Why is family economic situation important?
Low family income can adversely affect the health, education and self-esteem of children. Decades of research have provided evidence that low family income unfavourably affects children’s outcomes (Duncan et al. 2013). For most families, regular adequate income is the single most important determinant of their economic situation. Children living in households without sufficient income are at a greater risk of poor health and educational outcomes, both in the short and long term (Ryan et al. 2012). Low income affects a child’s diet and access to medical care, the safety of their environment, level of stress in the family, quality and stability of their care and provision of appropriate housing, heating and clothing (AIHW 2011; AIHW 2012).
In addition, studies have shown that children from low-income families are more prone to psychological or social difficulties, behaviour problems, lower self-regulation and elevated physiological markers of stress (Barnett 2008).
Does family economic situation vary across population groups?
In the 2015-16 ABS Survey of Income and Housing, there were an estimated 481,200 low income households with dependent children aged 0–14 years receiving an average real equivalised disposable income of $542. Equivalised disposable income is income left after tax that has been adjusted to account for the number of people living in the house and number of household incomes so that comparisons across households can be made. Further detail about this methodology is provided in the notes section.
The largest observed differences are in relation to family type; couple family households had a higher disposable income ($540 per week) compared to one-parent family households ($523).
There was little difference in income for households with the eldest dependent child in the 0–4 age group, relative to households with a child in the 5–14 year old age group ($541 compared with $542). Similarly, there was little difference reported between families with dependent children born in Australia ($539) relative to those with children born overseas ($534).
There was no obvious association between remoteness and equivalised household income, with households in Major cities having slightly higher income ($539) than households in Inner regional areas ($528), which in turn have lower income than households in Outer regional and remote areas ($544).
Has there been a change over time?
Over six survey periods between 2005-06 and 2015-16, the national mean equivalised disposable household income for households with dependent children aged 0-14 years in the second and third income deciles has increased year-on-year, in real 2015-16 dollars, from $449 in 2005-06 to $542 in 2015-16. This same trend has been observed for most of the population groups presented, with more pronounced variability observed for multiple family households and Inner regional areas, both experiencing a decrease in real household income between 2007-08 and 2009-10.
Equivalised household income is total household income adjusted by applying an equivalence scale. This makes it possible to compare income levels between households with different sizes and compositions. It reflects the need for larger households to have a higher level of income to achieve the same standard of living as a smaller household.
The equivalence scale allocates 1.0 point for the first adult (aged 15 years and over) in a household; 0.5 for each additional adult; and 0.3 for each child. Equivalised household income is derived by dividing total household income by the sum of the equivalence points allocated to household members. For example, if a household received combined gross income of $2,100 per week and comprised two adults and two children (combined household equivalence points of 2.1), the equivalised gross household income would be calculated as $1,000 per week (ABS 2013)
Low income households were defined as those in the second and third income deciles. The lowest decile is excluded because household income is not always a good measure of the total economic resources available to many people with an income close to nil or negative (some may own their homes and thus have low housing costs, some may be between jobs, or on holiday without pay and some may report negative returns on investments).
Deciles are formed using equivalised disposable household income of all households. Income is usually received by individuals but shared among family members. Household size and composition can therefore have a large impact on the standard of living that a given income can support. For this reason, income deciles are formed using equivalised disposable household income of all households, whereby an equivalence scale is used to adjust household income for household size and composition.
Data for all years are expressed in 2015-16 dollars.
- ABS (Australian Bureau of Statistics) 2013. ABS Household Income and Income Distribution, 2011—2012. Cat. No. 6523.0
- AIHW (Australian Institute of Health and Welfare) 2012. A picture of Australia's children 2012. Cat. no. PHE 167. Canberra: AIHW.
- AIHW 2011. Headline indicators for children's health, development and wellbeing, 2011. Cat. no. PHE 144. Canberra: AIHW.
- Barnett M 2008. Economic disadvantage in complex family systems: expansion of family stress models. Clinical Child and Family Psychology Review 11(3):145–61.
- Duncan, GJ, Kalil A & Ziol-Guest KM 2013. Early childhood poverty and adult achievement, employment and health. Australian Institute of Family Studies, Family Matters Issue 93, 2013, pp17-26.
- Ryan, R. M., Fauth, R. C., & Brooks-Gunn, J. (2012). Childhood poverty: Implications for school readiness and early childhood education. In O. N. Saracho & B. Spodek (Eds.), Handbook of research on the education of young children (3rd ed., pp. 301-321). New York: Routledge.