Kennedy, T. & Siminski, P. (2021). ‘Are We Richer Than Our Parents Were? Absolute Income Mobility in Australia’, Life Course Centre Working Paper Series, 2021-07. Institute for Social Science Research, The University of Queensland.
Tomas Kennedy and Peter Siminski
The share of people whose income is higher than their parents had at the same age is known as ‘absolute Income mobility’. Absolute mobility is an appealing indicator of economic progress because it captures aspirations for our children. It reflects economic growth, inequality, and opportunity.
Until recently, absolute mobility had never been estimated for Australia, nor indeed for any country in the world, mainly due to a lack of linked intergenerational income data. But new methods were proposed by Chetty et al. (2017, Science) and these have been verified by others. We use this approach to conduct the first dedicated study of absolute income mobility for Australia, using data from many sources.
We find that two-thirds of 30-34 year-olds have higher real incomes than their parents did at the same age, and this has been stable for 25 years. This is close to the highest percentage among countries for which estimates are available. Nevertheless, mobility was considerably higher for Boomers (over 80% had higher incomes than their parents). About two-thirds of this decline in mobility is due to lower economic growth. The remainder is due to rising inequality.
Absolute mobility is higher (78% for Millennials) if income is adjusted for family size. This is because ‘children’ have smaller households that their parents. This is partly due to delayed fertility. But it’s also simply because not everyone is a parent.
Absolute mobility is particularly high for children from low income families. Amongst people with low-income parents (at the 10th percentile), 90% have higher income themselves. Amongst people with high-income parents (at the 90th percentile), about 47% have higher income themselves.