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4102.0 - Australian Social Trends, 1999  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 24/06/1999   
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Contents >> Income & Expenditure >> Income Distribution: Lower income working families

Income Distribution: Lower income working families

Lower income working families are typically families with one earner and young children. Many of them are also families with less skilled workers.

Families with relatively low living standards are of concern to government and non-government organisations that aim to minimise the effects of relative poverty on the wellbeing of families. Low income is commonly associated with people who do not have jobs and who are consequently largely dependent on pensions and benefits provided by the social security system. However, there are also working families with low income whose resources are supplemented by government and welfare organisations. Identifying the types of families with relatively low living standards (measured using income) and their employment characteristics provides insights into those families in greatest need of support.

One commonly used method to identify families likely to have relatively low living standards is to examine those with relatively low incomes. By ranking families according to their equivalent income (see box) and selecting those at the bottom of the distribution, the circumstances of those with limited economic resources can be compared with those who are better off. In this review, those in the lowest two quintiles (40%) of the equivalent income distribution are compared with those at the higher end of the distribution.

In 1996-97, 30% of all families (excluding those with business interests) received a government pension or benefit as their largest single source of income. Most (86%) of these families had an equivalent income which placed them in the lowest two quintiles (40%) of the income distribution of all families. However, also among those in the lowest two quintiles of the equivalent income distribution were 470,000 working families (families whose principal source of income was from wages and salaries). These families represented 12% of all families (excluding those with business interests) and 30% of those in the lowest two quintiles of the income distribution of all families.


Identifying lower income families

This analysis is based on income data collected by the ABS in the Survey of Income and Housing Costs, 1996-97.

Families (actually family income units) are defined as a group of related persons within a household whose command over income is assumed to be shared. Income sharing is assumed to take place between married (registered or de facto) couples, and between parents and dependent children.

Because stated business income does not necessarily reflect living standards, family income units including a partner who has business interests have been excluded.

Dependent children are those aged less than 15 years, or 15-24 and both studying full-time and living with parent(s) and who do not have a spouse or offspring of their own living with them.

Working families have been defined as those whose principal source of income came from wages and salaries (excluding families with business interests).

Lower income working families
are those whose income fell in the two bottom equivalent income quintiles (lowest 40%) for all families.

Medium to high income working families
are those whose income fell in the top three equivalent income quintiles for all families.

Principal source of income is that source from which most income is received. This can represent less than 50% of income.

Principal earner in a couple is the partner who earned the most income from wages and salary.


Equivalent income

Lower income families have been identified on the basis of their equivalent income rather than actual income. Equivalent income adjusts actual income on the basis of the income unit's characteristics, such as size and composition, to allow the standard of living of different family types to be compared. For example, this adjusts for the difference that would exist in the standard of living between a couple with children and a couple without children who both receive the same combined income. Henderson Equivalence Scales have been used (for further information see Australian Social Trends 1998, Poverty: different assumptions, different profiles).

FAMILIES(a) IN EQUIVALENT INCOME QUINTILES, BY PRINCIPAL SOURCE OF INCOME, 1996-97

Lower income
Medium to high income
Total


First
Second
Third
Fourth
Fifth
Principal source of income
'000
'000
'000
'000
'000
'000

Wages and salary
138.4
331.4
562.8
710.8
729.4
2,472.8
Government pensions and allowances
581.7
426.3
143.6
24.2
* *
1,176.5
Investments(b)
52.3
29.8
83.9
54.8
59.9
280.8
Total
772.5
787.5
790.3
789.7
790.1
3,930.0

(a) Excludes all families with business interests.
(b) Includes income from superannuation.

Source: Unpublished data, Survey of Income and Housing Costs, 1996-97.


Mainly one-earner families with young children
The level of earnings from paid work can be related to a person's age and work experience, as well as a range of other factors. Within families, involvement in paid work (especially for mothers) can also be limited by the need to care for young children. Because limited work experience and early child rearing often coincide, their combined impact on the family's income can be substantial. In 1996-97, just over half (52%) of lower income working families had only one employed partner and a youngest child aged under 10 years.

As well as having a younger age profile, families with low equivalent income were larger than those with medium to high income (an average of 3.8 people compared to 3.0 people). This reflects the fact that larger families tended not to have the higher income needed to support the same standard of living as smaller families.

Altogether, just over three quarters (77%) of lower income working families were couple families with dependent children - in 61% of these families the youngest child was under 5 years old. In contrast, couple families with dependent children represented 51% of medium to high income working families - in 37% of these families the youngest child was under 5 years old.

Involvement of both partners in paid work is becoming the social norm (see Australian Social Trends 1997, Families and work). Overall, 78% of lower income working families with dependent children had only one partner working, compared to 30% of medium to high income working families with dependent children. Lower income working families whose youngest dependent child was under 5 years old were least likely to have two earners (17%), while those families in which the youngest dependent child was aged 10-24 years were most likely to have two earners (36%).

FAMILY TYPE PROFILE OF WORKING FAMILIES, 1996-97

Lower income
Medium to high income


Number
of Families
Average
family size
Average
weekly gross
income(a)
Proportion with one earner
Number
of Families
Average family size
Average weekly gross
income(a)
Proportion with one earner
Family type
'000
persons
$
%
'000
persons
$
%

Couple only
83.4
2.0
398
87.8
866.2
2.0
1,189
28.1
Reference person aged under 45
26.9
2.0
437
86.7
359.0
2.0
1,296
11.7
Reference person aged 45 or over
56.5
2.0
380
88.4
507.2
2.0
1,113
39.8
Couple with dependants
362.6
4.3
617
78.0
1,021.9
3.9
1,276
29.9
Youngest child aged 0-4 years
219.5
4.4
621
82.7
374.7
3.9
1,178
45.9
Youngest child aged 5-9 years
79.6
4.5
629
76.5
238.0
4.1
1,272
27.2
Youngest child aged 10-24 years
63.5
3.9
591
63.5
409.1
3.6
1,369
16.8
One-parent families
23.9
2.9
459
100.0
114.9
2.4
714
100.0
Total working families
469.8
3.8
570
80.9
2,002.9
3.0
1,206
33.2

(a) Average income before adjusting for different family size and composition.

Source: Unpublished data, Survey of Income and Housing Costs, 1996-97


Couple-only working families were generally less likely to have lower equivalent incomes. Couple-only families comprised 18% of lower income working families compared to 43% of medium to high income working families. Once again, those couple-only working families with lower income, predominantly had only one earner (88%) whereas among families that were in the medium to high income group, two earner families predominated (72%).

Among couple-only working families, those with lower incomes tended to be older than those with medium to high incomes. Of those with lower incomes, 68% were couples in which the reference person was aged 45 years or older, while among medium to high income earners, the proportion was 59%.

Lone parents who were working and had lower equivalent incomes were slightly more likely to be working part-time (38%) than lone parents who had medium to high equivalent incomes (30%). They also tended to have more children (an average of 1.9 compared with 1.4).

DISTRIBUTION OF EMPLOYMENT ARRANGEMENTS IN WORKING FAMILIES, 1996-97

Lower income
Medium to high income


Couple only
Couple with children
One-parent family
Couple only
Couple with children
One-parent family
Working arrangements
%
%
%
%
%
%

One earner
87.8
78.0
100.0
28.1
29.9
100.0
    Full-time
68.1
69.3
62.4
25.7
28.8
70.5
    Part-time
19.8*
8.7
37.6
2.4
1.2
29.5
Two earners(a)
12.2*
22.0
. .
71.9
70.1
. .
    Both full-time
5.8*
4.9*
. .
48.7
30.4
. .
Total
100.0
100.0
100.0
100.0
100.0
100.0

(a) Includes those families in which one or both partners worked part-time.

Source: Unpublished data, Survey of Income and Housing Costs, 1996-97.


What jobs do they do?
People working in high-skill jobs generally earn more income than those in less-skilled jobs. As might be expected, principal earners in lower income working families were more likely to be working in less-skilled jobs than those in higher income working families.

Nearly half (49%) of principal earners in lower income working families had occupations that are classified in the lowest two skill occupation groups (skill levels 4 and 5). These occupations comprise intermediate and elementary clerical, sales or service workers; intermediate production and transport workers; and labourers and related workers. Only a small proportion (14%) of principal earners in lower income working families had occupations that were in the highest skill level (level 1, which comprises managers, administrators and professionals).

In comparison, a third (33%) of principal earners in medium to high income working families had occupations in the lowest two skill levels. A further third (33%) of principal earners in medium to high income working families had occupations in the highest skill level.

OCCUPATION, BY SKILL LEVEL(a), OF PRINCIPAL EARNER IN WORKING FAMILIES, 1996-97

Lower income
Medium to high income
Skill level (occupation groups)
%
%

Skill level 1:
    (Managers and administrators, professionals)
13.9
32.8
Skill level 2:
    (Associate professionals)
10.1
14.9
Skill level 3:
    (Tradespersons & related workers, advanced clerical and service workers)
26.7
19.2
Skill level 4:
    (Intermediate clerical, sales & service work intermediate production and transport workers)
28.5
22.8
Skill level 5:
    (Elementary clerical, sales and service workers labourers & related workers)
20.9
10.4
Total
100.0
100.0

(a) Skill level as classified in the Australian Standard Classification of Occupations (ASCO) 2nd edition.

Source: Unpublished data, Survey of Income and Housing Costs, 1996-97.


Income support for working families with dependent children

The Department of Family and Community Services (formerly Social Security) administers a range of schemes which, subject to income and assets tests, provide financial support to individuals and families.1 The 1996-97 Income and Housing Costs Survey found that family assistance payments and the Parenting Payment were those most commonly received by working families.

Family assistance payments comprise a number of payments made to help with the costs of bringing up children. These include Family Payment, Family Tax Payment, and Maternity Allowance. Most families are entitled to Family Payment at the minimum rate. However, those with low incomes and those receiving other social security pensions and benefits receive a rate greater than the minimum.

Parenting payment gives an independent source of income to the partner who is not in paid work, or only getting a low income and mainly cares for the children. It provides increased choice for parents in balancing work and family responsibilities.


Sources of income other than wages and salaries
Most working families had sources of income other than wages and salaries. Among lower income working families, 77% received some income from government allowances, compared to 39% of medium to high income working families.

The majority (90%) of lower income working families with dependent children received income support through the social security system. The most common types of income support received were family assistance payments and the Parenting Payment. Larger families were more likely to receive support than smaller families. Among families with one dependent child, 84% received government income support which represented an average of 10% of their income. Among families with three or more dependent children, 94% received government income support which represented an average of 17% of their income.

Although a smaller proportion of lower income working couples without dependants received government income support (18%), the contribution it made, on average, to their income was greater (28%).

In 1996-97, 74% of working lone-parent families received income support from family assistance through the social security system. In addition, 23% of working lone-parent families received income from a sole-parent pension.

A small proportion of low-income working families with dependent children were not receiving government income support at the time of the Survey. For these families, their average gross weekly income was lower than that for families receiving support. This could be because of recent changes in the financial or family circumstances of some families in either group. For example, some of the families not receiving income support may recently have had their first child, or may not yet have applied for government support after a recent drop in their income. In some families the children may have been outside the eligibility age range.

GOVERNMENT INCOME SUPPORT FOR LOWER INCOME WORKING FAMILIES, 1996-97

Receiving income support

Proportion
receiving income support
Average weekly gross income
Share of income from support(a)
Average weekly gross income of those not receiving support
Total
Family type
%
$
%
$
'000

Couple only
17.9*
372*
28.0*
404
83.4
    Reference person aged under 45
25.2*
384*
31.0*
455
26.9
    Reference person aged 45 or over
14.4*
362*
25.4*
383
56.5
Couple with dependants
90.5
625
13.3
547
362.6
    With one dependant
84.3
506
9.9
492*
80.2
    With two dependants
91.0
600
11.0
562*
153.2
    With three or more dependants
93.6
719
16.8
607*
129.2
One-parent families
73.5*
475*
17.9*
415*
23.9
Total lower income working families
76.7
607
13.8
450
469.8

(a) Proportion of gross income received as government pensions and allowances.

Source: Unpublished data, Survey of Income and Housing Costs, 1996-97


Endnotes

1 Department of Social Security 1996, DSS Customers: a Statistical Overview, DSS, Canberra.

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