The Capacity of Families to Support Young Australians: Financial Transfers From Parents, Co-Residence and Youth Outcomes

Abstract

The Australian Government Department of Families, Housing, Community Services and Indigenous Affairs commissioned the Social Policy Research, Evaluation and Analysis Centre to report on how a young person’s future is shaped by his or her investments in education and choice of career path during early adulthood. This report describes whether young Australians from different family backgrounds are economically supported by their parents and how this support, or the lack of it, correlates with their decisions about educational and labour market investments. The report distinguishes between two kinds of parental support: co-residence and financial transfers. The analysis contributes to the literature on identifying young people at risk and can inform policies targeted at assisting young people in need and policies intended to counter the intergenerational transmission of disadvantage. The report begins with a review of the previous literature. The evidence suggests that young people in Australia are increasingly dependent on their parents for support as they complete their education and enter the labour market. Recent cohorts are less likely to leave home, more likely to receive financial support from their parents when they do live apart, and more likely to return home as circumstances change. This is partly because it now takes substantially longer than it once did to acquire work skills, and partly because of changes in social policy which have shifted the burden of supporting young adults from the public purse to families. The report provides new evidence based on analysis of Youth in Focus (YIF) Survey data combined with Centrelink’s administrative data about each family’s receipt of income support while the young person was growing up. Survey data were collected from a cohort of young Australians who were 18 years of age in 2006. The young people were interviewed about their current circumstances in 2006 and again in 2008. In 2006, YIF also interviewed their mothers, who provided additional information about circumstances during the young people’s childhood. The report uses the parents’ history of receipt of income support (Centrelink data) as a measure of the family’s social and economic disadvantage. The analysis is divided into two main parts. The first part is descriptive and gives an overview of young people’s study, work activities, the support they receive from their parents in the form of co-residence or financial transfers and, finally, how activities and support vary for people of different family backgrounds. The second part presents regression results from the estimation of models of co-residence, financial transfer, study activity and work activity. The regressions control for other background variables such as parents’ education, occupation, birth country, family size and family structure. Regarding the relationship between parental support and youth activities, the main findings can be summarised as follows. Young people who continue to live with their parents receive fewer financial transfers than otherwise similar young people who live apart, so there appears to be a trade-off in the support provided through co-residence versus financial transfers. Conditional on the youths’ study and employment status, parents direct larger financial transfers towards their children who are not living at home or who are studying full time, and away from their children who are working full time, so financial support appears to be more targeted at age 20 than at age 18. Looking at youths’ activities, enrollment in post-secondary education is not closely related to co-residential support, but is positively related to financial support. In contrast, youths’ employment status seems to depend on co-residence, but not on parental financial transfers. Specifically, youths who continue to live with their parents are significantly more likely to work part time and are significantly less likely to be unemployed or out of the labour market entirely. Regarding the role of family background and socioeconomic disadvantage, the main findings are as follows. Young people growing up in families with a history of receiving income support are less likely to live at home. Eighteen-year-olds from families who have a history of relying on income support receive less financial support from their parents, and the disparity in the financial support provided by families that do and do not have a history of receiving income support is larger at age 20 than at age 18. There is no significant effect of a family history of income support receipt on young people’s student status at either age 18 or age 20 once we account for family background, parental income, parental support (both co-residence and financial transfers) and youths’ employment status. Having a family history of income support receipt at age 18 is associated with a lower probability of part-time employment and a higher probability of unemployment or non-participation, but these relationships are much weaker at age 20.