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Income Distribution: Economic resources of older Australians
GROSS WEEKLY INCOME DISTRIBUTION, 1996-97
Level of income
In 1996-97, the average gross weekly income was $242 for older one-person income units and $481 for older couple income units. This was considerably lower than for most other population groups, mainly reflecting their low labour force participation. For example, in 1996-97, the average weekly income of all couple units was $890 and of all one-person units, $391.
The income distribution of older one-person units was very concentrated, with 60% having income in the range of $150-$224 per week. This concentration is associated with the large proportion of older one-person income units who were dependent on the age or service pension.
The distribution of income among older couples covered a wider range than among older one-person units, partly reflecting their slightly more diverse sources of income. Nevertheless, compared with all income units, there was still a high level of concentration at the lower end of the income distribution. Just over one half (51%) of older couple units received income in the range of $225-$374 per week.
OLDER INCOME UNITS BY PRINCIPAL SOURCE OF CASH INCOME, 1996-97
Sources of income
Most older people are not in paid employment. In 1996-97, only 6% of the population aged 65 and over were employed - 10% of males and 3% of females - and half of these worked part-time.1
At that time, the majority (87%) of older income units living in private dwellings received some cash income from government pensions and allowances. This formed the main source of income for 74% of older income units. Older one-person income units were more likely to be receiving cash income from this source than older couples (81% and 65% respectively).
Dependency on government cash benefits increased with age. This was particularly the case for couples, with 58% of 65-69 year old couple units whose principal source of income was from government cash benefits, compared to 78% of couple units aged 85 years and over.
Despite this high dependency on government cash benefits, a considerable number of older income units live on private income. In 1996-97, approximately 8% of older couples were mainly dependent on income from employment in the form of wages and salaries or business income. A further 12% were mainly dependent on superannuation and annuities, and 15% were mainly dependent on property income in the form of interest, rent or dividends. While 7% of older one-person units relied mainly on income from superannuation and 9% from property income, a very small proportion relied on employment income.
Over the coming decades, the effects of the current compulsory superannuation arrangements should increase the proportion of persons of pension age funding their retirement (see Australian Social Trends 1994, Retirement Income).
PROPORTION OF OLDER INCOME UNITS WHOSE PRINCIPAL SOURCE OF INCOME WAS FROM GOVERNMENT CASH BENEFITS, 1996-97
Comparison of living standards
The average income of older income units is relatively low compared to those aged under 65. However, with fewer dependants to support, reduced costs associated with going to work, lower income tax and lower housing costs, many of their expenses are also lower.
If gross cash income is used as a proxy for living standards, it is more appropriate to compare average incomes for units of similar size. Using this comparison, the average weekly cash income in 1996-97 for older couples without children present was 52% of that for couples under 65 years without children present. Older one-person units received 57% of the average gross weekly income of one-person units under 65.
However, these differences in gross income between older income units and those under 65 were not as large when net (i.e. after-tax) income is compared. As a result of the small amount of tax paid by many older units, average net income for older couples without children present was 60% of that of couples under 65 years without children present. Older one-person units received an average net income of 67% of that of one-person units aged under 65.
Older income units have high rates of home ownership. Consequently, they generally have much lower housing costs than younger income units, who are often paying considerable sums of money in mortgage repayments, or paying dwelling rents at market rates.
Other older income units with relatively low housing costs are tenants of public housing (9% of older one-person units in 1996-97) and non-standard accommodation such as living with relatives (10%).
To allow for the effects of different levels of housing costs, net income is often compared after housing costs have been deducted. Using this income measure, the position of older income units relative to younger units improves considerably. In 1996-97, the average net income after deducting housing costs for older couples without children present was 67% of that for couples under 65 years without children present. Older one-person units had an average net weekly income after housing costs of 73% of that of one-person units aged under 65.
INCOME OF OLDER INCOME UNITS RELATIVE TO THAT OF INCOME UNITS AGED UNDER 65(a), 1996-97
Source: Unpublished data, Survey of Income and Housing Costs, 1996-97
The ownership of assets confers advantages on owners, as such assets may be sold or borrowed against to finance an increase in consumption. For most older income units, the major part of their assets are tied up in their homes. The average value of equity of home owners in the older age group was $155,100 in 1995-96 (see Australian Social Trends, 1998, Wealth in the family home).
Some older income units own other property and financial assets, such as those whose main source of income is from interest, rent or dividends, or from superannuation and annuities. There are little official data available on the value of these types of assets for the Australian population.
OLDER INCOME UNITS BY HOUSING TENURE, 1996-97
Income in kind
Living standards are determined not only by cash income and asset holdings. For some people, the value of in-kind and other indirect benefits can provide for a substantial improvement in economic wellbeing. For example, older persons are more likely to benefit from government expenditure on health services provided at little or no cost to the user, (see Australian Social Trends, 1996, Household income redistribution).
Many older people also receive substantial levels of non-cash assistance through pensioner concessions, subsidies and rebates provided by the Australian government, State and local governments and government business enterprises. However, quantifying the value of these benefits to income units is difficult because of lack of data.
1 Australian Bureau of Statistics 1998, Year Book Australia 1998, cat. no. 1301.0, ABS, Canberra.