Living standards can be assessed by looking at a number of determinants such as income and poverty levels, how satisfied people are with their financial situation, financial resilience, leisure time, and access to services. When assessing living standards, it’s important we don’t restrict the experiences around income and/or poverty. While economic wellbeing is a significant player, it’s also important to take a holistic look at a balanced lifestyle1.
We know that living standards affect an individual’s social, economic, and health outcomes, and we know the effects may be enduring, with children who have experienced deprived living standards, often continuing to feel the impact of this into adulthood.
Income and Poverty
Income is one of the most common and straightforward measures of material living standards2. However, to fully understand how we measure this, it is important to understand it in further detail. “Equivalised disposable income” is basically a person’s income available after income tax and the Medicare levy have been deducted, that is then adjusted for household size and composition (number of dependents etc.)3. Simply put, a single person living alone earning $100,000 per year would have a higher equivalised disposable income than a married, single income earner with two children, earning the same amount.
In Australia, according to data from the ABS, the median equivalised disposable income per week (in 2014 dollars) was $590 in 2000-01 and this increased gradually to $837 in 2012-13.
Poverty is defined as living in a household with an equivalised income of less than 50% of the national median4. But despite increasing median incomes over the same period, according to data from the HILDA survey, the estimated proportion of Australians living in poverty increased significantly from 7.7% in 2001 to 10.8% in 2011. The good news is that since 2011 the poverty rate has fallen towards its 2006 level of around 9%.
Who’s at risk?
In our analysis of 2013 HILDA data, we saw that children, young people, and older adults were, on average, more likely to be living in poverty than 25 to 64 year olds. In particular, the population aged 65 and over were at the greatest risk, with a 19% chance of living in poverty compared to 7% for 25 to 64 year olds.
In addition, people with moderate, high, or very high levels of psychological distress also had significantly higher odds of living in poverty than those with low distress. The same can be said for people with a disability when compared to those without a disability. In addition, Indigenous Australians had a 17% chance of living in poverty, compared to 10% of non-Indigenous Australians. Unsurprisingly, the odds of living in poverty were also highest for people living in the most disadvantaged areas.
In addition, when we looked at trends over time in the "poverty gap" (the difference between the poverty line and
average equivalised household disposable income of households below the poverty
line) within the HILDA data, we found that poor households were significantly poorer in 2013, on average, than they were at the start of the millennium.
According to HILDA survey data, in 2013 70% of Australians aged 15 and over considered themselves to be financially comfortable or prosperous, a small but significant increase from 2011. Our analysis of those data revealed that the odds of feeling comfortable or prosperous were higher for young people aged 15 to 24, and people aged 65 and over, which may indicate the greater responsibilities of 25 to 64 year olds who are more likely to be raising children and paying a mortgage.
Living on Benefits
Despite increased poverty rates over the same period, HILDA data show that the proportion of households for which 50% or more of household income comes from benefits decreased from 24.4% in 2001 to 22.6% in 2011 and has remained at around 22% ever since.
According to our analysis of HILDA data, in 2013 the chance of living in a household reliant on benefits was:
- 12% for someone aged 25 to 64
- 20% for children aged 0 to 14
- 27% for someone with a disability
- 29% for someone living in a disadvantaged area
- 30% for someone with very high psychological distress
- 34% for an Indigenous Australian
- 44% for someone aged 65 or over
In this section we look at the population’s experience with financial difficulties throughout the year of the survey, with a particular focus on the ability to pay bills on time, make rent or mortgage payments and seeking financial help from friends and family, which were the most commonly reported financial difficulties.
While we saw that approximately 70% of people reported feeling financially comfortable or prosperous in 2013, not all shared this feeling. In fact, during the same period, data from the HILDA survey show that 3% were unable to heat their home, 3% asked for help from welfare or community organisations, 3% went without meals, 4% pawned or sold something, 5% were unable to pay their mortgage or rent on time, 11% had to ask friends or family for financial help, and 11% were unable to pay utility bills on time.
Free time is considered to be an important component of a balanced lifestyle5 and contributes to good quality of life and living standards. Satisfaction with free time was rated on a scale from 0 (totally dissatisfied) to 10 (totally satisfied) and according to 2013 data from the HILDA survey, Australians aged 15 and over rated their satisfaction at 6.7.
Lack of access to childcare, including because of affordability of services, is a significant barrier to women entering employment6. As such, it has secondary impacts on living standards by curtailing the household’s ability to earn additional income. In 2013, according to data from the HILDA survey, 24% of people with children under 15 who considered or used childcare to undertake paid work reported difficulties accessing childcare services. In addition, the number of people having problems with affordability of childcare rose significantly between 2001 and 2013: from 33% to 39%.
While 70% of Australians consider themselves to be prosperous, there are still significant deficits in the living standards of many. With around 9% of Australians living in poverty and 22% of Australian households receiving 50% or more of their income from benefits, we can see there is a long way to go with closing the gap of disadvantage. In particular, lack of access to childcare, including because of affordability of services, remains a significant issue and barrier to women entering the workforce. In 2013, 39% of people seeking or using childcare services had problems with affordability.
- SEN, A. 1984. The living standard. Oxford Economic Papers, 36, 74-90
- O'DONNELL, O., VAN DOORSLAER, E., WAGSTAFF, A. & LINDELOW, M. 2007. Measurement of living standards. Analyzing health equity using household survey data : a guide to techniques and their implementation. Washington, DC: World Bank Group.
- AUSTRALIAN BUREAU OF STATISTICS. 2011-12. Summary of findings [Online]. Available: http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/6523.0Main+Features22011-12 [Accessed January 2016].
- ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT 2016a. Poverty rate (indicator). OECD.
- MINISTRY OF SOCIAL DEVELOPMENT 2010. The social report. Wellington, New Zealand: Ministry of Social Development.
- MCNEISH, D. & SCOTT, S. 2007. The state of London's children report. London: DMSS Research & Consultancy for the Greater London Authority.