Social Policy Research Paper Number 29

Contents

• Executive summary
• Summary of main findings
• 1. Introduction
• 2. Data, measures and analysis
• 3. Income poverty
• 4. Subjective poverty
• 5. Financial stress
• 6. Interrelationships between and within indicators
• 7. Discussion
• Appendix 1: Conceptual and technical issues
• Appendix 2: Details on the data, measures and weights
• Appendix 3: Analyses of Wave 1 data
• List of shortened forms
• Endnotes
• References
• List of tables

6. Interrelationships between and within indicators

• 6.1 Interrelationships between before and after-housing income poverty
• 6.2 Interrelationships within measures across waves
• 6.3 Interrelationships between indicators

This section summarises the interrelationships between and within income poverty, subjective poverty and financial stress. Section 6.1 examines the interrelationship between the two measures of income poverty, Section 6.2 focuses on the performance of each measure across the two HILDA waves and Section 6.3 examines the proportion that were financially disadvantaged on two or three indicators in each wave and in both waves.

6.1 Interrelationships between before and after-housing income poverty

The correspondence between the two measures of income poverty is by no means perfect (Table 14). Of individuals classified as in poverty on the before-housing measure in Wave 1, 84 per cent were also classified as in poverty on the after-housing measure. For Wave 2, this figure was 83 per cent. This result reflects that adjusting for housing costs substantially changes the ranking of equivalised disposable incomes. The correspondence in the other direction is weaker; a substantially smaller proportion is classified as in poverty on the before-housing measure than on the after-housing measure. Of individuals classified as in poverty on the after-housing measure in Wave 1, 65 per cent were also classified as in poverty on the before-housing measure. For Wave 2, the figure was even lower at 61 per cent.

6.2 Interrelationships within measures across waves

Income poverty

Table 15 shows the percentages staying in and moving out of income poverty for the two HILDA waves. The proportions are quite sensitive to whether the before-housing or after-housing measure is used. According to the before-housing measure, 41 per cent of individuals in poverty in Wave 1 were 'stayers', that is were also in poverty in Wave 2. Nearly 60 per cent were 'movers', that is had moved out of poverty in Wave 2. On the after-housing measure, half were stayers and half were movers. These results are not simply due to differences in how the two measures define the proportions in poverty . Odds ratios, which summarise the association between variables independent of the marginal distributions, also show higher stability with the after-housing measure. On the before-housing measure, the odds for those in poverty in Wave 1 being in poverty in Wave 2 (rather than not being in poverty) are 7.9 times of the odds for those who were not in poverty in Wave 1.

This compares to an odds ratio of 9.1 on the after-housing measure. Therefore, the after-housing measure of income poverty shows higher levels of stability, probably because housing costs are more stable from year to year than annual household income.

Subjective poverty

The measure of subjective poverty was based on responses to a question on subjective prosperity. The association across waves in respondents' subjective evaluation of their level of prosperity is presented in Table 16. Because of the small numbers who said they were poor or very poor, the table represents all respondents with valid questionnaires, not the randomly selected group. Of the 348 respondents who said they were poor in Wave 1, 42 per cent said they were poor or very poor in Wave 2. A larger proportion judged themselves as more prosperous, nearly half (49 per cent) said they were 'just getting along' and 10 per cent said they were 'reasonably comfortable' or 'very comfortable'. Of the 64 respondents who said they were very poor in Wave 1, only 19 per cent judged themselves as very poor, and a further 33 per cent as poor, in Wave 2. Forty-seven per cent of the very poor group in Wave 1 judged themselves not to be poor in Wave 2.

Assuming that subjective prosperity constitutes an ordinal variable, the correlation of subjective prosperity among 10,295 respondents who answered the question in both waves is 0.62, which is similar to the correlation for income across waves.

Financial stress

There is not a strong correlation across waves in the incidences of cash flow problems (Table 17). Of those who could not pay their utility bills on time in Wave 1, nearly 56 per cent were in the same situation in Wave 2. About half of those who asked for financial assistance from friends or family in Wave 1 also asked for assistance from friends or family in Wave 2. The correspondence across waves for the other items tended to be lower, between 30 and 40 per cent. Table 17 also shows the correlations between waves for the single items and for the summary measure, which simply sums the number of incidences of financial stress. There is a tendency for the cross-wave correspondence to be weaker for the more severe cash flow problems. The wave-to-wave correlation for the summary measure was 0.60, which is similar to the wave-to-wave correlations for the income and subjective prosperity measures.

6.3 Interrelationships between indicators

Table 18 shows the before and after-housing poverty rates by subjective prosperity. Poverty is higher among households that judge themselves as poor or very poor, but the relationship is not particularly strong. Among households whose standard of living, according to a randomly selected household member, was prosperous or very comfortable, 6 to 10 per cent were in income poverty. About 10 per cent of the reasonably comfortable group were also defined as in income poverty. Of the group who judged themselves as poor, only 30 to 40 per cent were in income poverty, indicating that 60 to 70 per cent were above the poverty line. Only among the very small group (about 1 per cent of households) that judged themselves as very poor, was the level of income poverty, on the after-housing measure only, above 50 per cent.

Table 19 presents the results from a similar analysis of subjective prosperity and financial stress. Here the correspondence is stronger. About 66 per cent of poor and over 80 per cent of very poor households experienced two or more incidences of financial stress. About 30 per cent of households that were 'just getting along' experienced financial stress. Financial stress was much lower among more prosperous households. Of households that indicated they were poor or very poor in Wave 2, just over half had two or more incidences of financial stress in both waves.

Financial stress is not closely associated with income poverty (Table 20). Less than 30 per cent of households in before-housing poverty had two or more incidences of financial stress. Therefore, more than 70 per cent reported no incidences of financial stress. The relationship between after-housing income poverty and financial stress was a little stronger; just over 33 per cent of households in after-housing income poverty had two or incidences of financial stress.

Table 21 summarises the percentage of households that are financially disadvantaged on one, two or three measures. The first two lines show the percentages for before and after-housing income poverty. If subjective poverty (poor or very poor) is added as a criterion, the percentage that is financially disadvantaged falls substantially to around 2 per cent. If financial stress is the additional criterion, the decline is not as substantial— only 4 to 6 per cent of households were in income poverty and experienced financial stress. Only 1 to 2 per cent of Australian households in income poverty that indicated they were poor or very poor had experienced two or more cash flow problems. For persistent financial disadvantage across both Waves 1 and 2, the estimates are more than halved.

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