Beware the poverty trap

LOW-income budgets are fragile and need to be handled with care.

Twins Michelle and Katherine Baker in Carlton Gardens, Melbourne . Born in 1990 they have been part of a 24-year study about their lives, opportunities and prosperity.

IN Australia’s convict past, Robert Hughes noted, “a man could be crushed under the penal system like a toad beneath a harrow. But he could also remake his life.”

As it turns out, the British ­experiment to export an entire class it believed crafted crime and misery turned into an undeniable success story.

It is something Australian Institute of Family Studies boss Alan Hayes points to as a clear example of how opportunity, chance and design can combine to break intergenerational cycles of poverty.

The convicts were hopelessly poor. Their children became hardy, resilient and were born truly free. “Without wanting to get too romantic, I think back to the opportunity available every day to the people in the colony,” Hayes says. “It really changed the circumstances of people who had been in horrific circumstances beforehand.”

In the same year Hughes published his seminal volume The Fatal Shore — 1987 — prime minister Bob Hawke delivered his election trump card amid a speech that prefigured the “we all have to shoulder the burden” rhetoric of the Abbott Coalition government.

“For our next term, we are setting achievable new goals for Australia’s future in the world,” Hawke said. “And at the head of those goals is the future of all our children. So we set ourselves this first goal: by 1990 no Australian child will be living in poverty.”

GRAPHIC: Poverty rates Sub-type: comment CAPTION: GRAPHIC: Poverty rates

The date, a marker in time, became something of a lightning rod for social policy boffins and researchers and, early in the year, staff from the Brotherhood of St Laurence identified 167 babies born in varying circumstances and with varying backgrounds for a study that is still going to this day.

The 24-year study was intended to look for answers governments and society are still seeking: How are children affected by the diorama of their earliest years? Does money alone help? Can the love and support of a good family overcome the lack of income? Crucially, though not singularly, which government policy helped and what was frittered away?

“One thing I really wanted to look at was: to what extent did the cost of existing prohibit these young people from really engaging productively in work, education and life?” lead author Janet Taylor says.

“What we found was, in a sense, a multitude of things. There are patterns of stressors on families on low incomes that are intense and very different to those suffered by people who have more stable and better incomes. But we’ve found resilience as well: children born to disadvantaged circumstances who have flourished.”

Taylor published five in-depth stories from the study in a book, launched last week, that draws out the tales of struggle and success. The interviewers checked in with the families when the children were aged six months, three years, five, six, 11, 15, 18 and 21.

Debbie (not her real name) was born in inner Melbourne in 1990 to parents Lyn and Don, both from troubled homes pockmarked by alcoholism and deprivation. She has three other siblings.

The story of Debbie’s eventual climb out of disadvantage is one of parents determined to give their daughter a life that was unavailable to them. Critically, it’s a story of transformation that could have been derailed by the impact of a million little moments when money ran tight and jobs were lost.

“These stories remind us of just how finely balanced and fragile low-income household budgets are and the way this impacts life chances,” Brotherhood executive director Tony Nicholson says.

Debbie’s family lived in public housing flats for the first three years of her life but eventually moved to a country town where her parents eventually bought a home, in 2000.

The pair earned $35,512 a year in 2002 — a combination of Don’s job at a sawmill and government payments, including the Parenting Payment for Lyn.

“I thinks she knows, she doesn’t annoy me and comes and gives me a cuddle,” Lyn said in 1993 when asked if the stresses of their circumstances affected her daughter.

Don reflects on his own childhood. “I’ve got habits of my own,” he says. “My dad was an alcoholic; I just smoke my drugs. I don’t know how to be a father. It’s really trying. I feel that every day I let them down.”

By 2002, with all the children in school, Lyn is desperately searching for a job. “I need a job big time, anything. I’d go to a factory, anywhere,” she says.

“Because I haven’t got a licence, it’s hard, too. If I had a job, it might be a lot easier for all of them because they want this, they want that, but we can’t give it to them. Like we give them a house and food and love, but when they are teenagers it’s not enough.”

The Productivity Commission last year analysed trends in income distribution in Australia and found real equivalised household disposable income grew much higher than among other OECD countries, but with a greater disparity.

Income among the top 10 per cent of earners grew by 4.5 per cent over the past two decades while those in the lowest decile saw their income grow by 3 per cent.

During this time, a massive restructure of the social security network in Australia on the back of the Cass social security review targeted payments at the low end of the income spectrum. The commission noted the breadth of households receiving welfare shrank, although the amounts received by the lowest earners grew.

Household income (in 2011-12 prices) included about $266 in government payments in 1993-94, and this grew to $346 in 2009-10.

However, this is only part of the story. The rise in the value of transfer payments did little to offset the span of inequality. Welfare lowered the inequality of equivalised market income by 28 per cent in 1993-94 but by only 23 per cent in 2009-10. It was having less and less of an impact.

The 1990s saw a flourishing landscape of social security changes. Disability pensions — formerly invalid pensions — and a raft of other payments were recast as support for people who could not work, or who were raising children.

In this time, Australia’s economy has continued to grow. Nothing has halted its growth in 22 years. But an uneasy government has signalled concern about the future and, like Hawke in 1987, a nation that must ask its citizens to take some of the pain.

The age of entitlement is over, Joe Hockey warned. But the Treasurer could not have been talking about the most marginalised. This cohort has scarcely been touched by a litany of policy measures in almost a quarter-century.

National Centre for Social and Economic Modelling analysis of Australian Bureau of Statistics data indicates about 2.6 million Australians — 11.8 per cent — live in relative poverty, defined as an income half as much as the median household income.

The OECD says 14.4 per cent of Australians live in poverty, up from about 12 per cent in 1995. The definitions are fraught, and while many live in poverty cycles for generations, others may fall into, and out of, severe disadvantage.

The concern now, according to the Brotherhood’s Nicholson, is that hard-won strengthening of the social safety net, largely preserved under John Howard, will be wound back. “We need to be really careful that in an effort to balance the budget we do not destroy the fragile budgets of low-income people,” he says.

“Howard was particularly good on understanding the importance of engaging youth with school-to-work transition programs. The current Coalition government’s latest proposals are divergent from the Howard years, however.”

The coming social crisis will be forged in the fires of rapidly growing house prices, he says. The median house price in Sydney recently cracked the $800,000 mark for the first time and prices have increased 16.1 per cent since May 2012.

In the same period, one-quarter of low-income households — in the bottom 40 per cent — were categorised as being in housing stress, where they spend more than 30 per cent of their income on housing costs.

“This is the big sleeper behind the struggle to live. If you want shelter, you have to really skimp on a whole range of other things like healthcare and education,” Nicholson says.

Twins Michelle and Katherine Baker, 23, took part in the Brotherhood study and have documented their entire lives with the help of researchers.

They represent the quintessential middle-class family, neither rich nor poor.

“My parents made it clear that we would always have a room and roof over our head and food and clothing if we needed, it but if we studied we would have to pay for ourselves and get HECS,” Michelle says.

“I know that we had a lot of opportunities growing up. I was always told about my chances. At the same time I was aware other children did not.

“At school some of them would talk about PlayStations while some would wear the same pair of socks all week because they couldn’t afford new ones.”

Katherine finished Year 12 and started a baker’s apprenticeship which required her dad to drive her to work at 5am each day because she did not have a licence. Later, she changed to study law and is in her first year.

“I still live at home. I’ve never lived out of home and I think I will wait until I finish university before I do,” she says.

“I need to make sure my boss can give me the hours I need to pay rent and keep up with study before I move out.”

Theirs is a comfortable existence, supported by money and a family’s love.

AIFS director Hayes says there is research that shows community and family relationships play a dramatic role in determining success for any given person.

One young man in the Brotherhood study, 21-year-old Rob, grew up in a middle-income family and attended private school. However, his parents separated when he was young and he has been unemployed for two years, plagued by depression, other mental health problems and “anger”, in his own words.

“Choice is misunderstood by a lot of people,” Hayes says. “If you have a lot of resources you might have a lot of opportunities, but the luxury of choice can bring its own anxieties.

“Lots of people don’t make life choices. The fact both members of a family are working doesn’t mean they chose that for themselves. They work because living is expensive.

“The right mix of opportunity can break the intergenerational cycles of disadvantage, that’s true. But we don’t want to be too ­romantic about it because some people really get stuck.”

A quantitative study of 10,000 Australian children, designed by the AIFS, began in 2004 and confirms previous studies which point to the likelihood that joblessness and separation persist through generations.

“Whether you had a parent ­either jobless, separated and ­divorced or both is a big indicator of intergenerational disadvantage, and the analyses show this rather elegantly,” Hayes says.

“This requires a rethinking of the sorts of programs government and other organisations offer. If you can improve the relationships of couples with children, you can make a big difference. You might not increase the longevity of the relationship but change the way they treat each other when they do for the better.”

That is a more nuanced argument than simply calling for an increase in welfare payments and sorting out housing affordability but, in many respects, it is a scarier, more intangible, option.

“If there is a way to do it, and it would involve mobilising community support, then people would be better off, no question,” Hayes says.

Well, one question: How?

Social Services Minister Kevin Andrews might think he has the answer by providing $200 worth of counselling vouchers to people in relationships, but reality is never so simple. The search for answers will continue.

The Brotherhood study author Taylor has a starting point, however. “The safety net has to stay,” she says, “or else everything falls apart.”