Impact of income inequality on access
to services and entrenching disadvantage
If having a higher income simply
meant you could go on more holidays and drink more expensive wine, then we
wouldn’t care very much about how equally or otherwise it is distributed, but
when it’s the difference between lifesaving health care or a quality education,
then we should care a lot. A more equal society is one where you can
compress income distribution and also reduce the relationship between income
and the other things that matter to a good quality of life. Each individual
distribution matters. Money matters. Education matters. Health matters.
Job opportunities matter.
This chapter will examine the capacity of those on low incomes to access
a range of services within the community with a specific focus on health,
education, employment, and housing opportunities. The following areas will be
examined in detail:
health—the deleterious effect of low income on different health
outcomes; and impediments to access.
education—disadvantage within the education sector; and the
social and economic benefits of education.
housing—affordability; availability of public and social housing;
transport and participation in society.
employment—impediments to joining the labour market; impact of
childcare on the decision to enter the workforce; and the working poor.
This chapter will also look at how poorer access to these
services leads to entrenched disadvantage at an individual, household and
Access to these basic services are enshrined as fundamental human rights
within the UN Human Rights Declaration:
[E]veryone has the right to a standard of living adequate for
the health and well-being of himself and of his family, including food,
clothing, housing and medical care and necessary social services, and the right
to security in the event of unemployment, sickness, disability, widowhood, old
age or other lack of livelihood in circumstances beyond his control.
The disadvantage endowed by income inequality is not as simple as
comparing an individual's yearly income to others. There is a complicated inter‑relationship
between income inequality and a number of other factors that translates into
poorer outcomes particularly for already disadvantaged people. The relationship
that income inequality has with health, education, employment and housing is
best described as multi-dimensional inequality. The committee received evidence
from Dr Nicholas Rohde, Senior Lecturer at Griffith University, about his
I looked at income, education, leisure time and health
scores. The fact that these things tend to be associated means that you have a
higher level of disparity than you would think if you just look at income
alone, because poorer people tend to have lower health scores and they
tend to be less educated. I think leisure time, or free time, is more or less
uncorrelated. But poverty is concentrated over multiple dimensions, and if
you add them all up it is worse than it looks just on one dimension alone.
Many submitters spoke not about equality of outcomes but equality of
All individuals within a society, regardless of household income, should be
given the opportunity of access to good quality education (early childhood,
schooling and tertiary training), healthcare, and good job opportunities
regardless of where they live. A merit based society with intergenerational
mobility is the objective not a society where 'everybody has the same income'.
Inequality is not just a moral argument but also an economic one. This
chapter discusses the increased cost that society must bear as low income
individuals are more likely to be sick, less likely to participate in
employment and more likely to rely on welfare payments and on public housing
amongst other things. There are also benefits to society by reducing income
inequality and improving service delivery for low income individuals. Through
improvements to educational and training opportunities, individuals are more
likely to work and pay tax, and be less reliant on welfare payments. By
reducing impediments to the workforce, labour market participation can be
improved. Higher incomes will result in better mental health and greater
capacity for individuals to contribute to their own healthcare. The
inter-related benefits of improving access to these services far outweigh the
cost of delivering them.
Income inequality is a significant barrier to people accessing
preventive healthcare and even delay seeking medical assistance for some acute
injuries. This ultimately leads to a higher incidence of chronic and other
Health related outcomes are strongly correlated to a household's income,
with a social gradient for health being observed for life expectancy and a
range of chronic diseases.
A recent study on health inequalities in Australia found:
Socioeconomically disadvantaged groups experienced more
ill-health, and were more likely to engage in behaviours or have a risk
profile consistent with poorer health status. Their use of healthcare services
suggested that they were less likely to act to prevent disease or detect it at
an asymptomatic stage. Socioeconomic inequalities for many of the health
related indicators were found for both males and females and for each age
group, and they were evident irrespective of how socioeconomic position was
This report also found that a higher proportion of those in the lowest
income quintile were more likely to engage in riskier lifestyle choices
including insufficient physical activity, regular tobacco use, high salt
intake, no use of sun protection and food insecurity (running out of food).
Lower income children were also less likely to have been breastfed as children.
These riskier lifestyle choices combined with poor preventive capacities
correlate with higher levels of chronic and other diseases such as obesity,
hypertension, diabetes, emphysema, neoplasms (tumours) and arthritis. Although
lower income individuals were more likely to visit a GP, they were less likely
to do so for preventive reasons such as dental consultations, mammograms or Pap
smears. Tellingly, those on lower incomes perceived their own health as being
significantly poorer than those in higher quintiles.
In a submission to the committee, the Social Determinants of Health
Alliance (SDOH) stated that 'income is a fundamental determinant of health',
[L]ow socioeconomic status determined by income will
frequently give rise to exposure to a variety of stressors such as insecure
housing and difficulties with managing household finances. Stress gives rise to
changes in both the brain and body which can be adaptive in the short term, but
if sustained over longer periods contributes to common forms of mental illness
such as depression, and increased risk of conditions such as heart disease. Low
income is also likely to be associated with other well recognised stressors
such as insecure employment and unsafe neighbourhoods.
In its submission, SDOH wrote that 'there is significant evidence
available suggesting that the degree of income inequality matters for health
across all levels of society'. Referring to modelling conducted by the National
Centre for Social and Economic modelling (NATSEM), SDOH asserted that 'there
are billions [of dollars] in savings that could be made in Australia's health
system through improving the social determinants of health'. These include:
500 000 Australians could avoid a chronic illness;
170 000 extra Australians could enter the workforce, generating
$8 billion in extra earnings;
Annual savings of $4 billion in welfare support payments could be
60 000 fewer people would need to be admitted to hospital
annually, resulting in savings of $2.3 billion in hospital expenditure;
5.5 million fewer Medicare services would be needed each year,
resulting in annual savings of $273 million; and
5.3 million fewer Pharmaceutical Benefit Scheme prescriptions
would need to be filled each year, resulting in annual savings of $184.5
million each year.
It is also clear that there are specific low income disadvantaged groups
with a greater demand for these health services. The next section will examine
the deleterious effect of low income on health outcomes and also discuss
impediments to access.
Deleterious effect of low income on
This section will explain in more detail a range of specific health
outcomes and how they disproportionately affect low income earners. The
socio-economic gradient associated with a number of chronic and debilitating
illnesses is well‑documented, that is, individuals on low incomes are
more likely to have poorer health outcomes than higher income groups.
This is seen below in Figures 3.1–3.4 which detail the incidence of heart
disease, diabetes, cancer and depression indicating that higher rates of
disease are registered amongst lower income earners aged 45 years and older.
Figure 3.1: Percentage of individuals suffering from heart disease within
different household income groupings (Korda et al, 2014)
Source: Korda, R.J., Paige,
E., Yiengprugsawan, V., Friel, S., 'Income-related inequalities in chronic
conditions, physical functioning and psychological distress among older people
in Australia: cross‑sectional findings from the 45 and up study', BMC
Public Health, 14(1):741.
Figure 3.2: Percentage of individuals suffering from diabetes within
different household income groupings (Korda et al, 2014)
Figure 3.3: Percentage of individuals suffering from cancer within
different household income groupings (Korda et al, 2014)
Figure 3.4: Percentage of individuals suffering from depression within
different household income groupings (Korda et al, 2014)
This section will continue examining some of the statistics and trends
for low income earners and health with specific reference to disability, mental
illness, dental health, obesity and drug use.
A disability may impact on an individual's capacity to participate in
society through less engagement in employment, education and community. The
disability may be physical and/or mental and may manifest differently in its
severity and presence—that is, it may be episodic or continuous. It may also
require additional support such as medical and social services. As such, those
with a disability are likely to have a lower income due to lower participation
in the workforce and higher reliance on government allowances such as the
Disability Support Pension. The effect of low income is further compounded by
the additional cost of accessing these health and other social services.
The committee received evidence that 'people with disability with
multiple health issues pay higher out-of pocket costs than the rest of the
community.' These additional healthcare costs force the disabled to 'delay
seeking healthcare due to cost' and 'make difficult decision[s] between
everyday essentials and meeting their healthcare needs'. Further to this, those
low income individuals without disability who delay treatment due to cost may
find health issues 'become more serious by the time healthcare is sought, which
has the potential to lead to long term impairment, disability and further
A mental illness may impact on an individual's capacity to participate
in society through less engagement in employment, education and community. It
may also require additional support such as medical and social services. As
such, those with a disability are likely to have a lower income due to lower
participation in the workforce and higher reliance on government allowances
such as the Disability Support Pension. The effect of low income is further compounded
by the additional cost of accessing these health and other social services.
The committee received evidence from Dr Yvonne Luxford of the Public
Health Association of Australia (PHAA) stating that '[p]eople with mental
illness experience poorer health outcomes than the mainstream population'. Dr
Multiple risk factors (e.g. alcohol and drugs, food
insecurity) combined with a lack of protective factors (e.g. childhood experiences,
income) can predispose a person to the development of mental illness.
People experiencing mental illness or homelessness also face significant
barriers to accessing services which [then] contribute to poor health outcomes.
The inter-relationship between mental illness and other forms of
disadvantage, in particular access to housing, was explained by Mr Josh Fear,
the Director of Policy and Projects at Mental Health Australia (MHA):
Turning to housing, we know that rates of mental illness
amongst people in the homeless population are three times higher than rates of
mental illness more broadly. We, of course, have a huge shortage of affordable
housing in this country and long waiting lists to enter public and social
housing. At the same time, we know from much research that stable accommodation
is vital to mental health. The lack of stable accommodation can escalate
someone at risk of mental illness into homelessness and much worse situations
requiring expensive intervention by government.
The committee received evidence from Reverend Bill Crews, Superintendent
of the Ashfield Parish Mission (UnitingCare Australia), about the lack of
support for homeless people with a mental illness:
[I]f you have cancer and you go to hospital, the follow-up is
enormous. You get lots of support, lots of all of this, lots of warm
fuzzies—all of that. If you have a mental illness and go into hospital, you are
thrown out. Recovery is the loneliest place to be in the world, and yet we
expect people not only to be in that lonely place while they go through
recovery but to deal with Centrelink, to deal with banks, to deal with a card
that will not work, to deal with kids and all of that. You are just left on
your own to struggle. Yet somebody who has breast cancer or prostate cancer
gets all the supports in the world. That is what I mean. The inequality is just
The World Health Organization states that 'the interrelationship between
oral and general health is proven by evidence' with strong associations between
oral disease and a range of chronic diseases. Oral health is a 'key determinant
factor for quality [and participation in] life' with 'oral diseases restrict[ing]
activities in school, at work and at home causing millions of school and work
hours to be lost each year'.
ABS statistics show that nearly 30 per cent of the most disadvantaged defer
access to a dental professional due to cost.
In evidence to the committee, Ms Catherine Bartolo, CEO of YFS Ltd.,
said that '[t]o me some of the inequality in health is particularly around
good dental health and oral health'.
Ms Netty Horton of The Salvation Army noted that low income families 'cannot
afford a yearly dental check-up for [their] children'.
Further to this, the committee heard that closure of some dental programs
may lead to a reduction in accessibility.
Individuals who are overweight or obese are at risk of a number of
preventable diseases including heart disease, stroke, Type 2 diabetes,
osteoarthritis, some cancers and sleep apnoea. In 2007–08, a study found that
25 per cent of Australian adults and 8 per cent of children were obese. This
study also found:
A clear gradient can be seen in levels of obesity by
socioeconomic disadvantage: people who live in the most disadvantaged areas are
more likely to be obese than people who live in areas that are less disadvantaged.
Low income is likely to lead to poor food choices that lead to obesity.
Further to this, those from low socio-economic backgrounds were also found to
not engage in sufficient physical activity which is one of the factors leading
It is likely that those from low income backgrounds do not have the means
to meet the cost of participating in team sports, going to the gym or
purchasing equipment to allow them to remain active.
The committee received evidence from the Alcohol and Drug Service at
St Vincent's Hospital in Sydney noting that there are increases in
narcotic and hallucinogen overdose mortality rates, alcohol and drug related
harm—including crime and violence—as income inequality increases. Low income
groups are predisposed to heavy episodic binge drinking with consequential
health impacts ranging from acute injuries, caused by accident and violence, to
more cumulative long-term chronic illnesses.
Tobacco is the single most preventable cause of ill health and death in
Australia. It is a major risk factor in many preventable chronic diseases.
Broadly speaking, tobacco use in Australia is falling with daily smoking
rates for those aged 14 or over halving between 1985 (30 per cent) and 2010 (15
per cent). However, those with a low socio-economic background are one of a
number of disadvantaged groups in Australia where tobacco use remains
persistently high. For example, there are 15 per cent more people
deemed unable to work who smoke tobacco than those who are currently employed;
there are 10 per cent more people from the most disadvantaged
socioeconomic status who smoke than the most advantaged groups; and there are
10 per cent more people from remote or very remote locations who smoke than
those from major cities.
As a consequence, 13.5 per cent of all males aged 65 years and over in the
lowest income quintile has emphysema compared to 0.5 per cent in the
top income quintile. Furthermore, 11.9 per cent of all males aged 65 years and
over in the lowest income quintile has diabetes compared to 3.3 per cent in the
top income quintile.
Tobacco use plays a significant role in these statistics which result in an
added burden to the health system and affect individuals from low income
These socio-economic gradients for chronic disease and high risk health‑related
behaviours—tobacco and alcohol use—ultimately lead to the socio‑economic
gradient for death. A 2010 AIHW report found that in the lowest SES group men
and women die younger—four years and two years respectively— than those from
the highest SES group. Further to this, 'death rates among 15–64 year olds in
the lowest SES group were 70 per cent higher than those in the highest SES
These poor health indicators clearly relate directly to the poorer access for
low income people to primary and preventive healthcare services. This will be
discussed in the next section.
Impediments to access
A recent Senate inquiry found that individuals contributed 17.3 per cent
of the total health expenditure funding in 2011–12. The committee heard that as
a result of this, people would 'defer medical treatment or [defer] fill[ing]
prescriptions because of financial reasons.' Further to this, these
out-of-pocket costs were found to 'disproportionally impact on individuals with
the greatest health needs, including Aboriginal and Torres Strait Islander
people, people with chronic illnesses and people living in rural and remote
As explored further in chapter 4, these are the groups most likely to have
a lower income.
Income inequality and its impact on housing outcomes will be discussed
in more detail in a later section of this chapter. It is important to note here
the relationship between income level and where individuals can afford to live
and access services, specifically health services. Generally, those on lower
incomes are likely to be living in outer metropolitan, regional, rural and
remote areas. Poor access to public transport, health and employment
opportunities can compound health problems for those who live in these areas.
Those living in rural and remote areas are likely to have poorer health
outcomes due to a combination of access and higher costs. Higher costs are
generally imposed due to a lack of services in a local area forcing those
individuals to travel further and often pay for overnight accommodation to
access healthcare. Dr Yvonne Luxford reported:
[P]eople living in rural and remote areas are more likely
than those in the major cities to report that they do not attend medical and
dental visits, treatments, tests and medications because of cost. This is
exacerbated by a lack of funding in the system to support home visits,
especially in rural Australia.
The proposed introduction of the GP co-payment and increase in the
Pharmaceutical Benefits Scheme co-payment will reduce access for low income
individuals and households to medical advice and medication as they simply
cannot afford this out-of-pocket expense. This is discussed further in chapter
It is clear that those on a lower income not only have difficulty paying
for health services but also tend to face higher costs. It is also
well-documented that any policies—such as the GP co-payment—that move to
increase these health costs will result in poorer health outcomes. Impediments
to access for particular disadvantaged groups will be discussed in chapter 4.
The link between education and opportunity has long been recognised.
In 1972, the then opposition leader, Gough Whitlam, gave a speech where he
noted that 'education is the key to equality of opportunity'. The equality of
opportunity that high-quality universal education provides is that of the
opportunity of social mobility. It is the principle that a 'student's merit
rather than a parent's wealth' should decide the outcomes of that individual.
Education provides a series of benefits to an economy. Professor Thomas
Piketty in his book Capital in the 21st Century noted:
...knowledge and skill diffusion is the key to overall
productivity growth as well as the reduction of inequality both within and
between countries...the best way to increase wages and reduce wage
inequalities in the long run is to invest in education and skills.
It is this increase in skills and knowledge that enables
employees to become more productive by producing increased marginal value for
their employers. The employee's increased marginal value means the
employer is able to pay them a higher wage for their improved productivity.
Dr James Heckman found that an individual's lifetime earning capacity is
largely determined by age 18. Education is one of the most important
contributors to this finding.
The Review of Funding for Schooling (2011), known as the Gonski Review,
Individuals who reach their full potential in schooling are
usually able to make better career and life choices, leading to successful and
productive lives. Success in schooling also helps to provide the skills and
capacities needed to keep a society strong into the future. It deepens a
country's knowledge base and level of expertise, and increases productivity and
competitiveness within the global economy... higher levels of education are
associated with almost every positive life outcome—not only improved employment
and earnings, but also health, longevity, successful parenting, civic
participation and social cohesion. Countries that have significant numbers of
people without adequate skills to participate socially and economically in society
endure higher social costs for security, health, income support and child
Further to this, in developed countries—such as Australia—the provision
[G]oes beyond the legal obligation of governments to provide
the opportunity for schooling for all children that is secular, compulsory and free.
Governments must also, through addressing the facets of disadvantage, ensure
that all children are given access to an acceptable international standard of
education necessary to lead successful and productive lives.
In its submission, The Smith Family said:
The clearest pathway to addressing inequality,
inter-generational disadvantage and welfare dependency is to support children
and young people to develop the knowledge, skills, attitudes and behaviours
that set them up for participating in the complex employment market of the 21st
century. Education is the key enabler of economic and social participation.
Improving school attendance, Year 12 completion and post-school transitions is
critical to addressing inequality.
The Gonski Review
In 2011, the Australian Government commissioned the Gonski Review which
Australia's schooling system is characterised by a strong
concentration of disadvantaged students in certain schools, and conversely, a
strong concentration of advantaged students in other schools. Australia also
has a relatively low proportion of students who attend schools with average or
mixed socio-economic backgrounds.
There is a strong correlation between a student's level of
socio-economic disadvantage and their performance—that is, those with a higher
level of disadvantage perform more poorly than those with fewer disadvantages.
Further to this, a number of factors are entrenched in schools with more
students from a low socio-economic status (SES) background. These include less
material and social resources, more behavioural problems, less experienced
teachers, lower student and family aspirations, less positive relationships
between teachers and students, less homework and a less rigorous curriculum.
The review also found that 'there are complex interactions between
factors of disadvantage, and [that] students who experience multiple factors [of disadvantage]
are at a higher risk of poor performance'. For example, Aboriginal and Torres
Strait Islander students in remote areas are over-represented in the lowest
SES, are likely to speak another language at home and to have a disability that
affects their learning.
The compound effect of these factors is so large that Aboriginal and Torres
Strait Islander students for all
levels and domains 'performed, on average, below the mean score of Year 3 non‑indigenous
In response to this identified disadvantage, the Gonski Review
recommended that the Australian Government prioritise reducing educational
disadvantage in a new funding model. This new funding model would provide a
base level of funding for students with additional funding provided in response
to defined needs and disadvantage.
A number of recommendations from this report were adopted by the Government at
the time; however, there is no longer bipartisan support for these. As such,
the school funding model will remain unchanged and not address disadvantage.
The committee received evidence from the Victorian Council of Social
Service (VCOSS) suggesting that the 'increasing disparity in education [is
linked] to socio‑economic status'. Lower income families are unable to
afford the additional schooling expenses such as 'books, go on excursions and
go on camps...that enable children to really participate in schools'. It was
submitted that children may attend school but they are not fully participating
and engaging due to their families' low income status.
Housing and the implications it has on inequality are discussed in a
later section. However, it is important to note that rising housing costs
impact strongly on where individuals and families live and go to school. Low
cost housing is largely located on the fringes of cities where access to
services, including education, is poor.
Mr Paul Donegan, a Senior Associate of the Grattan Institute, noted the
presence of spatial inequality:
In places like Sydney, Melbourne and Brisbane higher income
earners are clustered in inner suburbs and the income gap between households in
the centre and everywhere else is widening.
The result is that housing is more expensive in the inner
city. Those on low incomes are segregated into communities of disadvantage
where schoolchildren are segregated into schools and classrooms with other
disadvantaged children. The anecdotal evidence suggests that higher income
families are purchasing homes in affluent inner city suburbs to access the
enrolment areas for high performing government and private schools.
This is a clear example of how income inequality further exacerbates and
entrenches the problem of educational disadvantage.
The Smith Family noted the importance of extracurricular activities in
providing a child with a range of physical, social, emotional and cognitive
development opportunities. The most important aspect is the opportunity to
build strong social networks whereby 'the positive influence of non‑parental
adults, such as coaches and tutors, enable[s] young people to expand the
networks of people they can draw on to support their development'. Of children
aged 5 to 14 years, 47 per cent from disadvantaged backgrounds did not
participate in extracurricular activities compared to 13 per cent from the most
advantaged communities. The factors for this poor participation included cost
of participating, lack of activities in the area, lack of knowledge of
activities and a lack of confidence in accessing them. The Smith Family notes
that 'this lack of participation [in extracurricular activities] can have
negative short and longer term impacts'.
Social and economic benefits of
This section discusses the social and economic benefits of action and
the consequences of inaction for each of the key stages of education.
Early childhood learning
The Smith Family comments:
Differences in children's educational and developmental
outcomes emerge very early on, with one in five children starting school behind
in one or more key areas. For children, living in Australia's most
disadvantaged communities, the figure is one in three. Children who start
school behind are more likely to be in the bottom 20 per cent of students'
scores on NAPLAN across primary and secondary school.
Professor Piketty says that 'pre-school education is the most important
single weapon in promoting equality and in over overcoming social, economic and
A paper by Dr James Heckman cites studies that demonstrate the 'substantial
positive effects of early environmental enrichment on a range of cognitive and
non-cognitive skills, schooling achievement, job performance and social
behaviours'. Clearly, this foundation needs to be consolidated with continuing
education, but it is clear that a focus on high-quality early education can
partially compensate for early adversity. The study conservatively estimates
the educational benefits of this approach are in excess of 14 per cent. This
estimate is higher than standard stock market returns (7 per cent) and does not
take into account other positive direct and indirect economic returns for
physical and mental health, increased economic contribution and reductions in
payments of other government assistance over the course of a lifetime.
Dr David Morawetz of Australia21 noted in his evidence:
I think it is well established that the period from zero to
five—early childhood—is extremely important in what happens in the rest of
life. To give you an anecdotal bit on that: a friend of mine was the
principal of Williamstown Primary School, one of the inner suburban primary
schools in Melbourne. It is a very mixed school—some rich parents, some very,
very poor parents with drug addictions and so on. He said: 'We get kids coming here
in grade 1 who are three years behind everybody else before you even start, and
we can never catch them up. The others have learned to read before they come to
school. The others have had books read to them night after night after night.
Some of these kids have parents who are on drugs. Some of them have parents who
are not on drugs but who are not coping and have had no early childhood
education at all in any way, shape or form; and, when they arrive, they are so
far behind that I just about cry, because we do everything we can to try and
help them to catch up, but they stay behind.' So I think it is probably the
single most powerful thing and, hopefully, something that would not politically
be a problem for anybody. The single most powerful thing we could do to reduce
inequality in Australia and try to give a fair go to all—because we used to
care about that, and I think a lot of people still do—is to have really good
early childhood education from zero to five. I would say that is priority No.
In evidence, the Australian Council of Social Service (ACOSS) submitted
that there is 'an inadequate level of resources and an inefficient direction of
resources [to early childhood education and care]' highlighting:
[H]ow critical access to early childhood education and care
is, particularly to disadvantaged children, and that there are much lower
levels of access to these services by lower income households.
Ms Emma King, CEO of VCOSS, impressed the importance of investing in
early childhood learning:
For every dollar that you invest in early childhood education
there is a $16 return. [Governments must continue to] increase the
participation rates of children in high-quality early learning and care at the
earliest possible opportunities, and looking to increase participation in
kindergarten et cetera. We know that it has a significant impact, particularly
for the most vulnerable children, but actually for all children.
The Gonski Review found that 'educationally disadvantaged students are
more likely to be developmentally vulnerable when they arrive at school than
their peers'. Consequently, it also found that 'strategies to address
educational disadvantage in school are most effective when integrated with, and
complimentary to, approaches to support early childhood development'.
Service providers at the hearing in Logan highlighted the benefit of
early childhood learning not just for children but also for families. Ms
Catherine Bartolo, CEO of YFS Ltd, stated:
[E]ven connecting them to other people to learn some social
skills before they get to school. In our families area we say that everyone
should be part of a playgroup or be booked into a childcare centre even just
for a day a week so that they get into that routine and habit...
Ms Lin Hatfield Dodds, National Director of UnitingCare Australia,
That may be the moment that you want to try to use those
childcare opportunities as a soft entry point to start working with the whole
The importance of nutrition in the early years, specifically
the provision of breakfast in schools, was also raised by members of the
committee and witnesses.
Primary and secondary education
People from disadvantaged backgrounds tend to perform poorly in
standardised testing. For example, in Year 3 NAPLAN testing, eight per cent of
students from low SES backgrounds and 16 per cent from Aboriginal and Torres
Strait Islander backgrounds do not meet the national minimum literacy standard.
This compares with 4.7 per cent of the total Year 3 cohort that does not meet
this standard. For those in Year 9, 18 per cent from low SES and 32 per cent
from Aboriginal and Torres Strait Islander backgrounds do not meet the national
minimum numeracy standard compared with 9.4 per cent of the total Year 9
cohort. Seventy-four per cent of disadvantaged youth and 54 per cent of Aboriginal
and Torres Strait Islander students complete Year 12 compared with 93 per cent
completion in the most advantaged SES.
Only 36 per cent of disabled children complete Year 12 schooling. This is
despite more than 90 per cent of disabled children attending a mainstream
These low Year 12 completion rates have subsequent repercussions with
41.7 per cent from low SES and 60.6 per cent from Aboriginal and Torres
Strait Islander backgrounds not engaged in post school work or study. This
compares with 17.4 per cent from the most advantaged groups.
The consequences of failing to achieve in primary and secondary
education is quite profound. Poor educational outcomes impact on an
individual's capacity to engage in further training, and in turn, on
employment. These employment opportunities will influence an individual's level
of income and the certainty of that income.
There are many different programs funded at all levels of government
that seek to engage with disaffected youth to ensure that they complete their
schooling and are able to engage with post school study or work. Some are
successful, others are not. Those that work should have their funding extended
and be rolled out into other communities where there is an identified need. A
lack of co-ordinated program evaluation was identified as the key impediment to
successful program delivery in this area:
[E]vidence rarely seems to be collated at a national level
and it rarely seems to be available in a timely fashion. If we could reach a
time where those things were published, it would enable those people running
those programs to benchmark themselves against the best outcomes for those. It
would also allow us to truly look at what programs are doing at the time.'
Early intervention and
prevention approaches, particularly those focused on the school transition
space, require coordinated cross-sectoral and cross‑jurisdictional
responses if they are to be effective. No one sector or jurisdiction has all of
the resources, skills or level of responsibility to respond to the size and
complexity of the school-to-work transition challenge currently facing
Evidence to the committee noted that engagement with young people ideally
should be through one focal point, rather than multiple state and federal
agencies. This would assist in ensuring accountability from government to
the individual and then, in turn, accountability reciprocated from the
individual to society:
I think one of the problems sometimes is that they have too
many people working with them. So they are on this merry-go-round of welfare
and going to child safety meetings and meetings about housing. It is almost
like [we need] one intense lead agency that they had to be accountable to.
Often they will say, 'I can't come because I am going to this appointment'
and things like that. It is a concern.
Tertiary and vocational training
The growth industries in the Australian economy will require highly
skilled employees. This, in turn, will require a high quality mass-education
system. An Australian Government report into the future Australian economy
In the medium and longer term, competitive pressures—as
employers navigate a complex mix of supply costs and market opportunities –
will mean that all employees will be subjected to the demands of new systems
and technologies. The need to combine new operational skills with
communication, teamwork and decision-making skills will intensify. The flexibility
and resilience to change jobs, apply skills in different contexts and go on
learning will be essential...
Along with specialist skills, these workers will need strong
basic skills and an ability to quickly adapt and pick up new skills, to make
the most of new opportunities.
Access to tertiary and vocational training is predicated on the cost of
the course—whether debt deferred or paid up-front—and capacity to pay for the
cost of studying, food, rent and other living essentials. The National Union of
Students (NUS) submitted that more than 76 per cent of full-time, low SES
undergraduates worried about their financial situation.
Mr Jack Gracie of the NUS stated that 'more than 50 per cent of students
believe that their studies are negatively affected by their financial
These statistics clearly focus on those who have commenced tertiary studies and
find it difficult to survive and achieve to their potential at their studies.
Universities Australia found that 'people from low SES backgrounds are about
one‑third as likely as people from high SES backgrounds to participate in
Even within the current system, there still remains inequitable access to
tertiary education for those from low SES backgrounds.
The committee received evidence that the recent increase in TAFE fees
will dissuade many from undertaking vocational training particularly in low
paid industries. Mr Sameh Gowegati, CEO of SMYL, provided the following example
in the Western Australian context:
A child-care diploma is an essential requirement now to work
in a child‑care centre. We provided that free of charge last year. Under
the Future Skills funding, that is now nearly $9,000, none of our clients have
the capacity—in any way, shape or form—to pay that. It is one of the negatives
of trying to have a more user-pay system. Take the policy side of it. We work
with people who have no way in humanity to pay $9,000 for a course and they
will not even try to. To a trainee, you have to up-front show people the course
fees. They look at that figure. That is more than a year's income for them.
They are out of there. A sad part too is that even if they could afford to pay
it they would be looking forward to entering an industry where they start work
at between $15 and $16 an hour and have to pay back $9,000.
In this section on education, the importance of engagement with
disadvantaged and disengaged youth is discussed. It is important that young
Australians undertake further training if they are to participate in the
economy of the future. Engagement is critical in showcasing to young adults the
possibilities that exist. Equally as important is an equitable tertiary and
vocational training system that facilitates participation based on merit rather
than family background or income.
Building an education and training
For some families and communities the effects of low income can have a
lasting impact as the disadvantage is conveyed inter-generationally. This not
only occurs through educational disadvantage where disadvantaged children are
segregated from children from advantaged backgrounds, but also through
inequality changing the 'aspirations, norms and values of [low socio-economic]
people'. As Wilkinson and Pickett have noted:
While education is viewed by the middle class and by teachers
and policy makers as the way upwards and outwards for the poor and working
class, these values are not always subscribed to by the poor and working class
Professor Jonathon West of the University of Tasmania describes a
culture of low aspiration in Tasmania fuelled by intergenerational disadvantage.
Some of these attitudes may be reflected in Tasmania's Year 12 retention rate
of '64 per cent compared to 76 per cent [nationally]'. The committee received
further evidence finding that those who live in poorer communities or
concentrated areas of disadvantage are often fearful to seek further education
as that means they have to leave that community—even simply to complete Year 11
and 12. In Tasmania, this trend is even more pronounced as the consequence of
attaining further education often means needing to move to the mainland for
employment options, leaving friends and family behind.
The Tasmanian Youth Forum conducted a forum and survey in September 2013
entitled 'Should I Stay or Should I Go?'. The Forum examined some of the
factors that made young people think about leaving Tasmania to 'learn, earn,
work or play'. Most participants indicated that they have thought about leaving
Tasmania primarily because of 'a lack of jobs in Tasmania'. Sixty-four per cent
said they would have to move away from Tasmania to 'do everything they wanted
to do in the future'. However, most agreed it was 'okay' to leave and return
with a range of experiences. The survey suggested that increased opportunities for
education, transport, youth‑focused events and jobs would entice young
Tasmanians to stay.
In contrast, some disadvantaged groups are noted for a positive attitude
to education and the opportunities for improving the living standards for
themselves and the next generation. Dr Peter Shergold, the Vice-Chancellor of the
University of Western Sydney, has commented on the drive of some disadvantaged
Migrants (and refugees) bring entrepreneurial drive and
ambition for their children. Young people brought up in two cultures possess an
additional asset that can enhance their educational qualifications in business,
law, medicine, nursing, teaching, engineering or community work.
In addition to this innate drive, there are examples of programs that assist
schools and communities in creating a culture that values education, training
and employment. The committee received evidence from Reverend Sandeman of the
Automotive Transformation Taskforce on the Northern Adelaide State Secondary
Schools Alliance (NASSSA) and Northern Connections:
It is really about making sure the intensity of experience of
employment at school is high, that it works for local employers and works for
local students. That is where we can assist schools to better provide for
post-school opportunities for their young people.
Chapter 6 of this report will discuss the power of engaging
disadvantaged and disengaged youth. Teachers and social workers helping young
people and their families understand the opportunities that education and further
training bring is helping to break the cycle of disadvantage in places like
Logan in south-west Brisbane. Issues around structural unemployment and geographic
disadvantage will be discussed in chapter 4.
Baptcare, in its affordable housing position paper, has noted that
'safe, secure, appropriate housing is a basic human right for all Australians
and is foundational to the wellbeing of individuals, families and communities.'
Previous sections have noted the complex relationship that exists between
housing and access to services and opportunities. A number of submitters have also
noted the deleterious impact that insecure housing arrangements have on stress
Further to this, there are those who have been excluded from housing
altogether. The number of homeless in Australia has increased from
89 728 in 2006 to 105 237 people in 2011.
This section will address issues relating to housing affordability,
availability of public housing and homelessness, and the interface between
housing, transport and participation.
The cluster of high income earners in the inner city areas of the major
metropolitan centres and the consequent growth in inner city housing prices has
been discussed in the education section of this chapter. This trend also has
implications for access to employment opportunities. In evidence, Mr Donegan
We have seen that since 2006 more than three-fifths of the
employment growth in Australia's five biggest cities has occurred within 10
kilometres of the city centre, where somewhere like Western Sydney has seen
zero net private sector employment growth. So opportunity is to some extent
concentrating closer in...
Since 2006 more than half of the population growth in the
five biggest cities in the country has occurred 20 kilometres or more from the
CBD. That creates a growing gap between housing and employment. For some
households it means it is harder to access the higher incomes on offer closer
to city centres. Others have to make tough trade-offs—long commutes, higher
living costs, more pressures on family time—the kinds of trade-offs that
households living closer to the city centre do not have to contemplate. The
most important thing policymakers can do is give people genuine choices about
where they live, including in areas with good access to jobs and transport.
That means making it easier to build homes in established inner and middle
The issue of housing affordability is not about everyone being able to
live in fashionable addresses. Affordable housing is about living close to
employment opportunities and services. An individual's postcode should not set
an upper limit on their income earning potential.
Mortgage and rental stress
A household is experiencing 'mortgage stress' if it is in the lowest 40
per cent of the income distribution and is spending over 30 per cent of its
income on mortgage repayments. A 2009 Senate report noted:
Financial institutions have traditionally applied a rule of
thumb of not allowing households to take out home loans requiring more than 30
per cent of gross income to service. A government inquiry which looked into
housing in the early 1990s concluded that people on low incomes could not
afford to pay more than 30 per cent of their income on housing.
This proportion has since become a benchmark.
National residential property prices increased by 10.1 per cent in the
2013–14 financial year,
clearly outstripping minimum wage growth (3.0 per cent)
and indexation to the base Newstart allowance (2.7 per cent) over this
The most recent rental data shows median weekly household rent increased
by 49.2 per cent between 2006 and 2011. This is more than double the rate of
increase for wages in the same period.
In 2011–12, more than 90 per cent of those in the lowest income quintile
were renting compared to 3.5 per cent in the top quintile.
In the same year, 45.5 per cent of low income households in Queensland spent
more than 30 per cent of their gross income on housing costs.
Dr John Falzon, Chief Executive Officer of the St Vincent de Paul Society
National Council, cited the following evidence:
47 per cent of low-income households are paying more than 30
per cent of their income on rent and 217,000 households are now on the waiting
list for social housing. These are concrete manifestations of a ramping up of
inequality in prosperous Australia.
The committee heard that '36% of households affected by a disability and
renting paid more than 30% of their gross income for housing compared with 26%
of households with no disability'.
The growth in housing and rental costs reflects clearly adds to the
number of households experiencing mortgage and rental stress and severity of
those experiencing this stress. VCOSS submitted that the problem is:
[Q]uite well evidenced in terms of there being pockets of
significant mortgage and rental stress, significant unemployment and...a range of
other social issues such as increased problem gambling, lower educational attainment
Professor Alan Duncan, the Director of the Bankwest Curtin Economics
Centre, explained that 'housing costs impose a proportionately greater burden
on those on low incomes in WA'. A household on median income living in a house
with median rent would pay about 30 per cent of their disposable income on
rent. A household with an income in the lowest quintile would have to pay
50–70 per cent of their disposable income to afford a lower quartile rental
property. Professor Duncan outlined the impact on a household of having to pay
such a high proportion of their income on housing costs:
Once one has taken housing costs out of the equation, the
amount of income remaining for those at the bottom of the income distribution
to afford other necessities of life is preciously small. So local housing
markets and the lack of availability of affordable housing for those on low
incomes really do have an important bearing on income disadvantage.
The 2009 Henry Review recommended that if rent increases faster than
government allowances or wages, the most efficient response is to index the
growth of housing to a rental index:
[t]he maximum rate of Rent Assistance should be increased to
assist renters to afford an adequate standard of dwelling. To ensure that Rent
Assistance can be maintained at an adequate level over time, the rent maximum
should be indexed by movements in national rents, which could be measured by an
index of rents paid by income support recipients.
This issue is revisited in chapter 6 of this report.
Negative gearing and Capital Gains
Tax concessions—The housing price drivers
According to the Australian Bureau of Statistics (ABS), on average, most
individuals hold the majority of their wealth in property and superannuation. Residential
property is the highest value asset that most hold. There is a positive
correlation between income and wealth across the different income quintiles.
There is also a substantial difference in the net value of such assets between
the bottom quintile (-$3 000) and top quintile ($1.11 million).
Those on higher incomes accumulate more wealth reflecting a capacity to service
higher mortgage payments from a higher income. The Australia Institute states
in a recent report that 'high incomes enable the accumulation of large wealth
holdings on the one hand, while large wealth holdings generate high incomes'.
Housing investment is a vehicle for wealth creation, wealth disparity and
income inequality that is reinforced over generations.
There are a number of tax concessions that real estate investors can use.
The main concessions relate to negative gearing and capital gains tax (CGT) exemptions:
negative gearing occurs when a 'rental [or investment property]
is purchased with the assistance of borrowed funds and the net rental income,
after deducting other expenses, is less than the interest on the borrowings'. This rental
loss can be claimed against other forms of income (for example, salary or
business income resulting in less tax being paid). The purpose of this type of
investment is to minimise tax initially and assumes that the property value
increases over time allowing the investor to realise a profit when the property
is sold at a later date;
CGT is applied to all asset sales including houses where the
asset value has increased over time. The tax is applied to the difference
between the purchase price and the sale price. There are a number of exemptions
to CGT, notably the exemption for 'main residences'. This exemption is not
These taxation arrangements clearly favour those with a high disposable
income, allowing them to purchase an investment property. While the practice
increases the stock of rental housing, it serves to limit the stock of
owner-occupied dwellings for sale. Many have attributed the use of negative
gearing to the record growth in house prices in Australia.
Current taxation policy is exacerbating the problem of increasing
housing prices and decreasing housing affordability. In a consultation paper,
Treasury suggests that a central tenet of a tax system should be the 'remov[al
of] tax biases that negatively affect business and household investment
decisions, offering the potential to increase productivity and Australia's
long-term prospects for economic growth'.
Targeting these housing tax concessions, and the skewed investment incentives
created by them, would assist in making housing more affordable for more
Australians whilst creating substantial revenues for budget.
Availability of public housing and
Many low income earners have difficulty accessing the private rental
market as they simply cannot afford the rent. There are a number of state and
federal government initiatives in place to financially support low income
earners with access to housing. Commonwealth Rent Assistance (CRA) is available
to those who currently receive a pension or the maximum rate of Family Tax
Benefit. This payment ranges from $85.07—single, no children, share-house—to a
maximum of $168.98—single or couple family with three or more dependent
children—per fortnight. This maximum rate is only available if your
fortnightly rent is higher than a defined threshold for your family situation.
The second mechanism is access to social or public housing whereby the state
government provides eligible individuals or households with access to housing
for a means tested rent of 25 per cent of household income.
Despite this support, Baptcare has noted that affordable housing is
becoming more difficult to access for low income earners. It identified the
loss of low income private rental housing in inner city areas—for
example, as inner city areas in Melbourne have become gentrified, up to
one-third of low income families have been forced to move between 2001 and 2006;
unaffordable housing is exacerbated by income—every recipient of
income support (except for the aged pension) provides an income (including CRA)
below the poverty line.
As such, many on these benefits are paying a larger proportion of their income
on housing. For example, 'in 2013, 60 percent of people on Newstart were
paying more than 30 per cent of their income in housing costs and a quarter
were paying more than 50 percent of their income in rent'; and
a decline in public housing—state housing departments are
struggling to meet demand for public housing. For example, waiting lists for
public housing in Victoria (34 000 people), Queensland (20 000) and
Tasmania (2 500) are extensive whilst operating costs of these departments
exceed revenue. This indicates that without change to the way that state
and federal government's approach housing issues, this problem will only get
The National Rental Affordability Scheme (NRAS) was a federal government
program established in 2008 to provide financial incentives to investors to
encourage investment in new housing developments for low income renters.
Several submitters to this inquiry expressed disappointment that the scheme
is being discontinued.
Although the Queensland Department of Housing and Public Works noted that the Scheme
could have been slightly better targeted, NRAS delivered good outcomes for
provision of affordable housing:
I think the product was not well targeted to investors and we
could have got more out of it. But I think the product, as far as getting
tenants into accommodation, is a very good product. Seventy-six per cent of
households tenanted through NRAS since 2008 have been on incomes less than
$5,000 per annum. NRAS has been very successful in Queensland...We administer
around $125 million per annum, delivering services for homeless people who are
probably the people who experience the greatest effects of income inequality
and often have no income at all.
Homelessness is defined by the Australian Institute of Health and
Welfare (AIHW) as someone living in no shelter, improvised shelter such as a
motor vehicle, short-term temporary accommodation or 'couch-surfing' with no
A recent report released by the AIHW noted that 'in the two and half
years [starting] 1 July 2011, Specialist Homelessness Services provided support
to over 400 000 people in Australia. Although a range of factors
influenced housing outcomes—including domestic violence, drug and alcohol use,
mental health issues, or young people living alone—most clients were also
likely to be unemployed with either no income or receiving income support'.
The committee received evidence from the Equality Rights Alliance (ERA)
Housing unaffordability is a driving force of economic
disadvantage, creating and sustaining poverty and homelessness and thereby stagnating
efforts to address and reduce inequality.
Further to this, ERA noted that women were especially
vulnerable to homelessness. Specific groups of women most exposed include
single and older, Aboriginal and Torres Strait Islander people, disabled and
those with care responsibilities.
Representatives of UnitingCare Wesley Port Adelaide spoke to the
committee about the:
[S]ignificant link between unemployment or underemployment
and poverty and homelessness. It sets up a cycle of disadvantage that I have
described as a perfect storm of disadvantage. People who get trapped in that
cycle find it extraordinarily difficult to escape from it without significant
support... without early intervention, without prevention programs, it is going
to be more and more difficult for people to get off that treadmill of
underemployment or unemployment and poverty and homelessness.
Further to this, evidence was received that detailed the changing face
We are seeing in our Port Adelaide office a growing number of
people who we would classify as the working poor: people who have been affected
by one or a couple family members losing their jobs, which throws all of their
life plans and their circumstances into disarray. So we have people presenting
for emergency relief who feel significant embarrassment and a sense of shame at
having to ask for something they have never had to ask for before. So it is not
only people who are on a disability support pension, a Newstart allowance or
some other sort of allowance who are now coming to us for support; it is people
who are in employment but have had hours cut or one person lose a job. We are
seeing those across our services in all our areas.
Joe Gannon described how 'most people are only three pay packets away
from a housing crisis' and dismissed the stereotype of 'homeless people
sleep[ing] in a park':
That is probably about five per cent of the people we deal
with in homelessness. It is not the person sleeping in the park we are dealing
with. We are dealing with homeless families. We are talking about mum, who has
left her husband, walking in with about four to five children...
[O]ver 60 per cent of those are children, under 14 years of
age, presenting in a homelessness-crisis situation.
Evidence the committee has received indicates a surge in demand for
emergency relief and financial assistance, and an increase in homelessness.
Reverend Crews noted that 'in Sydney there are at this moment 100 more homeless
people in the inner city than there were this time last year'.
The Queensland Department of Housing and Public Works expressed concern
that the proposed budget measures 'that impact low-income families [will]
increase the risk [that] they will become homeless'.
In 2009, the National Partnership Agreement on Homelessness (NPAH) was
established through the Council of Australian Governments (COAG) to help
'people who are homeless or at risk of homelessness achieve sustainable housing
and social inclusion'. The objective was to create a coordinated approach to
housing and homelessness. The four year agreement expired on 30 June 2013. NPAH
has been given a one year extension while the Commonwealth conducts a review.
Further to this, the role of the Commonwealth and state governments with regard
to housing will also be reviewed as part of the White Paper on the Reform of
The committee is concerned that Commonwealth housing and homelessness
policy appears to be in a hiatus with no apparent federal leadership on the
The Queensland experience
The Queensland Department of Housing and Public Works estimates that
there are over 200 000 low income households in Queensland who currently
receive CRA. Of these people, 72 000 are living in public housing. The
Department views its role as providing 'high-subsidy social housing assistance
to those most in need while ensuring that other low to moderate income earners
can access assistance to stay in or move to the private rental market'.
The Department told the committee that 20 years ago, public housing was
provided primarily to families whereas today it is provided to people with high
needs. In '55 percent of social-housing dwellings there is at least one tenant
who has a disability and around 25 per cent of all tenants in a social house
have a profound disability'. The Director-General told the committee that the
State Government has had to review its housing stock away from 3-bedroom family
homes on large blocks to 1–2 and 5–7 bedroom housing to reflect current demand.
As discussed earlier, the Queensland Department of Housing and Public
Works charges public housing tenants a rent of 25 per cent of their income. Eighty
per cent of public housing tenants receive a Commonwealth allowance as their
primary source of income. The Department told the committee:
Obviously any reductions in benefits coming out of the
Commonwealth budget reduces our income which reduces our capacity to put money
back into social housing. At the moment we estimate our subsidy per household
per year to be around $8,000 per year.
The committee expresses its strong concern at this impact of
the proposed budget measure, not only in Queensland but nationwide. There is
clearly a need to invest more in social housing options in Australia and any
measures—direct or indirect—that curtail this investment are to be strongly
Access to transport—whether private or public—is important to participate
in society. Transport provides people with the means to socialise, access
shops, services, healthcare, education, and jobs. Without transport people are
isolated from society and less likely to participate and prosper.
Income is one of the key determinants of where individuals live. Those
on lower incomes are more likely to live where housing costs are
lower—invariably this is on the peripheries of cities. Although Australia is
one of the most urbanised societies in the world, our cities are largely designed
with the following two underlying principles. First, medium to high density
housing in the inner and middle metropolitan areas is supported by strong
public transport systems. Second, the lower density outer metropolitan,
regional, rural and remote areas are largely designed with cars being the
primary means of transport. This clearly presents constraints for those on low
incomes—often unable to afford to buy and operate private transport—who are
forced to live in areas with inadequate public transport and as a consequence
are alienated from essential services and job opportunities.
Mr Donegan told the committee that 'living costs for households that are
entirely reliant on car transport are substantially higher than those for
people living closer in and who have good access to public transport'.
Other witnesses also raised cost of living pressures:
The other thing that is changing is the cost of housing and
the cost of transport for people. All of that is taking a bigger chunk out of
casualised, inadequate wages and thin and inadequate welfare payments. It is
just harder for people to make ends meet.
Griffith University publishes a report known as the VAMPIRE
index which examines the distribution of household exposure to higher petrol
prices, interest rate rises on mortgages and general price inflation due
to the increased price of oil. This report confirms that those living in outer
metropolitan areas are more likely to have a mortgage, more likely to use a car
as the primary means of transport and are more sensitive to general price
inflation. In the face of peak oil with higher petrol prices, and poor or
non-existent public transport, lower income households living in these areas
are forced to make decisions about what to prioritise in their lives. Reducing
car use—with no substitution options for affordable public transport—will
undoubtedly mean less participation in society for that individual or family.
The digital divide
In the modern world, technology is ubiquitous in every aspect of our
lives. In The Smith Family's submission to the committee, it was noted:
[A]ccess to technology, including both home computers and the
internet, is now seen as a key resource for young people's participation
Several submissions noted 'a lack of home access' to internet and other
technologies was an issue facing low income families with only 67.8 per cent of
children aged 5 to 14 years being able to access internet at home. This
compares with 90.5 per cent of children in the most advantaged communities.
The Smith Family described the impact of inequitable access:
The more limited access to technology that many young
disadvantaged Australians experience can impact their acquisition of digital
literacy skills and the educational outcomes they achieve. This in turn can
[a]ffect their post school pathways, their ability to secure employment, and
Mr Brendan Markey-Towler of the University of Queensland went further,
describing internet access as essential infrastructure to allow individuals to
participate in the economy, particularly those in rural and regional areas. As
he told the committee:
The challenge for policymakers, as I see it, is to be able to
provide services which allow individuals in the country to integrate; just
making it easier to obtain even something so simple as internet access which
allows them to communicate with economic centres.
Connectivity to affordable and accessible high-speed broadband is as
important as connectivity to affordable and accessible public transport options
in order to participate in the modern world.
A number of submissions to this inquiry highlighted participation in
paid employment as the most effective mechanism to lift individuals out of
poverty. Employment is critical to provide individuals with structure, social
networks, self‑sufficiency in life and retirement, and to achieve a sense
of value and contribution. Mr Roland Manderson, Deputy Director at Anglicare
Australia, told the committee that the 'notion of participation is much in the
public sphere and certainly having a job [or] occupation is a key form of
This section focuses on a number of broad issues affecting employment.
Employment issues relating to specific disadvantaged groups will be discussed
in the next chapter.
The unemployment rate—a headline rate of approximately 5–6% for the
total population over the last decade— is a deceptive statistic that does not
capture the lack of employment opportunities in the labour market, particularly
for young people. There are three other important statistics when measuring
people's engagement with the labour market. These are the unemployment rate,
the underemployment rate, the labour force underutilisation rate (LFUR),
and the extended labour force underutilisation rate (ELFUR).
These can be seen below in Figure 3.5.
Figure 3.5: Comparison of labour force statistics between young people
(15–24yrs) and all people (15–64 yrs) on August 2013
(ABS 6105.0 & 6202.0)
It is important to note that a large proportion of the Australian labour
force are eager to work but cannot access a job or sufficient hours. This is
the case for nearly 30 per cent of young people and nearly 15 per cent of the
total population. If an individual is unemployed, underemployed or engaged in
insecure work, he or she is likely to have poorer access to services. In most
cases, these are services required to participate in the labour market.
The advent of flexible work conditions has led to the development of an
'underclass in the workforce'
exposed to casual, insecure and low paid employment. Dr Falzon submitted that
'[w]e are aware of this growing category of the 'precariat'—people who are
precariously employed. There is an increasing trend towards casualisation, insecure
work and low paid work.'
Dr Mark Zirnsak from the Uniting Church gave an example of the impact
that insecure work has on individual well-being:
[A Uniting Church inquiry that] took evidence from people
about far more insecure forms of work—people whose job now involves getting up
at six o'clock in the morning and ringing up their employer to find out whether
they have a job for that day and, if so, where it is going to be. That clearly
impacts on people. They might be able to get an adequate income, but it is
clearly going to affect their ability to plan and to have relationships and
affect their sense of wellbeing and security in their life. Even if the income
might be adequate, or a higher income than they had in the past, it does impact
on those other aspects of their life. So, if you simply say that because their
income has improved their lives are better, that does not necessarily follow.
And those things—that sort of work security issue, for example—are things that
government policy does affect.
Ms Kasy Chambers, Executive Director of Anglicare Australia, noted the
difficulties experienced by low income earners when attempting to participate
in the labour force and society:
Like the government and in fact most people, Anglicare
Australia believes strongly in the value of participation, of being connected
and of belonging. However, we contend when someone's income is too low it can
actually prevent them from participation. The benefits of participation are
well documented. However, participation also costs. The cost of participation
is currently ill met by the lowest of government benefits. Anglicare is again
in agreement with the government in believing that nobody should exist on
government benefits over a long period. We believe that we owe it to members of
society to give them far more than that.
In a recent speech, the Treasurer, the Hon. Joe Hockey MP, spoke of the importance
of self-sufficiency in retirement.
There are many groups in our society who are unlikely to ever attain this
self-sufficiency. A recent industry survey found that a superannuation balance
of $510 000 (couple) and $430 000 (single) is required to sustain a comfortable
retirement. This survey also found that only 11 per cent of respondents have
more than $400 000 in superannuation and that 25 per cent of respondents have
less than $50 000. Further to this, more than two-thirds expect to rely on the
Clearly, there is a large gap between current superannuation balances and
self-sufficiency. There is also a large group of people currently reliant on
government allowances and exposed to intermittent, insecure employment. For
those who are underemployed, unemployed or reliant on low paid employment,
there is likely to be a greater reliance on government support for those people
in their retirement. The issue of self-funding retirement is discussed further
in chapter 4.
Transition—Safety net to the
There are many impediments to individuals who are trying to transition
from government allowances to the labour market. These include financial
disincentives such as earnings thresholds and the removal of benefits as an
individual transitions into the workforce offering low or no marginal benefit
in working; and non-financial disincentives such as discouraged job seekers,
and inadequate workplace flexibility for those with children, the disabled and
In their submission to the committee, People with Disability said:
Pervasive inequality and societal barriers block many people
with a disability from improving their situation through work. The labour force
participation rate for those aged 15–64 years with disability in 2009 was 54%,
much lower than that for those without a disability (83%).
The committee received evidence from Ms Terese Edwards, CEO of the
National Council of Single Mothers and their Children, on the issue of earnings
thresholds for payments, in particular Newstart:
We have this crazy, counterproductive system known as the
threshold allowance. To give you an example, a mum with three children on
parenting payment single can earn and keep about $113 per week. Once her little
one turns eight, she is allowed to keep $50 per week. These losses are
unrecoupable. National Welfare Rights estimates that a mum working 15 hours per
week on the minimum wage will have to work 28 hours once she has moved across
to Newstart just to retain that same amount. We question whether there is the
capacity and whether those hours are available.
In this example, there is no incentive for a mother to find
three childcare places, organise the children and her employer, and then pay
for the places in order to attend work and then receive no marginal benefit
until she has worked 28 hours. For a mother who can only access insecure,
intermittent work, the incentive is even less due to the increased difficulty
in finding a casual position in childcare, and perhaps not having access to 28
hours per week. In September 2013, there were over 265 000 individuals caring
for children who wanted to work but were not looking for work.
This is most likely due to the lack of incentive as described above.
According to the ABS, there are over 117 000 discouraged job seekers in
Australia with 'the most commonly reported main reason for not actively looking
for work was considered too old by employers (33 per cent) [and]
followed by no jobs in locality or line of work (20 per cent)'.
Discouraged job seekers are people who want to work but have been worn down by
discrimination and a lack of opportunities before becoming disengaged from the
Many submitters brought up intergenerational unemployment as an
impediment to labour market access.
These intergenerational issues reflect a complex interplay of factors including
lack of work opportunities, poor understanding of the benefits of education and
training, and a lack of resources to assist the next generation. The phenomenon
of intergenerational unemployment has arisen over the last 30 years, however,
the welfare payment system has not adapted to these changes. Ms Hatfield Dodds
explained that the welfare system was 'designed in a world where unemployment
was short term and sporadic [and payment] was really a bridge to get you from
job to job.' Ms Hatfield Dodds continued:
What we have seen since the late 1980s is the emergence of
intergenerational unemployment. So you do have people unemployed for two, three
or four years. We are working with people who have never had a job as well. We
work with those people. There are people growing up in areas of locational
disadvantage, the poverty postcodes, where no-one in a community has ever had a
Government support for the unemployed is too simplistic and does not
attempt to really engage with the range of complex issues that affect the
long-term unemployed. Ms Hatfield Dodds divided these into hard issues and soft
The hard issues are things like skilling people up for labour
market attachment and thinking around the health, transport, dental and housing
issues that we all know about. Then those really intractable issues at the core
are about people's expectations and hopes for themselves and their communities.
My [Port Adelaide] chair talks about loss of hope and fear of failure being the
two least tractable and most difficult things that we work with people around.
When you are working with people who are very deprived and very excluded, they
do not even dare to hope things can go right because right from the minute they
were born into a disadvantaged family in a disadvantaged area they have been
excelling at failing on almost any social or economic dimension.
In evidence, Ms Sarah Walbank from Carers Queensland Inc. described the
difficulties experienced by a carer:
My daughter is 24 years old but has funding for only 42 hours
per week. This means that we are together for no less than 110 hours per week.
As a consequence, I have no time to socialise, no assets and no way back into
the workforce.' The consequence of a parent carer's decision to leave the
workforce and accept more marginalised work is not merely a budgetary
inconvenience; it is a significant decision that has the potential to
negatively impact the family's financial capacity not only in their working
years but also longer term in their retirement years.
Ms Walbank continued, explaining the importance of the
pensioner education supplement for carers re-entering the workforce:
We have carers who have said to us, 'I'm actually qualified
in this but I'm completely unemployable because I've been out of the workforce
for 10 years. My qualifications are out of date. I'm not skilled in the
software. I'm not using the same language,' et cetera. The supplement is
important because it does provide some financial backup, particularly for
single-parent carers who we know are the most disadvantaged in Australia.
The issue of childcare is one that affects many Australian families and
acts as an impediment to the labour market. Although there are a number of
impediments to entering the labour market, the next section will focus
specifically on the issue of access to childcare and its impacts on labour
Households with dependent children generally have a number of options
regarding childcare and employment. Those households with two parents can
decide that one adult will remain in the workforce whilst the other remains
home to care for the children; both parents can work part-time and care
part-time; or both parents can work full-time whilst the children are placed in
childcare full-time. Single household parents with dependent children make
These decisions are influenced by many factors including personal
choice, financial circumstances, workplace flexibility and opportunities for
the child's intellectual and social development. These decisions are also
influenced by the age of the youngest child—that is, toddlers will require
longer day-care whereas school age children may require after-school care or no
care depending on school and parental work hours. This section will examine
factors that determine these decisions and the impact this has on both current
and future earnings capacity.
For middle and higher income families, the decision to access childcare
generally reflects personal circumstance. This may mean that in a two parent
household, the parent with the higher income continues working whilst the lower
paid partner cares for the children. As discussed in the next chapter, often
this partner is the woman. Alternatively, childcare may be used on a full-time
or part-time basis to allow both parents to work either in a full-time or
In lower income families, deciding whether to access childcare is
largely a matter of disincentives or impediments rather than a positive choice.
If potential income earned through entering the labour market is less, the same
or only marginally better than the cost of childcare, then that household's
adults (or adult) may choose to remain outside of the labour market. In most
cases, this will mean relying on social security allowances. As seen in chapter
5, these allowances provide a level of income support below the poverty line.
Although Australia has some of the most expensive childcare fees in the
Organisation for Economic Co-operation and Development (OECD), there are a
number of rebates that assist in reducing the cost of childcare close to the
The Australian Government currently offers two forms of assistance to those
families using childcare—the Child Care Benefit (means tested) and the Child
Care Rebate (not means tested). The Child Care Benefit pays a maximum of $4.10
per hour of care tapering off as income increases. The Child Care Rebate is
available to all families and pays a maximum of 50 per cent of child care costs
up to $7,500 per annum.
Figure 3.6 below outlines that participation in childcare services in
Australia is above the OECD average but employment within single parent
households is well below the average. This is primarily due to high average
effective tax rates (AETR). When moving from a government benefit to
employment, single parents are taxed at a high AETR due to benefits being
removed and income tax being paid. The AETR is at a rate of 50 per cent and
generally higher at the lower income levels. This compares with dual parent
households with an AETR of 50 per cent or less. AETR also decreases at higher
prospective employment income of all households.
This means that those with lower earning potential and particularly single
parent households have weak financial incentives to re-enter the labour market.
Over fifteen per cent of households in the lowest income quintile are single
parent households, this compares with 1.3 per cent in the top quintile and an
average of 5.8 per cent across all quintiles.
Participation in childcare services for children aged under 3 years
related to OECD average of 22.9
Source: OECD 2011
Figure 3.7: Sole parent employment rate
related to OECD average of 70.6%
This chapter has noted the particularly severe impact that low income
has on an individual's ability to access basic services. It is critical that
the Commonwealth Government maintain policies and programs, and the delivery of
these services, to ensure that inequality in Australia does not continue to
rise. Further to this, a number of principles that should guide the retention
and improvement of these services are outlined below.
The committee accepts that access to health services is impeded for low
income and other disadvantaged groups. It is important that out‑of‑pocket
expenses do not prevent timely and appropriate access to healthcare and
pharmaceuticals for low income and other disadvantaged groups. This will be
examined in more detail in Chapter 5. Funding for public healthcare needs to be
increased with a renewed focus on primary healthcare and preventive health
The committee received a range of evidence confirming the importance of
education. The committee considers that improved access and outcomes for
disadvantaged groups must be prioritised. As such, funding levels must be
predicated on the level of disadvantage. That is, more funding and resources
need to be provided to ensure that outcomes—such as, standardised testing, Year
12 completion, transition to study or the labour market—for identified disadvantaged
individuals and schools are brought in line with the broader population. The Commonwealth
must provide both leadership and funding to ensure that all Australians,
regardless of background or income level, are able to access education and training
that will lead to employment.
The committee is concerned that the Commonwealth Government is backing
away from its commitments in housing and homelessness (see paragraph 3.93). Evidence
presented to the committee suggests that there needs to be a greater
co-ordination of housing policy at a Commonwealth level. The committee considers
that national urban planning guidelines should be developed to ensure that new
and existing developments have access to public transport, health, education
and other services. Further to this, national planning guidelines for new
housing be developed which require a social mix of public and private housing
with a minimum target of affordable and public housing for low income and other
The committee received evidence on the issue of rental stress as rents
continue to rise in excess of CPI and wages growth. The committee considers
that increasing rent assistance commensurate with a rental index that reflects
real rental growth would assist with housing cost pressures.
The committee also notes the negative impact of the favourable taxation
treatment of residential property assets on housing affordability. The
Commonwealth Government should consider these taxes in its proposed white paper
on the reform of Australia's tax system.
This chapter has identified a number of systemic and cultural barriers
to those with low or no income. This includes disincentives for working mothers,
and discrimination against older workers, people with disability and those with
The committee received evidence about a number of successful programs
engaging disaffected youth and a number of other disadvantaged groups.
The committee recognises that the current funding model does not deliver
the best outcomes when considering the need for continuity and the realisation
of longer term objectives. This can only be achieved through the provision of
secure, longer term project funding which allows service providers to establish
a more permanent presence—including continuity of staffing—within a community. Longer
term funding arrangements allow social workers to build a real rapport with a
community, making change and project success more likely. The committee accepts
that programs reliant on government funding need to be accountable and subject
to rigorous evaluation. However, greater collaboration and communication
between government and service providers to create partnerships with real
objectives rather than isolated projects may better assist the community and
individuals these projects are designed to serve.
A number of these programs are explored in more detail in chapter 6.
Flexibility within workplaces for those with children, people with
disability and carers, and financial disincentives when moving from welfare to
work are the major impediments for those wanting to enter the workforce.
Employers need to recognise the value of all employees and, in turn, be
recognised for employing disadvantaged groups such as older (45 years and
over), disabled and episodically disabled, working parents, and carers.
The Commonwealth Government should consider the income tax burden on low
income earners as part of its proposed white paper on the reform of Australia's
tax system. The committee considers that low income earners should not be
financially penalised as they move from welfare to work. Finally, access to
affordable childcare particularly for those with insecure, intermittent employment
needs to be prioritised by the Government.
The committee notes that in many sections of the Australian economy
insecure work—including short-term contracts, casual or work in declining
industries—poses real challenges to employees. Chapter 6 of this report
considers the need for a targeted planning program for workers facing
retrenchment. This program would assist workers to gain the necessary skills to
transition to more secure employment.
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