Children in Australia’s poorest households have about 10% chance of becoming top earners

Treasury research finds most severe poverty is ‘particularly entrenched’ but children far more likely to progress than in US

Children born into Australia’s poorest households will have little more than a 10% chance of becoming top income earners in their lifetime, according to new Treasury research.

Treasury research on intergenerational income mobility, to be released on Friday, found children in the bottom fifth of households in Australia had a 12.3% chance of reaching the top fifth by income. It said they were “60% more likely” to make this leap than in the US, where just 7.5% make it into the top fifth.

The report found that “poverty in the bottom decile is particularly entrenched”, a conclusion likely to add to calls to combat disadvantage through measures including raising the rate of jobseeker.

The report, by Nathan Deutscher in the structural analysis branch, examined the incomes of more than 1 million children born in Australia between the 1978 and 1982.

It found that, on average, having parents 10% higher in the income distribution lifted an Australian child’s income by 2.2%, compared with 3.4% in the US.

In Australia greater income mobility was driven by a strong labour market and education, with children in the mining states of Western Australia and Queensland particularly benefiting from high-paying jobs.

The report also noted the “striking success of second-generation Australians” evidenced by the “tendency of migrants to outperform locals with similar backgrounds”.

“For example, Vietnamese Australians had fathers with an average income rank at the 29th percentile but ended up at the 54th percentile in the space of a generation.”

“Migrant upward income mobility tends to reflect upward educational mobility … second-generation Australians aspire to more education, attain it, and earn more as a result.”

The report also noted increased “headwinds” for current generations including declining test scores, barriers to geographic mobility including due to house prices, and slowing productivity.

In two comparator countries, Sweden and the US, those born into the top 1% of households by income did better than Australia due to “inherited wealth (and hence capital income) rather than IQ, non-cognitive skills or education”.

The treasurer, Jim Chalmers, said it would be unfair if prospects were determined solely by where Australians were born or who their parents were.

“Social and economic mobility is the secret to a stronger, more sustainable and more inclusive economy in the future,” he said. “We’re doing well but we can do better.”

That will be reflected in the Albanese government’s agenda for 2023 including “investing in the high-wage jobs of the future, giving Australians the skills they need for those jobs and doing more to tackle entrenched disadvantage in parts of our country”, he said.

The Albanese government has come under pressure from crossbench senator David Pocock to increase jobseeker welfare payments, eventually agreeing to establish an expert committee to advise on the adequacy of welfare before every budget.

On industrial relations, Labor has already passed one bill to boost workers’ bargaining power and will introduce a second tranche of reforms to legislate its promises of same-job same-pay in labour hire and minimum conditions in the gig economy.

In the education portfolio, Labor has boosted fee-free Tafe places but has come under fire for delaying a new schools funding agreement by one year, which advocates warn will slow scheduled increases in public school funding.


Paul Karp

The GuardianTramp

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