Australian Institute of Family Studies Research Paper No. 37

Appendix A

The income support system 2002

This is a description of the income support system as it was during November and December 2002 - the period over which the FAWD 2002 survey was conducted. The source of information on payments is the Centrelink publication A Guide to Commonwealth Government Payments, 20 September-31 December 2002.

The Family Tax Benefit Part A (FTB A) basic fortnightly payment rates were $126.70 for each child under 13 years of age, $160.72 for each child aged 13 to 15 years, $40.74 for each child aged 16 to 17, and $54.74 for each child aged 18 to 20 years and each dependent full-time student aged 21 to 24. Payments were reduced by 30 cents for each dollar of fortnightly income above $1,184.85 until the base rate ($40.74 for each child under 18 years and $54.74 for each child aged 18 to 24 years) was reached. Income above $3,063.19 per fortnight (plus $3,212 for each eligible child after the first) further reduced base rate payments by 30 cents for every dollar until payments were nil.

The Family Tax Benefit Part B (FTB B) was paid at the full rate of $108.78 per fortnight for families with their youngest child aged under 5 years, compared to $75.88 for those with their youngest child aged 5 to 18 years (those aged 16 to 18 had to be full-time students). For couple families, receipt of FTB B is subject to income testing of the secondary earner's income. The secondary earner could only earn up to $67.38 per fortnight before payments were reduced at the rate of 30 cents to the dollar. Families still received a reduced rate of FTB B if the secondary earner's earnings remained below $431 per fortnight for those with their youngest child aged less than 5 years, or below $321.04 per fortnight for those with their youngest child aged between 5 and 18 years. There is no income test on the primary earner's income so, in the case of sole parents, the payment is universal.

The Parenting Payment was introduced in March 1998, incorporating the previous Sole Parent Pension and Parenting Allowance. It has two main streams:

• Parenting Payment (single), which is payable to lone parents under pension rates and conditions, with the maximum payment ($429.40 per fortnight) equal to the Age Pension (single), and the income test (by which earned income over $116 per fortnight plus $24.60 per child reduced payment) equal to that for all pensions; and
• Parenting Payment (partnered), which is payable to partnered parents under allowance rates and conditions, with a maximum payment in 2002 of $338.10 per week. It is taxable, income-tested on the income of both the claimant (earned income over $62 per fortnight reduced the payment) and the partner (earned income over $568 per fortnight reduced the payment), and is assets tested.

Parenting Payment is a very important payment, as virtually all very low-income lone mothers receive it in one form or the other, as do many other mothers whose husbands are in low paid work. For couples with children, where the male partner (usually) is receiving an unemployment payment, the female partner is likely to be receiving the Parenting Payment (partnered).

To qualify for Parenting Payment, a person must care for a dependent child or children aged under 16 years, have income and assets under certain amounts, and have been an Australian resident for at least two years; or be a refugee; or have become a lone parent while an Australian resident.

Appendix B

Difference between target gross hourly wage and reservation gross hourly wage

Figure B1

Appendix C

Descriptive statistics and estimates of the determinants of hourly wages

Table C1 Summary statistics

	Mean (n = 1108)	Standard deviation
Age	40.1	7.5
Age squared	1664.3	580.7
Less than year 10	0.051	0.221
Year 10	0.142	0.349
Year 11	0.065	0.247
Vocational or trade qualification	0.329	0.470
Diploma	0.132	0.338
Degree	0.165	0.371
Respondent has poor health	0.069	0.254
NESB migrant	0.062	0.242
ESB migrant	0.116	0.320
Regional area	0.421	0.494
Remote area	0.014	0.116
ACT	0.020	0.140
NT	0.005	0.073
QLD	0.197	0.398
SA	0.081	0.273
TAS	0.027	0.162
VIC	0.264	0.441
WA	0.064	0.245

Table C2 Estimates of determinants of gross hourly wage, OLS model

	Coefficient (n = 1108)	T-stat
Age	0.001298	0.11
Age squared	0.000023	0.14
Less than year 10	-0.136	-2.95
Year 10	-0.031	-0.83
Year 11	-0.092	-1.93
Year 12 (omitted category)
Vocational or trade qualification	-0.001	-0.04
Diploma	0.073	1.71
Degree	0.245	6.27
Respondent has poor health	-0.093	-2.24
NESB migrant	-0.031	-0.77
ESB migrant	-0.044	-1.38
Born in Australia (omitted category)
Regional area	-0.068	-3.32
Remote area	-0.191	-2.74
Major city (omitted category)
ACT	-0.046	-0.56
NT	0.095	1.04
QLD	-0.054	-1.99
SA	0.020	0.50
TAS	0.047	0.77
VIC	-0.035	-1.33
WA	0.040	0.80
NSW (omitted category)
Constant	2.693	12.25
R-squared	0.1307

Notes: The dependent variable is the natural log of gross hourly wage. The self-employed are excluded from the estimates. Also excluded are respondents earning less than $3 per hour (6 respondents) and those earning more than $200 per hour (1 respondent).