Employment is not the only solution to ending persistent poverty: study

A new University of Melbourne report on income poverty dynamics finds employment is not the best way to pull all Australians out of poverty.

Conducted by the Melbourne Institute: Applied Economic & Social Research with the support of the Paul Ramsay Foundation, the study found persistent poverty remains a significant phenomenon in Australian society, with 13 per cent of the population deemed persistently poor, defined as persistently having an income less than 60 per cent of the median income.

Using 19 years of data between 2001-2019 from the longitudinal Household, Income and Labour Dynamics in Australia (HILDA) Survey, report authors Dr Esperanza Vera-Toscano and Professor Roger Wilkins describe the extent and nature of persistent poverty, looking at why people descend into poverty, why some remain trapped there, how others escape, and what the risks for poverty re-entry are.

“Looking back over the first two decades of this century, we find that poverty is not simply a temporary or transitory experience in Australia, highlighting the continuing policy imperative of tackling persistent disadvantage in the Australian community,” Dr Esperanza Vera-Toscano said.

“A person’s household success in the labour market is critical to their experience of poverty. An increase in the number of employed people in the household is strongly associated with poverty exit, and a decline in household labour earnings increases the risk of poverty entry by over 50 per cent, contributing to over one-third of all entries into poverty in Australia.

“There is also a strong association between (lack of) work and the risk of persistent poverty. Policy measures geared towards increasing employment, and retaining employment for those already employed, are key to reducing persistent poverty.”

However, the authors note that employment is not the only factor of importance. Changes in family disposition, particularly the formation of a single-parent family, increases the risk of poverty entry.

“Who you live with, what they do, and what happens to them are important. Thus, the household perspective is critical to understanding poverty and designing appropriate policy responses.” Professor Wilkins said.

Additionally, the report found that the onset of disability or substantial caring responsibilities were strongly predictive of poverty entry and poverty persistence.

“Put simply, those who are more likely to experience persistent poverty tend to be constrained in their ability to participate in the labour force. Therefore, focusing only on labour market-related anti-poverty policy measures is not enough,” Professor Wilkins said.

Assistance including child care support and disability care services are vital to improving labour participation for those restricted by caring responsibilities. But for a significant number of people, income support will continue to determine their living standards.

“The unavoidable conclusion is that boosting income support payments beyond their current austere levels remains a crucial pillar of policy for governments genuinely committed to reducing persistent disadvantage,” Professor Wilkins said. Read the full report here.

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Sarah Corridon