The latest Household, Income and Labour Dynamics in Australia (HILDA) Survey, released today by the University of Melbourne, found that inequality within age groups was worst in Australia’s oldest cohorts; the 55-64-year-olds and those 65 and over.
It said that while inequality among those aged 55-64 is partly due to the different incomes of those still working and those in retirement, the high level of inequality among the 65 and older cohort is harder to explain.
The report’s authors, Professor Roger Wilkins and Dr Inga Lass also noted that inequality in this group worsened significantly between 2003 and 2008.
“Later retirement could potentially explain some of this rise, since a growing minority of the age group is not retired (and therefore receiving higher incomes),” they said.
“However, it may also be that growth in the number of retirees with significant superannuation holdings and other assets has increased inequality among this age group.”
Speaking in University of Melbourne publication, Pursuit, Mr Wilkins said there are policy implications for this inequality and the broader intergenerational inequality.
“The inequality we are seeing among retirees probably reflects the generous tax treatment that self-funded retirees have enjoyed and which I think has been over the top,” he said.
“We need to be thinking about perhaps taxing self-funded retirees a little more and reducing taxes on low income earners, who are disproportionately younger.”
While income inequality hasn’t worsened since 2001, income mobility is declining, meaning individual incomes haven’t changed in any significant way.
“While the increase in income stability from year to year is a positive development for people with good incomes, this is not a good development for people with low incomes, since they are more likely to have persistently low incomes,” the authors said.
At the same time, Australians younger than 30 are finding it harder than ever to enter the market. The ACT and the Northern Territory are the only regions where the home-ownership rate among 18-39-year-olds has actually increased since 2002, up from 37.4 per cent to 37.7 per cent in 2014.
In Sydney, the rate fell from 29.2 per cent to 19.7 per cent, and in Melbourne it plummeted from 35.7 per cent to 21.3 per cent.
Measuring over a similar period shows the rate of renter-home owner conversion has also plunged. Between 2001 and 2004, 13.5 per cent of renters became home owners, however between 2013 and 2016, only 7.6 per cent of renters made the jump.
It’s a slightly rosier picture for those aged 35-44, with 9.8 per cent making the leap between 2013 and 2016. However, that still reflects a fall from 15 per cent in 2001-2004.
“The transition from renting to home ownership has become less common, particularly among younger age groups. While there may be a number of factors behind this trend, increases in residential property prices (see Australian Bureau of Statistics, 2018b) are likely to be an important part of the explanation,” Mr Wilkins said in the report.
Adding to younger buyers’ difficulty is the growing rate of underemployment, which the ABS defines as part-time workers who would like to work more hours and are able to do so.
In February 1978, this figure was 2.6 per cent but by February 2017 it had reached 8.7 per cent. Younger workers are substantially more likely to be underemployed, with 41.2 per cent of those between 15 and 19 identifying as underemployed and 47.1 per cent of those aged 20-24.
Mr Wilkins commented to Pursuit, “In terms of generational equity, it doesn’t strike me as fair when you have younger people coming through facing higher house prices, and larger student debts because they need be more qualified to progress in a labour market that is less receptive to new entrants than what it was.”