Melbourne Institute

Session 2A

The Dynamics of Low Pay Employment in Australia
Author/s: Lixin Cai, Department of Education, Employment and Workplace Relations

Abstract: Using the Household, Income and Labour Dynamics in Australia (HILDA) survey, this study shows that the largest proportion of low pay spells originated from higher pay; only a small proportion were from non-employment or recent graduates. While the majority of low pay spells transitioned to higher pay, a significant proportion ended up with non-employment. The multivariate analysis shows that workers who entered low pay from higher pay also have a higher hazard rate of transitioning to higher pay; and those who entered low pay from non-employment are more likely to return to non-employment. Union members, public sector jobs and working in medium to large size firms increase the hazard rate of transitioning to higher pay, while immigrants from non-English speaking countries and workers with health problems have a lower hazard rate of moving into higher pay. There is some evidence that the longer a worker is in low paid employment, the less likely they are to transition to high pay.

 

The immigrant wage gap and assimilation in Australia: does unobserved heterogeneity matter?
Author/s: Robert Breunig (The Australian National University), Syed Hasan (The Australian National University), Mosfequs Salehin (Australian Treasury)

Abstract: Immigrants to Australia are selected on observable characteristics. They may also differ from natives on unobservable characteristics such as ambition or motivation. If we account for unobservable differences, we find a wage gap for immigrant men from English speaking backgrounds, in contrast with previous research which has found no wage gap. Controlling for unobserved heterogeneity also seems important for finding cohort effects. Immigrants that arrived before 1985 faced a larger wage gap compared to native-born Australians than subsequent cohorts. Confirming other research, we find wage gaps for immigrant men and women from non-English speaking backgrounds. Wage assimilation occurs slowly for all groups, but is slowest for those from non-English speaking backgrounds.

Session 2C

Does Question Order Affect Reports of Childbearing Desires, Expectations and Intentions in the HILDA Survey?

Author/s: Amina Keygan (The Australian National University)

Abstract: Childbearing intentions and measures of intended family size are considered to be amongst the most important proximate determinants of subsequent childbearing behaviour. These measures are also understood to remain relatively stable at an aggregate level across the reproductive life course of cohorts. Between 2001 and 2011, Australian individuals reported dramatic fluctuations in their desires, expectations and intentions for children. Using data from 11 waves of the Household Income and Labour Dynamics in Australia Survey, this paper investigates the potential causes behind these instabilities, and focuses particularly on the effects of changing question order in the battery of family formation questions. The analyses indicate that in years when question order differed from the previous wave, both men and women reported significantly higher desires, expectations and intentions for children. The paper concludes that the current question order used in HILDA to collect family formation information is in error, and offers an alternative approach. Given that measures of childbearing intentions are becoming increasingly influential in Australia, the implications of these findings are discussed in the dual contexts of family policy and survey methodology.

 

Tailoring Mode of Data Collection in Longitudinal Studies

Author/s: Olena Kaminska and Peter Lynn (University of Essex)

Abstract: Longitudinal studies provide possibilities to tailor future wave design to respondent’s preferences, among them mode of interview. Assigning preferred mode to each respondent can potentially be efficient in terms of effort (e.g. number of attempts), and advantageous in retaining respondents. Our study explores whether self-reported mode preference predicts participation in different modes. As part of a longitudinal experimental study called Innovation Panel (UK) we asked respondents about their most and least preferred interview modes (face-to-face (F2F), postal, telephone or web), and to rate the chance that they would participate in the next wave if they are contacted via each mode (except F2F as this was the mode of interview). In the following wave respondents were randomly assigned to F2F protocol or web with F2F follow-up protocol. All three types of questions perform well in predicting participation in web part of the mixed-mode protocol, but less well the difference in participation between MM and face-to-face protocols. We provide an example of cost and quality considerations in assigning difference mode preference groups to MM or face-to-face mode protocols.

Session 3A

Non-Standard ‘Contingent’ Employment and Job Satisfaction: A Panel Data Analysis

Author/s: Hielke Buddelmeyer, Duncan McVicar and Mark Wooden (The University of Melbourne)

Abstract: It is widely assumed that contingent forms of employment, such as fixed-term contracts, labour-hire and casual employment, are associated with low quality jobs. This hypothesis is tested using data from a nationally representative household panel survey covering a country (Australia) with a high incidence of non-standard employment. Ordered logit regression models of job satisfaction are estimated that hold constant all time-invariant individual differences as well as a range of observed time-varying characteristics. The results indicate that, among males, both casual employees and labour-hire workers (but not fixed-term contract workers) report noticeably lower levels of job satisfaction. Restricting the sample to persons aged 20-59 increases the estimated magnitudes of these effects. Negative effects for women are mainly restricted to labour-hire workers. We also show that the relationships between job satisfaction and contract type vary with educational attainment and the length of job tenure. Working hours arrangements also mediate the relationship.

 

Job Characteristics and Labour Supply

Author/s: Lars Kunze and Nicolai Suppa (Technical University of Dortmund)

Job characteristics have been studied from various perspectives. Their influence on labour supply, however, has mostly been neglected. The aim of this paper is thus twofold: First, we propose a consistent conceptual framework, based on Lancaster’s approach to consumer theory, for rationalizing such characteristics in conventional theoretical labour supply models. Within this framework, we investigate two main hypotheses: Favorable< job characteristics imply (i) lower wage elasticities of labour supply but (ii) larger (less negative) income elasticities. Second, we provide new empirical evidence on the job characteristics-labour supply nexus by estimating a standard discrete choice model using Australian data. The empirical findings lend support to our hypotheses and thus buttress the importance of job characteristics in labour supply decisions.

Session 3B

Measuring Individual and Household Saving in Australia

Author/s: Steven Stillman (University of Otago), Malathi Velamuri (Independent Researcher) and Yun Liang (Motu Economic and Public Policy Research)

Abstract: In this paper, we examine two measures of individual and household saving in Australia calculated using the Household, Income and Labour Dynamics in Australia (HILDA) Survey. We consider the distribution of each of these saving measures, as well as how they vary by household characteristics. We compare these figures to official government statistics on aggregate saving by households.

Session 3C

Household income after separation: Does initiator status make a difference?

Author/s: Belinda Hewitt (The University of Queensland), Anne-Rigt Poortman (Utrecht University, The Netherlands)

Abstract: An influential hypothesis in divorce research is that high financial costs deter divorce. This study indirectly tests this hypothesis by examining whether people who initiate separation do better financially than those who did not initiate. The analytic sample comprised 6,424 first marriages of men and women at Wave 1 of the Household Income and Labor Dynamics in Australia (HILDA) survey, who were followed over the subsequent 7 waves. Using a random intercept model, we found no significant differences in household income for men who initiated separation relative to men who reported a partner or jointly initiated separation. Unexpectedly, women’s household income was lower if they initiated separation than for women who did not. Several reasons are proposed for these unexpected findings.

 

Patterns of Contraceptive Use

Author/s: Edith Gray (The Australian National University) and Dharma Arunachalam (Monash University)

Abstract: This paper investigates the pattern of contraceptive use of Australian women who are at ‘risk’ of pregnancy: that is, women of reproductive age who are sexually active. The aims of the paper are to determine how women control their fertility, and how contraceptive use varies over their reproductive life course.

There are many factors that are associated with contraceptive method use to prevent or delay pregnancy. Availability and access to methods is an important consideration, and the paper will start with an overview of the types of contraceptives available in Australia and how they are regulated. This will be followed with an overview of the most popular through to the lesser used methods. Contraceptive method use in Australia will also be compared with a number of other countries.

Method use will then be compared for different sections of the population. Important factors which have been found to be associated with contraceptive method use include age, partnership status, education, religiosity, family size (number of children ever born), and fertility intentions.

An emphasis will be placed on the type of method used and the timing of fertility intentions. Gray and McDonald (2010) noted that the intended timing of next birth was related to the type of contraceptive method used. Women who intended to have a child in the next three years were more likely to use a method which could be easily stopped.

This paper will use information on contraceptive method use and fertility intentions collected in HILDA as part of the Generations and Gender module in 2005, 2008 and 2011.

Session 4A

Hours of Paid Work among Single and Partnered Mothers in Australia: How Childcare Package Matters

Author/s: Michelle Brady and Francisco Perales (The University of Queensland)

Abstract: To increase parental labour force participation families with children usually combine multiple childcare sources. While some families use only formal or informal childcare modes, others combine these into a mixed childcare package. In this paper we theorize and test the relationships between family type, childcare arrangements, and mothers’ work hours using Australian panel data and panel regression models. We find that mothers of young children who use a mixed childcare package complete more hours of paid work than mother of young children who use other childcare packages, but the reasons for this are different among single and partnered mothers. For single mothers the most important characteristic of mixed childcare packages is their flexibility, while for partnered mothers is their capacity to maximize childcare hours. These findings imply that government policy could increase maternal labour supply by subsidising a wider array of childcare, not just regulated formal childcare.

Session 4B

Holistic Housing Pathways for Australian Families Through the Childbearing Years

Author/s: Melanie Spallek, Michele Haynes and Andrew Jones (The University of Queensland)

Abstract: In the 1950’s the typical housing tenure pathway was more clearly defined with young adults leaving the family home to marry following by the birth of the first child while residing in a rental home, followed by entering home ownership. For the first time in Australia longitudinal data is available that allows to examine tenure transitions along with other life events, in particular birth of children, marital transitions and changes in employment. Sequences of tenure transitions and life events are derived from a sample of 4345 adults from ten waves of the longitudinal Household Income and Labour Dynamics in Australia (HILDA) survey with a focus on families of childbearing age. The statistical technique of multi-channel sequence analysis is used to group similar sequences of housing tenure transitions as they occur alongside other key life-events, identifying a typology of housing pathways. Over a period of ten waves, there is a large group of individuals (52.8%) that are referred to as ‘stayers’ and do not experience any transitions in housing tenure status during the period of the survey. This group shows relatively fewer transitions between marital statuses, compared to the ‘mobile’ group of individuals that changed their housing tenure status at least once throughout the observed period from 2001 to 2010. The main typologies identified were related to transitioning into home ownership and with the birth of a child either before or after the transition. The majority of tenure and life event sequences show that individuals are already married by the time of transitioning into home ownership. Changes in employment status have not been found to contribute to tenure changes in a substantial way. Results show that life events are still interrelated with housing transitions, but in a less predictive way. Pathways are now more diverse with transitions 2 into home ownership occurring before and after the birth of a child, noting that marriage seems to precede the decision of buying a home.

 

Socio-spatial Mobility and Neighborhood Outcomes in Australia: How “fluid” is Australian Society

Author/s: William A. V. Clark (University of California) and Regan Maas (California State University)

Abstract: Households choose places from a hierarchy of options defined by social, economic and environmental contexts and these choices are conditioned by economic contexts and family status. While we know a good deal about the choice processes we know somewhat less about the spatial outcomes of these decisions apart from the well-established finding that most residential changes involve relatively short distances. Recent research has begun to fill that gap and in this paper I extend that research by using data from the Household Income and Labor Dynamics Survey in Australia (HILDA) to construct matrices of socio-spatial movement and consider the relationship of community in-flows and out-flows and the probability moving above and below the diagonal of the matrix. The research shows that there is substantial movement across the matrix of opportunities defined by the Index of Advantage and Disadvantage (Seifa). Economic resources and social status improve an individual’s chance of moving up the socio-spatial hierarchy and there is no evidence of substantial polarization across decile movements. It is true that there is substantial within decile movement but there is also movement away from the diagonal. The analysis suggests that Australia is still a fluid society.

Session 4C

Reversing the Causality- Does Happiness Reduce Income Inequality?

Author/s: Satya Paul (University of Western Sydney)

Abstract: This paper investigates the effect of happiness (self reported life satisfaction) on income inequality by exploring the causality from happiness to income based on the panel data from the first five waves (2001-2005) of Household Income and Labour Dynamics in Australia (HILDA) survey. Happiness is hypothesized to impact upon the income generating capacity of an individual directly by stimulating working efficiency and indirectly through its effect on the allocation of time for paid work. Both these effects of happiness on income are tested in a model consisting of an income generating function and work hour equation. The income flows of happiness and other variables obtained from the model are inserted into the income inequality decomposition equations to obtain their relative inequality contributions. The empirical results reveal that happiness has a positive effect on income generation and contributes to the reduction of inequality.

Session 5A

Underemployment Among Mature Age Workers in Australia

Author/s: Jinjing Li, Alan Duncan (University of Canberra) and Riyana Miranti (Curtin University)

Abstract: Underemployment is a serious and pervasive problem both in terms of its impact on those individuals affected, and for the economy as a whole. Literature has found that those who experience periods of underemployment are more likely to have lower job satisfaction, higher job turnover, poorer mental and physical health and persistently lower earnings. This paper explores the patterns of underemployment for mature aged workers in Australia, and analyses factors that contribute to a heightened risk of underemployment. Our results point to a significant path dependency whereby previous periods of underemployment increase the propensity towards underemployment in the current period.

 

Transition Pathways in HILDA - an Analysis Using Optimal Matching and Cluster Analysis

Author/s: Jane Fry and Clare Boulton (Productivity Commission)

Abstract: In this paper, data from HILDA’s education and labour market activity calendar are used to examine transitions within and between the labour market and the education system for about 6500 working-age individuals. The HILDA calendar is rarely used but provides an invaluable data source for analysing transitions. Activity data captured at frequent intervals are critical to identifying any ‘turbulence’ in individual activity patterns. The analysis of transitions can accommodate some of the more complex patterns, including ‘churning’ and ‘stepping stones’ from education to work. For four age segments, optimal matching and cluster analysis techniques are used to identify a small number of groups — called pathways — based on similarities in the patterns of activities that individuals undertake. Some pathways are dominated by education or by work, some mostly by NILF; others show transitions (such as education to work or work to NILF). The pathways associated with work tend to predominate, except among the senior segment (where individuals tend to retire). Individual characteristics, such as gender, education and reasons for labour market withdrawal, add richness to the story for each pathway.

Session 5B

Age at Migration, Language Proficiency and Socio-economic Outcomes: Evidence from Australia

Author/s: Cahit Guven (Deakin University) and Asadul Islam (Monash University)

Abstract: This paper seeks to estimate the causal effects of language proficiency on the economic and social integration of Australian immigrants. Identifying the effects of languages on socioeconomic outcomes is inherently difficult, due to the endogeneity of the language skills. This study exploits the phenomenon that younger children learn languages more easily than older children to construct an instrumental variable for language proficiency. To achieve this, we exploit the age at arrival of immigrants who came as children from Anglophone and non- Anglophone countries. We find English proficiency to have a significant positive effect on wages and promotions among adults who immigrated to Australia as children. English proficiency leads to lower levels of mental health and life satisfaction. People with better English skills take more risks and drink more, and marry at older ages. English proficiency significantly decreases the importance of religion for male immigrants. Partners of immigrants with better English skills drink more in general. Fathers’ proficiency in speaking English has a significant, positive effect on their children’s English-speaking proficiency, high school achievements and occupational prestige.

 

Investigating the ‘healthy immigrant effect’ in Australia Using Fixed Effects Models: Findings from a Nationally-Representative Longitudinal Survey

Author/s: Santosh Jatrana, Samba Siva Rao Pasupuleti,(Deakin University) and Ken Richardson (University of Otago)

Abstract: We used a longitudinal analysis to assess the differences in health outcomes (physical, mental and self-rated health), among Foreign-Born (FB) from English Speaking Countries (ESC) and non-English Speaking Countries (NESC) relative to Native-Born (NB) Australian over a 10 year period. We used hybrid regression models for evaluation of these health outcomes in 5,795 NB and 1,665 are FB from the Household, Income and Labour Dynamics in Australia (HILDA) survey. After adjusting for all the time varying and time in-variant covariates, FB from NESC who had been living in Australia for more than 10 years were more likely to have poor physical health, mental health and self-rated health. We did not find any significant differences in the mental health of FB from ESC and NB Australiana throughout this 10 year period. However, FB from ESC maintained their physical health and self-rated health advantage over a longer period (more than 20 years).

Session 5C

The Age-Happiness Puzzle: The role of economic circumstances and financial satisfaction

Author/s: Inga Kristoffersen (The University of Western Australia)

Abstract: Happiness and satisfaction is often found to be u-shaped in age, with a minimum around age 45. Some samples exhibit a wave‐shape, rather than a simple u-shape, where a maximum is observed around age 70 and happiness and satisfaction debates slightly after this point. Such patterns have been found in various samples across the world, including Australia (though it is not universal), and persists also after key variables are held constant. Various possible explanations for this apparent puzzle have been presented in the literature. One such explanation holds that middle‐aged people might be more sensitive to status and suffer from gaps between aspirations and realisations, and that this has a negative effect on wellbeing during this stage of the life cycle. This hypothesis is supported in the wider literature by reports of expectations lessening and goal-achievement gaps narrowing after middle‐age and that age improves our ability to adjust to life situations and cope with adversity. Materialism, which has been shown to be negatively related to happiness and satisfaction, is also reported to be at its highest in midlife and at its lowest in old age. Consequently, one would expect the marginal utility of economic circumstances and financial satisfaction to be greater in midlife than in old age. This paper explores this possibility, using data from the 11 currently available waves of the HILDA survey (there is a focus on waves 2, 6 and 10, which contain wealth information). Results provided reasonably strong and robust support for these hypotheses. Financial concerns accounts for about half of the u‐shape of life satisfaction over the life cycle. Utility as a function of economic circumstances shifts leftwards or upwards during the latter half of the life cycle, which means less income and wealth is required to maintain a given level of financial satisfaction (as well as life satisfaction in general), and the strength of the relationship between economic circumstances and financial satisfaction, and between financial satisfaction and life satisfaction, also falls during this time.

Session 6A

Retirement and Asset Allocation in Australian Households

Author/s: Megan Gu (University of New South Wales)

Abstract: This paper examines the effect of the retirement decision on the asset allocation of Australian households using data from the Household Income Labour Dynamics of Australia (HILDA) Survey. It investigates the popular financial advice that as individuals reach retirement they should hold lower risky assets. This advice stems from economic foundations informed by the life cycle theory of consumption, saving and portfolio choice. Utilising the panel data nature of HILDA by using data from wave 2 (2002), wave 6 (2006) and wave 10, we estimate three models for single and couple households - a pooled ordinary least squares model, a fixed effects model and a random effect model. In each model, we consider the proportion of risky assets held by each household and the relationship with retirement, retirement intentions, labour income characteristics, and individual and household demographics and characteristics. We find some evidence of retired households decreasing proportion of risky assets held.

 

Pathways to Retirement: Evidence from the HILDA Survey

Author/s: Diana Warren (The University of Melbourne)

Abstract: Using data from the first eight waves of the Household Income and Labour Dynamics in Australia (HILDA) Survey, this paper adds to existing knowledge of how pathways to retirement are decided. Two complementary estimation strategies are used to model the labour force transitions of mature age men and women. First, a standard multinomial logit model is used to determine the characteristics associated with specific patterns of labour force participation. Second, a dynamic mixed multinomial logit model is used to estimate labour market states in each year. Both approaches provide new evidence about coordinated retirement among mature age couples, not only in the timing of retirement but how the transition to retirement is made. The results also provide new evidence about the different effects of specific components of household wealth on how the transition to retirement is made. Controlling for unobserved heterogeneity in the dynamic multinomial model confirms the existence of true state dependence in the labour force states of mature age men and women. This implies that policies aimed at encouraging older workers to delay retirement will be more effective in boosting mature age participation than policies aimed at encouraging older workers back into the workforce after a period of non-participation.

Session 6B

Measuring the Effects of Removing Subsidies for Private Insurance on Public Expenditure for Health Care

Author/s: Terence Cheng (The University of Melbourne)

Abstract: This paper investigates the effects of reducing subsidies for private health insurance on public sector expenditure for hospital care. An econometric framework using simultaneous equation models is developed to analyse the interrelated decisions on the intensity and type of health care use and private insurance. The framework is applied to the context of the mixed public-private system in Australia. The simulation projections show that reducing premium subsidies is expected to generate net cost savings. This arises because the cost savings achieved from reducing subsidies are larger than the potential increase in public expenditure on hospital care.

Session 6C

Parenthood and Employment Outcomes: The Effect of a Birth Transition on Men's and Women's Employment Hours

Author/s: Michele Haynes, Lachlan Heybroek, Belinda Hewitt and Janeen Baxter (The University of Queensland)

Abstract: In this paper we focus on the effect of a birth transition on men's and women's paid employment hours in Australia. Previous research has shown that childbirth is typically associated with women's withdrawal from the paid workforce, while for men, there is either little observed change or a slight increase in work hours. Various demographic and institutional factors have been shown to affect these patterns. Australia is a particularly interesting case as it combines both a very high rate of part time employment, especially for women, with some of the longest working weeks in the OECD. Recent research has used longitudinal data to examine employment hours of mothers and fathers, but this research is often limited in both the number of waves of data and analytical design. We extend this work by using eleven waves of data from the Household, Income and Labour Dynamics in Australia (HILDA) panel survey and take a life course approach to analysing the change in employment hours immediately following a first birth, the trend in hours of employment over waves following the birth, and the change and subsequent trend in hours of employment following a second birth. Our results show that a first birth does affect the likelihood of leaving employment for women but not for men. For women who are in employment, time spent in paid work is reduced by almost half following a first birth and is reduced by a further six hours per week following a second birth, but slowly increases with time following a birth. For men, time spent in paid work is not reduced after the first birth but work hours are significantly lower by two hours following a second birth.

Session 7A

Labour Supply Responses to Policy Changes with Hours Constraint

Author/s: Xiaodong Gong and Robert Breunig (The University of Canberra)

Abstract: In this paper, we investigate the response of female lone parents to two reforms to the welfare system in Australia. We look at changes to both hours and participation and focus on the channels of adjustment, in particular the role of job changes for adjustment in hours. We highlight the relationship between policy design and heterogeneous outcomes. Workers/non-workers and mothers with high/low education respond differently to different policies. We find evidence of within job rigidities as the adjustment of working hours happens primarily through changing jobs. Our findings also provide support for the importance of accounting for fixed costs of working.

 

Session 7B

Working Time and Cigarette Smoking: Evidence from Australia and Great Britain

Author/s: David Angrave, Andy Charlwood (University of York) and Mark Wooden (The University of Melbourne)

Abstract: Cigarette smoking is a risk factor in a range of serious diseases including cardio-vascular disease, cancer, stroke and type II diabetes. Theory suggests that working long hours will increase smoking propensities among workers. Consequently there is a significant body of evidence on the relationship between working time, working conditions and smoking. Most of these studies are based on small scale samples of specific occupations or workplaces. Results are inconsistent and therefore inconclusive. This paper provides new evidence on how working time affects smoking behaviour using nationally representative panel data from Australia (from 2002 – 2011) and Great Britain (from 1992 to 2011). We exploit the panel design of the surveys to look at changes in smoking behaviour within the same individuals over time as working time changes. In contrast to most previous studies, this means we control for time invariant aspects of personality and genetic inheritance which may affect both smoking propensities and choice of working hours. We find that working long hours tends to increase the chances that former smokers will relapse, reduce the chances that smokers will quit and increase smoking intensity among regular smokers and that these effects become more pronounced for workers who usually work very long hours (50 or more hours a week) compared to those who work moderately long hours (40 – 49 hours a week). However, precise patterns of results vary by gender and country location, suggesting more longitudinal research is needed to identify more precisely the working conditions that influence smoking behaviour.

Session 7C

How Portfolios Evolve After Retirement: Evidence from Australia

Author/s: Alexandra Spicer, Olena Stavrunova and Susan Thorp

Abstract: Households in many countries around the world reach retirement with lump sums of financial wealth accumulated through defined contribution retirement plans. Australian households offer a useful case study in how retirees manage wealth from individual accumulations. We study the dynamics of retirement wealth and portfolio allocation using the three wealth waves of the Household Income and Labour Dynamics in Australia (HILDA) panel survey. The average retired household accumulated wealth in 2002-06 and decumulated 2006-10 following the trend in financial asset prices. At older ages, households prefer less risk and more liquidity, while maintaining ownership of the family home. The probability of retired households depleting financial wealth to less than one month’s public pension payment increased over the sample, however households who deplete financial wealth do not liquidate their housing wealth at higher rates than other households. Finally, in contrast to the U.S., the overall effect of health shocks on the wealth of retired Australian households is minimal.