term poor and income support dependent differ from those who are not, including families with low incomes from work? If the children of income support recipients are more likely to experience unemployment, lone parenthood and other misfortunes in later life, what are the factors that might reduce these risks?

In the Department of Family and Community Services, we have just begun a long-term research project to attempt to answer some of these questions. This paper provides some background to the issues and outlines the initial phases of our research program.

Trends in the labour market and poverty

Australians hold strongly to notions of egalitarianism. We pride ourselves on our capacity to provide relatively equal opportunities for all. In such a society, the life chances of children should not be affected unduly by the education, employment and income support experiences of their parents.

In the not too distant past (1973-74), we were world leaders in social mobility (Erikson & Goldthorpe 1992, cited in Travers & Richardson 1993). Since the early 1970s, however, there have been a number of economic and social developments that threaten our sense of egalitarianism and may have eroded the extent of social mobility in this country. These include:

Similar trends have been observed in a number of other countries (Scherer 1997).

Partly as a consequence of these trends, there has been a large increase over the past two decades in the numbers and proportions of Australian children living in households that are workless and/or reliant upon income support.

These data could be interpreted as showing a substantial increase in the extent of income support dependence and worklessness in this country. Such a conclusion is by no means straightforward and would need to be qualified in a number of ways. For example, the figures relate only to one point in time and do not therefore indicate the extent of longer-term worklessness and income support reliance. Among the income support recipient families, many have substantial income from paid work. Nevertheless, it seems clear that an increased (and perhaps still increasing) proportion of Australian children spend at least part of their childhood in families with low income.

What we do not know is how many experience long periods of poverty or how their life chances are affected by that poverty. At an OECD conference in November 1996, Professor Gosta Esping-Andersen (1997: 64) summed it up in this way:

It is undeniable that bad jobs, low pay, unemployment, and poverty afflict more and more people. Yet if people’s experience of marginality and want is only temporary, life chances will probably not be seriously impaired. Indeed, if systematic entrapment can be avoided, low-end ‘lousy’ jobs may even be socially beneficial, because they provide easy labour market entry for young people, immigrants and women. We face a crisis of polarisation only if the losers of today are losers for life, and if they pass their underprivilege on to the next generation.

Unfortunately, we do not yet have in Australia the longitudinal data that we need to answer these questions. There is a fairly large US literature based primarily on two major longitudinal surveys — the Panel Study of Income Dynamics (PSID) begun in 1968 and the National Longitudinal Survey of Youth (NLSY) begun in 1979. While we do not assume that the findings from these surveys can be simply generalised to the Australian situation, they offer some indications of what we might expect to find here.

The American experience

The US data generally show that there is both considerable movement into and out of poverty and some persistence in poverty. Summarising the first ten years of the PSID (roughly the 1970s), Duncan (1984: 41) found that almost a quarter of the survey population had been poor in at least one of those years, but far fewer were long-term poor. Only about one in twenty had been poor for at least five years and fewer than one in a hundred for all ten years. He defined as persistently poor those who had been poor for eight or more years — these amounted to between two and a half and five per cent of the survey population, depending on the definition of poverty used.

Figures for welfare receipt (defined broadly to include food stamps as well as the various income support programs) followed a broadly similar pattern. Again, these showed about a quarter of families receiving some form of welfare support in at least one of the ten years, but much smaller proportions as long-term recipients. Furthermore, the figures for welfare dependency (that is, having been dependent on welfare for more than half of family income) were substantially lower than those for receiving any level of support. Only about nine per cent of the survey population had been substantially dependent on welfare for at least one year in the past ten and two per cent were persistently welfare dependent (Duncan 1984: 74-78).

These figures suggest that persistent poverty was not especially widespread in the US, at least in the 1970s. Such persistent poverty as there was, however, was ‘heavily concentrated into two overlapping groups: black households and female-headed households’ (Duncan 1984: 48). Some researchers have suggested that increasing rates of lone parenthood since the 1960s and 1970s could well mean that persistent childhood poverty is now more prevalent than the earlier data would suggest (Corcoran & Chaudry 1997:49).

So what does the American research tell us about the outcomes for children who grow up in poor and/or welfare-recipient households? In a recent survey of the poverty literature, Corcoran and Chaudry (1997) report that:

Studies of welfare receipt across generations have also found that the children of welfare recipients are more likely to receive welfare as adults than are the children of non-recipients. A number of researchers (eg Rainwater 1987, McLanahan 1988) have found that daughters of welfare recipients were more than twice as likely to receive welfare themselves than the daughters of non-recipients. Gottschalk (1992), in a review of the evidence, criticised most of these studies for not controlling for the correlation between welfare receipt and low income. Nevertheless, his own analysis of the data led him to conclude that ‘mother’s participation is significantly correlated with both early births and daughter’s participation in AFDC, even after controlling for family background and income as well as a host of other observed characteristics’ (Gottschalk 1992: 268).

This does not necessarily mean that most daughters of welfare recipients go on to become welfare recipients themselves. Duncan (1984: 91) found that ‘most adult children from welfare families were not receiving welfare income themselves, and most of the adults who were receiving welfare income did not come from welfare households’.

Gottschalk, McLanahan and Sandefur (1994: 102-106) report data from four longitudinal surveys on the longer-term effects on children of growing up in a non-intact family. They focused on three ‘high risk’ life events that increase the probability of poverty and welfare dependence in adulthood. They found that, compared with young people from intact families, those from non-intact families were:

These effects were consistent across racial groups and socio-economic classes. About half of the difference between the groups was explained by differences in family income and the remainder by other factors, such as parental behaviours and residential mobility. They conclude that ‘family structure has a moderate causal effect on children’s lifetime income’ (Gottschalk, et al 1994: 105), but stress, once again, that only a minority of children from both intact and non-intact families experience these high risk life events.

By and large, researchers have not found that specific psychological and attitudinal factors are important, with the possible exception of attitudes to schooling (Plotnick et al 1998, Harris 1997). This suggests that unfavourable attitudes are not the primary vector for transmission of intergenerational disadvantage.

The Australian evidence

Australian evidence on these issues is sketchy and incomplete. We have no large-scale longitudinal datasets from which to draw the kinds of conclusions that are possible from the US data. Nevertheless, there is some evidence of similar patterns of intergenerational correlation here.

We do know that young people from low socio-economic status (SES) groups are significantly less likely than those from higher SES groups both to finish secondary school and to take up post-secondary education (Chapman 1992, RHEFP 1998). This disadvantage does not, however, appear to extend to rates of completion of post-secondary qualifications. Among those who proceed to further education, students from low SES backgrounds have similar success and retention rates to other students (RHEFP 1998: 92). In the light of this evidence, the Review of Higher Education Financing and Policy (the West Report) recommended earlier this year

That governments make every effort to ensure that virtually all young people proceed to the end of secondary education in order to open up possibilities in later life for participation in postsecondary education (RHEFP 1998: 93).

Australian Bureau of Statistics (ABS) data show that young people whose parents are not in work have lower labour force participation rates and higher unemployment rates than young people with at least one parent in work. The 1992 Survey of Families (ABS 1994) collected data on the labour force status of parents and any young people aged 15-24 who were living at home. Table 1 summarises the results.

The lowest participation rates were found among young people from families with no parental employment, with the exception of young people whose parents were both outside the labour force. Young people without a parent in work were one and a half to two times more likely to be unemployed than young people with at least one parent in work.

Table 1: Labour force status of young people aged 15-24 and living with parent(s) by parental labour force status, 1992

 

Family type and parental labour force status

Labour force status of young person

Participation rate
(%)

Unemployment rate
(%)

Couple families
Both parents employed


71.7


17.7

One employed, one unemployed

70.8

20.3

One employed, one not in the labour force

71.3

20.2

Both parents not in the labour force

72.9

30.6

Both parents unemployed

56.5

32.4

One unemployed, one not in the labour force

53.0

41.2

All young people in couple families

70.7

20.1

One parent families
Parent employed


69.0


28.2

Parent unemployed

55.7

33.5

Parent not in the labour force

59.0

42.9

All young people in one parent families

64.5

32.7

Source: ABS 1994

More recently, the ABS Survey of Employment and Unemployment Patterns (SEUP) collected information from a group of jobseekers over a period of several years. It showed that young people with one or both parents in work were significantly more likely to have found stable employment over a one-year period than young people whose parents were not in work. In these data, father’s employment appears to be have been more influential on young people’s employment outcomes than mother’s (ABS 1998: 106).

The Negotiating the Life Course data set

We have recently begun to analyse data collected from a group of young people aged 18 to 24 by the Australian National University (ANU) as part of the Negotiating the Life Course survey. As well as basic demographic variables, this survey provides information on respondents’ educational attainment, employment histories since age 15, current or most recent occupation and current (ie at the time of data collection) receipt of income support payments. It also contains information on the educational attainment and occupations of parents and for mothers a summary measure of the extent of labour force attachment during the respondent’s childhood.

The data set contains 293 records, 36 from young people who were receiving primary income support at the time of the survey. Characteristics of the young people in the sample and their parents are summarised in Appendix 1.

These data should be interpreted with caution for a number of reasons.

Nevertheless, our initial analysis has found a number of significant correlations and others that warrant further research.

Personal factors

Personal factors that may be expected to increase the probability of a young person receiving income support include low educational attainment, inadequate labour force attachment and having had a child, particularly at a young age. We have found significant correlations between respondents’ educational attainment and their occupational skill levels, probability of employment and income support receipt. These confirm the apparent importance of completing secondary school.

Family background factors

This data set provides some evidence of correlations between the educational attainment and employment experiences of parents and those of their children.

Unemployment payment vs parenting payment

Of the 36 income support recipients, 22 received an unemployment payment and 14 a parenting payment. While there were some differences between the two groups in terms of parental characteristics, the findings were somewhat contradictory.

Growing up in a lone parent family

Only 18 of the respondents apparently grew up in a lone parent family. Seventeen of these lived with their mothers. Because of the very small number, findings from this group are indicative at best.

In summary, these data suggest that there may be similar factors at work in Australia to those found in the US. In particular, they appear to confirm that completion of secondary school ‘protects’ young people against worklessness and income support receipt and that the children of secondary school completers are more likely to complete school themselves. They also suggest that the daughters of lone parents are more likely to become parents at a young age and to receive income support as a result. However, because the data do not allow us to identify very precisely the degree of parental labour force attachment (especially for fathers) or to positively identify which parents received income support themselves, we cannot tell from this data set how important these factors might be.

Planned Departmental research

The next phase of our research is designed to add some more pieces to the puzzle. In it we will seek answers to the following questions:

Research methodology

We are planning to construct a data set consisting of young people who turned 16 during a specified month in 1996. These will be drawn from family allowance records, which represent all but the highest income quartile of Australian families. The data set will therefore contain young people from three main groups of families:

The second and third groups are quasi-control groups, since they will contain some families who have previously (even recently) received income support. Data on these families will be drawn exclusively from their family allowance records.

For young people in families where at least one parent receives a pension or allowance, data from the family allowance record will be combined with data from the parents’ income support records. Variables that we hope to be able to capture include details of current (and possibly previous) income support episodes, recent labour force attachment and earnings history and duration of lone parenthood (where applicable). From these we should be able to distinguish degrees of income support dependence among this group — particularly between those families (whether two parent or lone parent) who are wholly reliant on the social security system and those where parents combine paid work and income support to a greater or lesser extent. A list of proposed data items is at Appendix 2.

The final, most important, part of the data set will consist of the young people’s income support history over the two years until their 18th birthday. This information will be obtained by a data-matching process against family allowance and income support files and is designed to identify those young people who access mainstream income support in their own right before the age of 18.

We have targeted this age bracket for two main reasons.

This phase of the research is about the what questions. Its primary purpose is to quantify the extent of intergenerational income support receipt in Australia. We hope it will tell us how many young people actually follow their parents into the income support system at an early age, and something about how they differ from others who do not follow that route. It should point to a number of factors that will bear further investigation.

This first phase of the research should enable us to make a judgement about whether we have in Australia a significant problem of intergenerational poverty and disadvantage. If we decide that we do, we will need to do more research to help us understand why and how the phenomenon occurs. In the longer term, we would aim to use this understanding to inform the development of policy responses to the issue across all relevant portfolios and levels of government.

Conclusion

In recent decades, rising rates of unemployment and sole parenthood have seen a growth in Australia of income support receipt by families with dependent children. This has led to concern about the possible adverse effects that extended joblessness and/or income support reliance by parents may have on the life chances of their children. Evidence from the US suggests that the children of income support recipients are more likely than other young people to drop out of school early, make a poor transition to the workforce and/or become parents at an early age. These events, in turn, increase the likelihood of them receiving income support.

While there is Australian evidence of correlations between the educational attainment and employment experiences of parents and those of their children, we do not yet know how these affect longer-term life chances. Nor do we know whether or how the income support system is involved. Clearly there are many questions yet to be asked and answered. We hope that over the next year or so, we will be able to add considerably to the sum of knowledge on this topic in Australia.

 

REFERENCES

Australian Bureau of Statistics (ABS), 1994, Focus on Families: Education and Employment, Cat No 4421.0, ABS, Canberra

ABS, 1997, Labour Force Status and Other Characteristics of Families, June 1997, Cat No 6224.0, ABS, Canberra

ABS, 1998, Australian Social Trends, Cat No 4102.0, ABS, Canberra

Chapman, B, 1992, AUSTUDY: Towards a More Flexible Approach, Australian Government Publishing Service (AGPS), Canberra

Corcoran, M & Chaudry, A, 1997, ‘The dynamics of childhood poverty’, Children and Poverty, Vol 7 No 2, pp 40-54

Danziger, S, Sandefur, G & Weinberg, D, 1994, Confronting Poverty: Prescriptions for Change, Harvard University Press, Cambridge

Duncan, G, 1984, Years of Poverty, Years of Plenty: The Changing Economic Fortunes of American Workers and Families, University of Michigan, Ann Arbor

Erikson, R & Goldthorpe, J, 1992, The Constant Flux: A Study of Class Mobility in Industrial Societies, Clarendon Press, Oxford

Esping-Andersen, G, 1977, ‘Welfare states at the end of the century: the impact of labour market, family and demographic change’ in OECD, Family, Market and Community, OECD, Paris, pp 63-80

Gottschalk, P, 1992, ‘The intergenerational transmission of welfare participation: facts and possible causes’,Journal of Policy Analysis and Management, Vol 11 No 2, pp 254-272

Gottschalk, P, McLanahan, S & Sandefur, G, 1994, ‘Dynamics of poverty and welfare participation’ in Danziger, S, Sandefur, G & Weinberg, D, 1994, Confronting Poverty: Prescriptions for Change, Harvard University Press, Cambridge

Harris, K, 1997, Teen Mothers and the Revolving Door, Temple University Press, Philadelphia

McLanahan, S, 1988, ‘Family structure and dependency: early transitions to female household headship’, Demography

Organisation for Economic Co-operation and Development (OECD), 1997, Family, Market and Community: Equity and Efficiency in Social Policy, OECD, Paris

Plotnick, R, Klawitter, M & Edwards, M, 1998, Do Attitudes and Personality Characteristics Affect Socioeconomic Outcomes? The Case of Welfare Use by Young Women, Discussion Paper No 1161, Institute of Research on Poverty, University of Wisconsin-Madison

Rainwater, L, 1987, Class, Culture, Poverty and Welfare, Center for Human Resources, Heller Graduate School

Review of Higher Education Financing and Policy (rhefp), 1998, Learning for Life: Final Report, AGPS, Canberra

Scherer, P, 1997, ‘Socio-economic change and social policy’ in OECD, Family, Market and Community, OECD, Paris, pp 13-61

Travers, P & Richardson, S, 1993, Living Decently: Material Well-being in Australia, Oxford University Press, Melbourne

 

APPENDIX 1

NEGOTIATING THE LIFE COURSE SURVEY — RESPONDENT CHARACTERISTICS

Characteristic

No

%

Gender (n=293)

   

Male

132

45

Female

161

55

Age

   

18

42

14

19

39

13

20

47

16

21

34

12

22

40

14

23

51

17

24

40

14

Country of birth

   

Australia

248

85

Other English speaking country

17

6

Non-English speaking country

28

10

Income support status

   

Unemployment payment

21

7

Parenting payment

15

5

AUSTUDY

27

9

No income support

230

78

Age at first birth

   

Under 18

5

2

19 to 20

12

4

21 to 22

8

3

23 to 24

7

2

No children

261

89

Educational attainment

   

Still at school

11

4

Incomplete secondary school

59

20

Completed secondary school

127

43

Post-secondary qualification

96

33

Worked last week (fortnight?)

213

73

Occupational skill level (n=212)

   

1 (least skilled)

70

33

2

66

31

3

36

17

4

19

9

5 (most skilled)

21

10

 

APPENDIX 1

NEGOTIATING THE LIFECOURSE SURVEY - CHARACTERISTICS OF RESPONDENTS’ PARENTS


Characteristic

Mothers

Fathers

No

%

No

%

Educational attainment

(n=280)

 

(n=271)

 

No schooling

1

0

3

1

Primary school

10

4

11

4

Incomplete secondary school

133

48

108

40

Complete secondary, no post-school qualifications

60

21

42

15

Trade certificate/diploma

37

13

57

21

Tertiary qualification(s)

39

14

50

18

Father’s employment history

   

(n=274)

 

Employed

   

269

98

Never employed

   

5

2

Mother’s employment history

(n=292)

     

Never worked

106

24

   

Employed less than half recipient’s childhood

114

29

   

Employed more than half recipient’s childhood

171

46

   

Mother’s employment intensity

(n=219)

     

Almost always part-time

66

30

   

Some part-time/some full-time

60

27

   

Almost always full-time

93

42

   

Occupational skill level

(n=218)

 

(n=260)

 

1 (lowest)

52

24

26

10

2

56

26

52

20

3

36

17

61

23

4

22

10

29

11

5 (highest)

52

24

92

35

 

APPENDIX 2

Possible data items for intergenerational data set drawn from social security records

Data on parent(s)

Age

Gender

Marital status and history

Number of children (dependent and non-dependent)

Age at birth of first child

Previous income support episodes - payment type, payment duration, cessation reason

Current income support episode — payment type, payment duration

Earned income

Child support income

Total non-DSS income

Home ownership indicator (owner/purchaser/non-owner)

Rent type (non-home owners)

Country of birth

Customers born overseas - date of arrival, preferred language

Postcode

Data Items — child

Family allowance category (immediately before age 16)

Gender

Position in family (Only/oldest/youngest/middle)

Rate of payment (at home/away from home)

Independence indicator

Marital status and history

Number of children (at age 18)

Age at birth of first child

Age first accessed income support

Each episode of income support - payment type, payment duration, cessation reason

Earned income

Child support income

Total non-DSS income

Home ownership indicator (Owner/Purchaser/Non-owner)

Rent type (non-home owners)

Country of birth

Customers born overseas - date of arrival, preferred language

Postcode


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