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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


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;


Setting the Stage


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


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


Youth and their Families

www.melbourneinstitute.com Source: OECD calculations based on the OECD Short-Term Indicators Database

OECD Youth Unemployment


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


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


Many young people are heavily reliant on their families to get by …

and this will only intensify with proposed changes to working age payments.


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


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%


Those with Mental Health Issues


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


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

http://dx.doi.org/10.1787/9789264124523-en


Unemployment of those with MH Disorder (OECD)


http://dx.doi.org/10.1787/9789264124523-en


Income of those with MH Disorder (OECD)


http://dx.doi.org/10.1787/9789264124523-en


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.


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;


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;


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

http://www.oecd.org/els/soc/youth-social-indicators.htm

http://www.oecd.org/els/soc/youth-social-indicators.htm

http://dx.doi.org/10.1787/9789264119536-en


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

http://dx.doi.org/10.1787/9789264124523-en


Background Slides


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


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


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


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


Growth in Disability (OECD)


http://dx.doi.org/10.1787/9789264124523-en


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


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?



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


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



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



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