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Maintaining the Social Contract in the Face of Reform
Deborah Cobb-Clark Melbourne Institute
Pathways to Growth: The Reform Imperative Economic and Social Outlook Conference 2014
www.melbourneinstitute.com
What is the social contract?
“… persons’ moral and/or political obligations are dependent upon a contract or agreement among them to form society.” IEP (2014) And in Australia …? Reciprocity (mutual obligations) Equity & redistribution Social inclusion Risk sharing Social justice Intergenerational fairness
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Overview
Consider what an end to the “age of entitlement” might mean for the social contract;
Argue that labour market initiatives (partnerships) targeting currently marginalised groups are key to maintaining the social contract;
Focus specifically on the challenges of: – youth and their families; – those with mental health issues;
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Setting the Stage
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Social Exclusion by Age Group (2001 – 2012)
Source: Brotherhood of St Laurence & Melbourne Institute, Social Exclusion Monitor Bulletin , October 2013, with update.
0
10
20
30
40
50
60
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Perc
enta
ge
Under 15 years – all social exclusion 15 to 24 years – all social exclusion 25 to 49 years – all social exclusion 50 to 64 years – all social exclusion 65+ years – all social exclusion
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How Households Get Their Income
Source: OECD (2011), Divided We Stand: Why Inequality Keeps Rising, OECD Publishing. http://dx.doi.org/10.1787/9789264119536-en
Wages Self-Employment Income
Capital Income
Government Transfers
Taxes
AUS 27% 7% 9% 62% -4%
OECD-30 56% 11% 6% 45% -18%
Bottom Quintile
Wages Self-Employment Income
Capital Income
Government Transfers
Taxes
AUS 113% 10% 9% 1% -33%
OECD-30 102% 18% 9% 8% -37%
Top Quintile
www.melbourneinstitute.com Source: Youth in Focus Project -- Transgenerational Data Set – NOTE: Excluding FTB-A & Youth Allowance Student , New Strata
Income Support by Receipt by Family Income Support History
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Intensive IS
IS Age 10+
IS Mod: Age 6-10
IS Age <6
IS Light: Age 6-10
No IS
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Youth and their Families
www.melbourneinstitute.com Source: OECD calculations based on the OECD Short-Term Indicators Database
OECD Youth Unemployment
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Not in Employment, Education or Training
Source: OECD (2014). Social policies for youth: Selected indicators on the situation of disadvantaged youth (NEET), http://www.oecd.org/els/soc/youth-social-indicators.htm
Share of youth not in employment education or training (NEET) in % of all youth
Percentage-point change in NEET rates, 2007-2011
0 10 20 30 40NetherlandsNorwayDenmarkGermanySwedenCanadaLuxembourgBelgiumSloveniaIcelandUnited StatesUnited KingdomAustriaSlovak RepublicFrancePortugalFinlandCzech RepublicPolandAustraliaEstoniaMexicoHungaryItalyIrelandChileSpainGreeceOECD Average
Inactive NEET rates Unemployed NEET rates
-5 0 5 10 15
Inactive NEET rates Unemployed NEET rates
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Study & Employment by Family Income-Support History
Data source: Cobb-Clark, D. & Gorgens, T (2014). Parents’ economic support of young-adult children: do socioeconomic circumstances matter?, Journal of Population Economics, 27 (2), 447-471 & Youth in Focus.
0
10
20
30
40
50
60
Age 18 Age 20 Age 18 Age 20 Age 18 Age 20
No study, no work No study No work
Perc
ent
None
Moderate
Extensive
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Many young people are heavily reliant on their families to get by …
and this will only intensify with proposed changes to working age payments.
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Parental Support by Family Income-Support History
Data source: Cobb-Clark, D. & Gorgens, T (2014). Parents’ economic support of young-adult children: do socioeconomic circumstances matter?, Journal of Population Economics, 27 (2), 447-471 & Youth in Focus.
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
None Moderate Extensive None Moderate Extensive
Age 18 Age 20
Co-residence
Financial Gift
Median
90th Percentile
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Homelessness
Source: Scutella R., Johnson, G., Moschion, J., Tseng, Y & Wooden, M. (2012). Journeys home research report No.1: Wave 1 findings.
Age at which first became homeless: <18 years old: 51.3% <25 years old: 72%
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Those with Mental Health Issues
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Disability Support Pension Recipients (2001-2013)
Data source: Department of Social Services (2013). Characteristics of disability support pension recipients.
32.5% 33.3% 33.7% 34.0% 33.9% 33.6% 31.9% 31.1% 30.0% 29.2% 28.2% 27.3% 26.1%
22.6% 23.7% 24.7% 25.4% 26.2% 26.8% 27.3% 27.6% 28.2% 28.7% 29.5% 30.3% 31.2%
10.1% 10.2% 10.5% 10.7% 11.0% 11.3% 11.2% 11.2% 11.4% 11.6% 11.8% 12.0% 12.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
DSP Recipients by top 3 primary medical conditions - June 2001 to June 2013
Musculo-skeletal & connective tissue Psychological/psychiatric intellectual/learning
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Employment of those with MH Disorder (OECD)
Source: OECD (2012). Sick on the job? Myths and realities about mental health and work. http://dx.doi.org/10.1787/9789264124523-en
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Unemployment of those with MH Disorder (OECD)
Source: OECD (2012). Sick on the job? Myths and realities about mental health and work. http://dx.doi.org/10.1787/9789264124523-en
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Income of those with MH Disorder (OECD)
Source: OECD (2012). Sick on the job? Myths and realities about mental health and work. http://dx.doi.org/10.1787/9789264124523-en
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How do we maintain the social contract in the face of current reforms?
Improve access to the labour market and employment opportunities for groups with reduced access to the social safety net.
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Reduce the LM barriers for youth; Penalty rates; Apprenticeships/vocational training; School to work transitions; Programs to provide workplace experience;
Recognize that not all youths will have family support and build in safe-guards;
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Understand that … “mental health is a new priority challenge for the labour market” (OECD 2012)
More focus on common mental health issues; Identify mental health issues among the unemployed as
well as disabled; Strengthen the activation elements of the disability
system and make work pay; Develop partnerships with employers to help people find
work; Co-ordinate employment and mental health services;
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Australian Bureau of Statistics (2014). Labour Force, Australia, cat. 6202.0. Brotherhood of St Laurence (2014). On the treadmill: Young and long-term
unemployed in Australia. Cobb-Clark, D. & Gorgens, T. (2014). Parents’ economic support of young-
adult children: Do socioeconomic circumstances matter?, Journal of Population Economics, 27 (2), 447-471.
Department of Social Services (2013). Characteristics of disability support pension recipients.
OECD (2014). Social policies for youth: Selected indicators on the situation of disadvantaged youth (NEET), http://www.oecd.org/els/soc/youth-social-indicators.htm
OECD (2013). Latest labour market developments and the OECD youth action plan. Presented at OECD High Level Parliamentary Seminar.
OECD (2011). Divided We Stand: Why Inequality Keeps Rising, OECD Publishing. http://dx.doi.org/10.1787/9789264119536-en
References
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OECD (2012). Sick on the job? Myths and realities about mental health and work. http://dx.doi.org/10.1787/9789264124523-en
Scutella R., Johnson, G., Moschion, J., Tseng, Y & Wooden, M. (2012). Journeys home research report No.1: Wave 1 findings.
Youth in Focus -- http://rse.anu.edu.au/research-projects/youth-in-focus/
References
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Background Slides
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Why focus on the issue of intergenerational mobility?
Intergenerational mobility may improve equity by reducing inequality, promoting social justice and distributing resources more equitably;
Intergenerational mobility may be an instrument for achieving greater economic efficiency by ensuring that individuals’ talents are fully utilized.
The way resources are allocated across generations affects overall social welfare – defined across generations – through the endowments that each generation inherits (Atkinson 1981; 1983);
www.melbourneinstitute.com Source: Brotherhood of St Laurence, On the treadmill: Young and long-term unemployed in Australia, 2014.
Australian Youth Long-term Unemployment
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0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
Jan-
96
Mar
-96
May
-96
Jul-9
6
Sep
-96
Nov
-96
Jan-
97
Mar
-97
May
-97
Jul-9
7
Sep
-97
Nov
-97
Jan-
98
Mar
-98
May
-98
Jul-9
8
Sep
-98
Nov
-98
Jan-
99
Prop
ortio
n re
ceiv
ing
inco
me
supp
ort (
%)
Income support receipt by family origin group
Non-recipient group Middle income familiesLow-income working families One adult low-paid work and other receiving supportShort-term social security recipient families Long-term social security recipient families
Intergenerational Correlation in Income Support
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Australian Youth Unemployment (Ages 15-24)
0
5
10
15
20
1978 1983 1988 1993 1998 2003 2008 2013
Unemployment Rate
All persons 15-24 year olds
Source: ABS, Labour Force, Cat. 6202.0. seasonally adjusted
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Australian Youth Employment Rates (Ages 15-24)
50
55
60
65
1978 1983 1988 1993 1998 2003 2008 2013
Employment to Population Ratio
All persons 15-24 years old
Source: ABS, Labour Force, Cat. 6202.0. seasonally adjusted
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Growth in Disability (OECD)
Source: OECD (2012). Sick on the job? Myths and realities about mental health and work. http://dx.doi.org/10.1787/9789264124523-en
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Pyschological/ psychiatric
31%
Musculo-skeletal & connective
tissue 26%
Intellectual/ learning
13%
Nevous system
5%
Circulatory system
4%
Other 21%
Source: Senate Estimates, found in “One third on pension for mental health,” The Australian, January 29th, 2014, p.6
Main Medical Conditions -- Disability Support Recipients
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Average age of leaving home: – Men: 20.8 years old – Women: 20.5 years old
Economic Resources: – Briefly experience a drop in total and equivalised household incomes
Financial Hardships: – Increase after leaving parent’s house; by 33%-points for men and
66%-points for women – Men typically go without meals and ask friends and family for help,
while women also miss utility, mortgage and rent payments – Hardships are temporary and disappear within 5 years for men, but
are larger and sustained for women
Source: Ribar D, C. (2013) Is leaving home a hardship? Melbourne Institute working paper.
Is Leaving Home a Hardship?
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Income Support by Receipt by Family Income Support History
Source: Youth in Focus Project -- Transgenerational Data Set – NOTE: Excluding FTB-A , New Strata
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Intensive IS
IS Age 10+
IS Mod: Age 6-10
IS Age <6
IS Light: Age 6-10
No IS
www.melbourneinstitute.com Source: Youth in Focus Project -- Transgenerational Data Set – NOTE: Excluding FTB-A & Youth Allowance Student , New Strata
Income Support by Receipt by Family Income Support History
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Intensive IS
IS Age 10+
IS Mod: Age 6-10
IS Age <6
IS Light: Age 6-10
No IS
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Income Support by Receipt by Family Income Support History
Source: Youth in Focus Project -- Transgenerational Data Set – NOTE: Excluding FTB-A, Old Strata
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Intensive IS
IS Age 10+
IS Mod: Age 6-10
IS Age <6
IS Light: Age 6-10
No IS
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Income Support by Receipt by Family Income Support History
Source: Youth in Focus Project -- Transgenerational Data Set – NOTE: Excluding FTB-A & Youth Allowance Student , Old Strata
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Intensive IS
IS Age 10+
IS Mod: Age 6-10
IS Age <6
IS Light: Age 6-10
No IS