Deep and Persistent Disadvantage in Australia

Staff working paper

This paper by Rosalie McLachlan, Geoff Gilfillan and Jenny Gordon was released on 11 July 2013.

Strong economic growth is a way of increasing living standards and opportunities. Yet despite growing levels of prosperity over the last two decades, and the unemployment rate more than halving, there are concerns within the community that some Australians are being 'left behind'.

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Key points
Media release
Contents

Australia has experienced two decades of economic growth and rising average incomes, but some in the community continue to be 'left behind'.
Disadvantage is a multi-dimensional concept. It is about 'impoverished lives' (including a lack of opportunities), not just low income. Poverty, deprivation, capabilities and social exclusion are different lenses to view and measure disadvantage.
A number of researchers produce estimates of the extent of disadvantage in Australia. Each relies on contestable assumptions and thresholds.
Around 5 per cent of Australians aged 15 plus are estimated to have experienced deep social exclusion in 2010, fewer than in 2001 (7 per cent). The rate of very deep exclusion was stable at around 1 per cent (Social Exclusion Monitor).
Fewer people experience ongoing disadvantage — 3 per cent of Australians experienced deep social exclusion for five or more years (between 2001 and 2010) and just under 1 per cent for seven or more years.
People who are more likely to experience deep and persistent disadvantage include: lone parents; Indigenous Australians; people with a long-term health condition or disability; and people with low educational attainment. Many are public housing tenants and are weakly attached to the labour market.
Disadvantage has its roots in a complex interplay of factors. Many of these factors, when combined, can have a compounding effect. The probability that any one person will experience disadvantage is influenced by: their personal capabilities and family circumstances; the support they receive; the community where they live (and the opportunities it offers); life events; and the broader economic and social environment.
A child's earliest years fundamentally shape their life chances. Gaps in capabilities between children from socioeconomically disadvantaged families and their more advantaged peers appear early in life. Starting school 'behind the eight ball' can begin a cycle of disadvantage that sets a trajectory for poorer outcomes later in life.
Education is a foundation capability. It improves a person's employment prospects and earning capacity, and the evidence points to a relationship between education and better health and raised civic and social engagement.
Employment is the route out of disadvantage for most people of working age.
Disadvantage imposes costs on people and families who experience it and on the broader community. Only avoidable costs (reductions in disadvantage that are realistically possible) should be included when estimating the costs of disadvantage.
Longitudinal data is critical to understanding the dynamics of disadvantage. But people who are most disadvantaged are often not well represented in such studies. Administrative data has the potential to provide new knowledge to inform researchers and policy makers about deep and persistent disadvantage.

Background information

Jenny Gordon (Principal Adviser Research) 02 6240 3296

Deep and Persistent Disadvantage in Australia

A Productivity Commission Staff Working Paper on Deep and Persistent Disadvantage in Australia found that strong economic and income growth has played a critical role in improving living standards and employment opportunities, but some people continue to experience deep and persistent disadvantage.

The authors, Rosalie McLachlan, Geoff Gilfillan and Jenny Gordon, find that there is no single agreed way to define and measure disadvantage. Nonetheless it is clear that disadvantage is about 'impoverished lives', rather than just low income.

Many Australians experience disadvantage at some point in their lives. Fewer experience deep disadvantage. The Social Exclusion Monitor shows that around 5 per cent of Australians aged 15 years plus experienced deep social exclusion in 2010, down from 7 per cent in 2001. The rate of very deep exclusion over the decade remained at around 1 per cent.

Experience of disadvantage is also very dynamic. Most people who become disadvantaged are able to move out of it relatively quickly, but a small group remain disadvantaged for extended periods of time. Between 2001 and 2010, just under 3 per cent of Australians aged 15 years plus experienced deep social exclusion for five or more years and just under 1 per cent for seven years or more.

People who are more likely to experience deep and persistent disadvantage include lone parents and their children, Indigenous Australians, people with a long-term health condition or disability, and people with low educational attainment. But most people in these groups, through their personal resilience and capabilities, family support, and/or opportunities for work or other engagement in society, do not experience deep and persistent disadvantage.

Of particular policy relevance, the authors find that:

a child's early years are fundamental to shaping their life chances
education is a foundation capability — it improves a person's employment prospects and earning capacity, and can lead to better health, improved life satisfaction and higher levels of social engagement
employment is the route out of disadvantage for most people of working age.

Background information

Jenny Gordon (Principal Adviser Research) 02 6240 3296

Other

02 6240 3330 / media@pc.gov.au

Preliminaries
- Cover, Copyright, Contents, Acknowledgments and Abbreviations
Overview - including key points
Chapter 1 What is this paper about?
- 1.1 Why the policy interest in disadvantage?
- 1.2 The paper structure
Chapter 2 What does it mean to be disadvantaged?
- 2.1 Poverty — the traditional concept of disadvantage
- 2.2 Deprivation
- 2.3 Capability approach
- 2.4 Social exclusion and inclusion
- 2.5 Bringing together measures of income, deprivation, capabilities and social exclusion
- 2.6 The importance of dynamics in understanding disadvantage
Chapter 3 The extent of disadvantage in Australia
- 3.1 Income based measures of disadvantage
- 3.2 Indicators of deprivation
- 3.3 Indicators of social exclusion
- 3.4 Characteristics of Australians most likely to experience disadvantage
- 3.5 Where do people experiencing disadvantage live?
- 3.6 The relative merits of the different measures of disadvantage
Chapter 4 Factors influencing life chances of experiencing disadvantage
- 4.1 Early experiences and how they can influence life chances
- 4.2 Success at school — education and life chances
- 4.3 Beyond school
- 4.4 The importance of employment
- 4.5 Poor health, disability and disadvantage
- 4.6 Relationships and families
Chapter 5 The costs of disadvantage
- 5.1 A broad framework for measuring avoidable costs
- 5.2 Forgone employment income
- 5.3 Expenditure on 'regrettables'
- 5.4 Quality of life costs
- 5.5 The distribution of costs
Chapter 6 Where to from here? – measurement and data issues
- 6.1 Issues underlying the different measures of disadvantage
- 6.2 Longitudinal data — critical for understanding disadvantage
- 6.3 Administrative data
Appendix A Characteristics of Australians most likely to experience disadvantage
Appendix B Strengths and weaknesses of measures of disadvantage used in Australia
References

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