Family finances under the ‘new familism’

The IPA Review has published an article by me on what I call the ‘new familism’. The article tracks how since the 1970s the left and right have each developed their own ideologies of the family. Despite significant differences of intellectual justification and policy detail, left and right converge on significantly increased state support for people with children.

The table below from the latest HILDA statistical report highlight just how much those with dependent children improved their financial position in the 2000s.

The figures are equivalised disposable income, which takes account of how many people live in the household. It recognises that while additional people in a household add costs, there are also economies of scale in living together and that typically children have lower consumption needs than adults. Equivalisation allows us to directly compare the financial resources of different types of households.

Though these figures show that children still cost their parents money compared to the clearest alternative available to them (non-elderly couple, though this would include ’empty nesters’ so age partly explains the $$$ difference), the gap narrowed significantly between 2001 and 2007. In 2001, families with dependent kids were 25% worse off in financial resources per person than a couple without kids. By 2007, that had dropped to families with dependent kids being 11% worse off.

There is no income breakdown showing to what extent these figures are driven by government handouts to families, but I’d guess that this is the major factor. An element of conservative familism is that families maintain their class position despite the cost of kids – Abbott’s maternity leave policy is an example of this. But it looks like the Howard government had already made significant moves towards achieving this conservative goal.

9 thoughts on “Family finances under the ‘new familism’

  1. Actually Andrew I think that government support for families is likely to be a relatively small part of this, but most of it is stronger higher real wages in the period.

    Some colleagues and I are doing a paper for the AIFS conference and what we find is that the average market incomes of the fifth decile of persons of working age – not quite the median but close to it – increased by $146 per week in real terms while transfers to the fifth decile increased by less than $20 per week in real terms.

    Proportionately the increase in transfers was higher than the increase in market incomes, but the increase in market incomes is nearly 8 times as much in money terms as the increase in transfers.

    Also, the increase in mens wages was close to $90 per week for the middle decile, and in dollar terms was the most important contributor to higher incomes.


  2. Do you know why singles without dependent children did so much better than couples without dependent children?


  3. Peter – Are people with kids more likely to be in a particular decile of market income? The puzzle is why households with seemingly similar earning capacaties did so differently – especially the huge contrast between non-elderly couples with and without kids. In percentage terms lone parents with kids increased their income by twice as much as non-elderly lone persons without kids, though the absolute difference is not so large.

    Unless we assume that the market (accidentally) gave much greater rewards over this time period to the groups of people who are more likely to have kids, which seems on the surface to be unlikely, the main explanations are transfers or changed labour market participation and/or hours of work. The sums of money involved in FTB are so huge that they cannot not be making a difference.

    Did women with kids increase their hours? Did women without kids decrease their hours? (According to EMTR theory, it should be the other way around).

    Rajat – The Howard government was generous with lone parents (FTBs A and B) plus it pressured them back into paid work. They are still the worst off in the non-elderly population because of their high rates of welfare dependence, but have a large % increase off a low base. Singles without kids have relatively low rates of welfare dependence and presumably were already mostly working FT in 2001, so less scope for increasing their incomes via work.


  4. Andrew

    Lone parents did particularly well in relative terms – starting from a very low base – because they had large increases in real transfers but also because their employment rate increased very significantly.

    My general approach is that if you want to understand trends in aggregate (i.e. average or median) income then you need to look at large groups and large income sources,

    Small changes in large numbers are usually more significant then large changes in small numbers.


  5. Andrew my theory on the difference in growth between couples with and without kids is that those with kids are working increasing hours because they need the money. Couples without kids are much more likely to have excess cash and therefore could make lifestyle decisions about their employment (e.g. do something fulfilling that doesn’t pay big $). Those with kids are more likely to be in the position of having to go for the money.


  6. Andrew, I meant to get your thoughts on the reason for the difference between “Non-elderly couple” (4% increase)and “Non-elderly lone person” (14.9% increase).


  7. A related issue that requires more analysis is the role of demographic and cohort changes.

    For example, one of the most remarkable income changes over the last 10 years is that the proportion of households with a head aged 55 to 64 years saw their rates of welfare receipt drop by around half.

    Some of this is likely to be due to government policy changes, but it is also because the cohort of 55 to 64 year olds now have different characteristics then the cohort did 10 yeras ago – more likely to have higher education, more likely to be two-earner couples and many entered the labour market in favourable times.


  8. Rajat – Poorly educated men are more likely to be single and to do badly in the labour market, so perhaps they benefited from improved economic conditions. The difference between the dole and even the minimum wage is a lot. But in the absence of further explanation I find some of these differences hard to believe. The HILDA sample is big – about 7000 households – but maybe we are getting sampling problems.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s