Working poor in Australia; an analysis of poverty among households in which a member is employed.(Report)

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Currently, both "work" and "family" are key priorities of the Australian Government as, faced with an ageing population and high costs of living, it is grappling with the challenge of promoting increases in both fertility and labour force participation. With this focus, family payments were expanded substantially under the Howard Government (Harding, Vu, Payne, & Percival, 2006) and the promotion of "work-life balance" has become increasingly prominent. However, in 2005-06 almost 390,000 Australians--around 87,000 of whom were children--had incomes below the poverty line, despite having a member of their household employed. This represented nearly one-fifth of all Australians in poverty and 2.7% of all people in households where someone was employed part- or full-time. Using the most recent (2005-06) Australian Bureau of Statistics (ABS) Survey of Income and Housing (SIH), this study assesses the extent of poverty among households in Australia with at least one employed member, and how the characteristics of this group differ from those of all Australian households living in poverty.

In Australia, paid work has traditionally been, and generally remains, a guarantee against being in poverty. Frank Castles (1985) described Australia as the "wage-earners' welfare state", a term which has become standard in describing Australia's unique system. Castles explained that although the Australian system is not a welfare state in the European sense, a strong system of arbitration and wage regulation means that, through their wages and other working conditions, the welfare of Australians is provided for and protected. In 1904, three years into Australia's nationhood, an Industrial Arbitration Court was established and, in 1907, the formative "Harvester judgement" ruled that workers be paid a "fair and reasonable" wage sufficient for a male to support a wife and children. The decision introduced employee needs into the wage equation, a transformation of the traditional model where employer profit was the key component in the determination of wages (Bessant, Watts, Dalton, & Smith, 2006; Mendes, 2008). In 1908, the Age Pension was introduced, followed by invalid pensions in 1910, both key aspects of the Australian social security system that continue today. This established as a statutory right access to income support for Australians who are unable to work, and represented a rejection of the model of universal social insurance that had been adopted by many other countries (Bessant et al., 2006). Thus, from the early beginnings of the Australian nation, the idea of fair wages and a safety net for those unable to work was institutionalised.

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Due to these foundations, Australia has not historically had the problem of "working poverty" in the sense that some other countries do. For example, in the United States (US), the 2008 national minimum wage was US$5.85 an hour (Acs & Turner, 2008), and Acs and Loprest (2005) found that one in four low-income families with at least one full-time full-year worker reported that they had to "cut or skip" meals because they were unable to afford enough food. Due to Australia's strong tradition of wage regulation and the safety net of government income support, the majority of Australian households with one full-time or even one part-time worker would not generally experience such hardships. In 2003, the ratio of the minimum wages of fulltime workers to the median was 0.57 in Australia and 0.32 in the US (Organisation for Economic Cooperation and Development [OECD], 2008), indicating that the gap between minimum and median earnings was substantially greater in the US than Australia. However, Australian studies, using various methodologies, have found that a substantial proportion of people in households where members are in paid employment remain in poverty (Eardley, 2000; Harding, Lloyd, & Payne, 2004; Marks, 2007; Saunders, Hill, & Bradbury, 2008). This study draws on discussion surrounding the methodologies of poverty measurement, and uses new data to analyse poverty among households where at least one person is employed part- or fulltime, the characteristics of this group in 2005-06 and trends from 1997-98. The first section describes the data and methodology used, followed by a discussion of results and conclusions.

Methodology

Measuring poverty