Why aren't you earning enough?

Australia's largest household survey has revealed that the circumstances in which we grow up significantly impact our future income and wealth potential. Our parents' educational attainment and occupation, family makeup, and the age at which we move out of the family home—as well as immigrant status and age of migration—are key indicators of future income and wealth potential.

The Household, Income and Labour Dynamics in Australia (HILDA) Survey—produced by the Melbourne Institute—is Australia's only large-scale nationally representative longitudinal survey, monitoring the movements of over 10,000 Australians since 2001 to create a 'moving picture' of how their lives are changing. The most recent report presents evidence of significant inter-generational transmission of socio-economic advantage and disadvantage, with educational attainment, employment and earnings at 25 years of age mirroring family income distribution.

The analysis examined associations between family background characteristics and household income and wealth by analysing the economic wellbeing of people aged 35-54 and what they say about their family background. The survey also considered how family income when growing up affects economic outcomes in early adulthood, following individuals over eight years from the age of 17.

The report author, Associate Professor Roger Wilkins, says the potential for such rich analysis will increase the longer the HILDA Survey continues. 

As the length of the HILDA Survey panel grows, it will be increasingly possible to examine how outcomes and experiences, measured when individuals are young, affect their outcomes in later life.

The research found that 25-year-olds with families in the top income quintile earn, on average, over $400 more per week than those with families in the bottom quintile. Individuals from higher income backgrounds are more likely to have a university degree and be employed in full time work.

A mother's employment when a daughter is 14 is linked to positive future education, employment and wealth outcomes, but was found to have no significant bearing on a son's future economic status. A father's employment, however, is associated with positive effects on income for both men and women, and positive effects on wealth for men, but not women.

Parental occupation type is also a determining factor. Professional and managerial occupations of fathers, and professional and community, personal services, clerical, administrative and sales worker occupations of mothers, tend to be associated with positive wealth outcomes.

Eldest male siblings generally have the best income and wealth outcomes but there are no statistical benefits for females who are the eldest child. Wealth potential appears to decline as the number of siblings increases, and only children tend to out-earn those with one or more siblings.

"Generally the more children parents have, the fewer resources—time and money—they have for each child," says Professor Wilkins.

The age a person leaves the family home is also related to labour market and outcomes. The survey found that people who moved out of home between the ages of 21 and 24 tended to achieve greater levels of wealth in later life than those who moved out before they turned 18. Remaining in the family home after 25 was found to be negatively associated with future earning potential.

HILDA-graph

The survey found significant earning penalties for immigrants. Men born in continental Europe have a mean equivalised income that is $8,353 less than Australian born citizens. For women the earning penalty is smaller, but still statistically significant at $4,989. Regarding wealth measures, however, the penalties are greater. Men from continental Europe have $382,512 less in household wealth than native-born men, followed closely by continental European women. For men, each additional year before arrival in Australia acts to reduce household wealth by $4,803.

Find out more about what makes Australian's happy, relationship satisfaction, education and labour market statistics in the latest HILDA report, available for free download at: melbourneinstitute.com/hilda/


 The HILDA Survey is conducted by the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne, and funded by the Australian Government Department of Social Services.