#18 December 2007 - Melbourne Institute News

Melbourne Institute News December 2007 ISSN 1442-9500 (print)

ISSN 1442-9519 (online)

Print Post Approved PP381667/01204

Issue 18

Our Schools... Our Future

Professor Stephen Sedgwick, The Hon Stephen Smith MP, The Hon Julie Bishop MP, Professor Glyn Davis, Mr Michael Stutchbury at the ‘Our Schools... Our Future’ Conference.

Poverty in Australia This article, by Dr Roger Wilkins, explores the changing face of poverty in Australia.

Page 2

Happiness more elusive than Depression The findings are out for this recent working paper by Drs Wang-Sheng Lee and Umut Oguzoglu.

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HILDA Statistical Report It’s been over a year since the last volume of this excellent and in-depth report by Dr Bruce Headey and Ms Diana Warren. Four stories from the report are included in this article.

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On November 15 the Melbourne Institute sponsored a conference on schooling, Our Schools…Our Future, in conjunction with The Australian newspaper. Melbourne Institute Director, Professor Stephen Sedgwick provides some personal reflections on the debates during the day. It is not a summary of proceedings.

The event brought together academics and practitioners who discussed how to improve outcomes achieved by school students. Data presented at the conference show that students in Australia do reasonably well in international literacy and numeracy tests, on average. Yet concerns linger about how well prepared our students are for the rapidly evolving economic and social conditions that they will undoubtedly experience throughout their adult lives; and for those who do not successfully acquire the skills necessary to transition easily into adult life and work.

As is so often the case at such conferences, the discussion quickly turned to the role of teachers and teaching. The depressing thing was that the same issues have been raised and debated for well over a decade. One speaker neatly captured the issue when he observed that while attendance at school is compulsory, learning seems to be optional. The twist, however, is that it is not just the students who need to be the learners: good teachers are instinctively also good learners who keep abreast with developments in their field and continually adapt their styles to meet the needs of each student entrusted to their care. (cont’d Page 2)

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Our School... Our Future Conference Preparatory courses need to develop the skills and attitudes amongst beginning teachers that support evidence based evaluation of teaching strategies and a self critical approach to teaching focused on meeting the individual needs of every child. Amongst other things this is leading some universities, including the University of Melbourne, to redesign the practicum to provide more clinically-oriented approaches to classroom work. Such efforts will be in vain, however, if school based leadership and culture do not support such approaches. No amount of publicly funded professional development will ever substitute for good leadership and supportive practices at the coal face. Many schools, principals and teachers meet such tests. Sadly, however, not all school cultures are as energized as they could be. Students suffer as a result.

Moreover Professor Bill Louden’s presentation suggests that these effects are dynamic since the prior learning of a student accounts for more than half of their achievement through the year. Poor teaching for a year or two can have very long lived consequences for the students concerned.

The effects of a poor school culture can be long lived in other ways as well. For example, skills may atrophy and enthusiasm wane if beginning teachers do not experience the professional nurturing needed to sustain their enthusiasm and hone their skills as self critical learners. In years to come there will be major opportunities for gifted young teachers to assume leadership positions in schools as the aging teaching workforce progressively retires – provided, of course, that the young and the gifted remain enthusiastic and in the profession long enough.

There was an active debate about what motivates young people to want to take up teaching and older workers to remain active. Clearly the reward structures are important.

Most commentators seem readily to accept that a case can be made for increasing teachers’ pay, subject to budget constraints, though views quickly polarise about how closely pay can be related to performance and how to measure performance. In a sense, how much to pay teachers (or nurses etc) is dependent on community attitudes to such matters. Community attitudes also matter importantly, however, for the esteem in which the profession is held. I am of the generation whose parents strongly supported schools and teachers, especially

(Cont’d)

regarding matters of discipline and standards. How often, these days, do teachers feel that they do not receive the support they need from parents? Are we asking too much of schools, not simply with an overcrowded curriculum but also because schools are often asked to enforce child access orders, mediate disputes between warring parents, report suspected cases of abuse etc. If, as a community, we are looking for more from our schools and teachers, perhaps we should give them the support they need to do their job. For example, Finland is often cited as a country in which teachers are well qualified academically and enjoy high pay and social status and where children perform very well in international tests.

However schools also need to be accountable to funding bodies, parents and the community for the results they achieve for students. Policy changes in recent years have encouraged greater parent choice so as to provide some incentives to schools to improve standards. The effective exercise of choice requires access to good information. Well designed national tests and reporting of results can assist parents. Moreover it can provide teachers and schools with at least some evidence about the effectiveness of different approaches to teaching. Measurement of student performance can attract powerful emotional responses on both sides of the debate. However, I am constantly impressed by the likes of Dr Chris Sarra, formerly principal of Cherbourg State School in South East Queensland, who continually remind us that we risk selling students short, including indigenous students and others from low socio economic backgrounds, if we do not set and support the achievement of high standards in schools.

Finally, let me add a word about IT. Information Technology offers great opportunities to young people and teachers. However it is a tool, not a panacea. IT-savvy content, pedagogy and classroom practice are evolving more slowly than technology. Alongside the investments in equipment, therefore, there needs to be a significant investment in intellectual effort to make good use of it and to skill/re-skill teachers.

Many of the conference presentations are available for free download at www.melbourneinstitute.com.

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Happiness More Elusive than Depression In recent years, economists have started foraging into what was previously the exclusive domain of psychologists – the science underlying happiness. Their main contributions so far has been to use more sophisticated statistical tools to determine significant correlates with subjective well-being.

Continuing in this tradition, a recent working paper

by Melbourne Institute researchers Wang-Sheng Lee and Umut Oguzoglu introduce a new methodological approach to examine the factors associated with wellbeing and ill-being. Importantly, their work departs from the majority of other studies (in what is now often referred to as the economics of happiness literature) in that they do not assume that well-being and ill-being are opposite ends of the same continuum. In other words, they do not assume that becoming less happy is equivalent to becoming more depressed. This approach is consistent with the fact that many psychologists currently believe that well-being and ill-being are best regarded as separate constructs. Empirical happiness research has generally not made such a distinction because of the technical difficulties in analysing a two-dimensional outcome.

Based on adopting state-of-the-art dynamic panel data methods to analyse a nationally representative sample

of men and women from the Household, Income and Labour Dynamics in Australia (HILDA) survey, their main findings suggest that past depression has a much more persistent effect on current depression than past happiness has on current happiness. They also find that past depression has strong effects of current happiness, whereas past happiness has little effects on current depression. Simply put, together, these findings suggest that it is harder to stay happy than it is to stay depressed.

The results of this study suggest that simply encouraging depressed persons to have a more optimistic outlook towards life (i.e., increasing levels of past happiness) would have little effects in helping one break out of a spell of depression. Instead, other efforts need to made to cure depression. Such a result also helps explain why chronic depression is a common medical condition that has been subject to much research, whereas chronic happiness is an uncommon phenomenon.

Viewing well-being and ill-being as separate constructs has an important policy implication. Even in economic boom times, where a rising tide lifts all boats (for example, suppose the government decides to give all tax payers a tax rebate), it is not necessarily the case that such an increase in well-being directly corresponds to a reduction in feelings of ill-being or discontent that lead to crime or deviant behaviour. It is important to simultaneously have in place other policies aimed specifically at reducing such deviant behaviour (for example, more law enforcement).

The working paper, 28/07 can be downloaded from www.melbourneinstitute.com.

2008 Economic and Social Outlook Conference Thursday 27 and Friday 28 March 2008 at the University of Melbourne

is being assembled to ensure that this conference is the premiere such event in 2008.

The theme of the conference is: “New Agenda for This will be the fifth such Economic and Social Outlook Prosperity�. The conference program is intended Conference held jointly by the Melbourne Institute and to facilitate a timely, wide ranging debate over two The Australian at 18-month intervals since the inaugural days touching on such major current economic and Towards Opportunity and Prosperity conference in April social policy issues as managing the resources boom, 2002. This was followed by Pursuing Opportunity and the education revolution, federal-state relations, the Prosperity in November 2003, Sustaining Prosperity in performance and funding of hospitals, skills shortages, housing affordability, innovation, infrastructure (including April 2005 and Making the Boom Pay in November 2006. broadband), regulation, indigenous disadvantage, social Details including registration forms will be updated inclusion and climate change. A panel of quality speakersMelbourne regularly on our websiteEconomic www.melbourneinstitute.com Institute of Applied and Social Research - Page

The Changing Face of Poverty in Australia In a recent Melbourne Institute working paper, Roger Wilkins examined trends in the rate of poverty and the socio-demographic characteristics of persons in poverty over the period 1982-2004.

The concept of poverty adopted is one of relative socioeconomic disadvantage. Specifically, a person is defined to be in poverty if the annual disposable income of their household is less than half the median household annual disposable income (with income adjusted for household size using the OECD equivalence scale). This is a definition which has been widely adopted internationally.

However, an ‘absolute’ poverty measure is also examined, whereby the poverty threshold is held constant in real terms at the 1982 poverty level.

Rates of Poverty Graphs of poverty rates over the 1982-2004 period are presented in Figure 1. For the relative measure of poverty, we see that the proportion of the population in poverty grew from 11.1 per cent in 1981-82 to 12.9 per cent in 2001-03 (the 2001-02 and 2002-03 income surveys have been pooled together). This arose via a steady increase between 1981-82 and 1989-90, a sizeable drop between

1989-90 and 1995-97, and a quite steep increase between 1995-97 and 2001-03. By contrast, absolute poverty fell substantially over the 22-year period, especially after 1993-95, to be 8.1 per cent in 2001-03. The rise in relative poverty is therefore not due to a real decline in the incomes of low-income persons; rather, it has derived from the failure of incomes of low-income persons to keep pace with growth in the median income.

Socio-demographic characteristics of persons in poverty Table 1 shows some of the substantial changes in the characteristics of those in poverty that have occurred between 1982 and 2004. Single persons accounted for one-third of those in poverty in 1981-82, but by the end of the sample period represented 46 per cent of the poor. Couples without dependent children also increased their share of those in poverty, from 8 per cent to 14 per cent. Persons in sole parent families dropped from 21 per cent to 16 per cent of the poor, while persons in couple families with dependent children dropped from 38 per cent of persons in poverty in 1981-82 to only 24 per cent in 2001-03. To some extent connected to the changing family type structure of the poor, the age structure of those in poverty also changed markedly over the twodecade period. In 1981-82, 30 per cent of the poor were under 15 years of age and 6 per cent were over 65 years of age. By 2001-03, 18 per cent of the poor were under 15 years of age and 16 per cent were over 65 years of age.

The proportion of those in poverty born outside Australia has grown markedly. In 1981-82, 19 per cent of the poor were foreign-born, and in 2001-03, 27 per cent were foreign-born. A sizeable increase in the proportion of those in poverty who hold post-school qualifications is also evident, although poverty has nonehteless remained predominately confined to the less-educated, who still accounted for three-quarters of the poor in 2001-03.

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Sources of changes in the socio-demographic composition of persons in poverty

qualifications. However, it is equally evident that changes in within-group poverty rates have also been important.

The risk of poverty has increased for the elderly, nondependent youth, single persons, foreign-born persons and those without post-school qualifications, and it has decreased for sole parent families and residents of Queensland, the ACT and the Northern Territory.

Indeed, for all characteristics other than educational attainment, within-group poverty rate changes appear to play a more important role than population structure changes in affecting the composition of poverty.

Changes to the socio-demographic composition of poverty are the product of changes to the sociodemographic composition of the population and relative changes in poverty rates within each socio-demographic group. The study’s analysis revealed that changes in the characteristics of the population account for some of the changes in the characteristics of persons in poverty.

For example, population structure changes have acted to decrease the proportion of those in poverty aged under 25 years, increase the proportion aged over 35 years, increase the proportion in sole parent families and increase the proportion holding post-school

Full details of the study are contained in Working Paper No 12/07, available from www.melbourneinstitute.com.

Table 1: Socio-demographic composition of poverty — proportion in each group 1981-2

1993-1995

2001-2003

Change over full period

0.533

0.522

0.534

0.001

0-14

0.298

0.223

0.180

-0.118*

15-20 - dependent

0.045

0.046

0.043

-0.002

15-20 - not dependent

0.147

0.167

0.125

-0.022*

21-24

0.092

0.090

0.086

-0.006

25-34

0.125

0.111

0.103

-0.022*

35-44

0.092

0.105

0.102

0.010*

45-54

0.064

0.079

0.095

0.031*

55-64

0.075

0.085

0.108

0.033*

65+

0.062

0.095

0.158

0.096*

Sole person

0.339

0.389

0.459

0.120*

Sole parent

0.206

0.153

0.159

-0.047*

Couple

0.080

0.138

0.138

0.059*

Couple with dependent children

0.376

0.319

0.244

-0.132*

Foreign-born

0.190

0.207

0.268

0.078*

No post-school qualification

0.838

0.7914

0.740

-0.098*

‘Other’ post-school qualification

0.141

0.156

0.193

0.052*

Bachelor’s degree

0.020

0.050

0.067

0.046*

-

0.585

0.592

-

Female Age group

Family type

Educational attainment

Reside in capital city

* indicates the change is statistically significantly different from zero.

Melbourne Institute of Applied Economic and Social Research - Page

HILDA Statistical Report 2007

The latest HILDA Statistical Report was released on December 13. This year, the 142 page report spans many areas of Australian social life.

Some extracts follow below. You can download the full report from www.melbourneinstitute.com/hilda.

Education Epidemic An education epidemic is underway in Australia according to new research by the University of Melbourne’s, Melbourne Institute of Applied Economic and Social Research.

A new study shows that around 30 per cent of Australians have undertaken some adult education in the last four years.

“These figures are extraordinary” said Dr Bruce Headey, author of the research.

“And to top it all off, the data in our study shows that this education actually works. Graduates are getting better jobs” he said.

The study shows that there are more females undertaking adult education, especially in the 25+ years age bracket.

“Prime age women had a higher rate of participation in formal education than prime age men” he said.

The study also shows that females were more heavily involved than their male counterparts in job training.

However, the study also found that close to 90 per cent of men in this age group are employed, compared to 70 per cent of women, therefore there are actually more men in aggregate who are involved in some form of training.

The study found that enrolment in formal education declines with age, being higher in the 25-34 age group than among 35-44 year olds, who in turn have higher participation rates than 45-54 year olds. By comparison, the relationship between age and participation in job training appears non-existent for men and quite weak for women.

Further findings can be found in the study entitled “Adult Education and job training: Everyone is doing it, but does it pay off ?” by Dr Bruce Headey.

It’s easy to get rich Apparently it’s not so difficult to get rich, the difficulty is in staying rich. This is according to new research by the University of Melbourne’s, Melbourne Institute of Applied Economic and Social Research.

A recent study shows that Australian wealth is unusual amongst Western countries, with the incomes of the welloff almost as volatile as the incomes of the poor.

“It is widely believed that the same individuals and families usually remain well off for long periods, or even for several generations” said Dr Bruce Headey, author of the report.

“But in reality, most well-off people are ‘self-made’ rather than inheriting wealth and it is not particularly easy to remain at the top of the pile” he said.

“It is important to remember that changes in income are not solely due to changes in market earnings, but also to changes in household composition (e.g., a child leaves home to get married) and to household members joining or leaving the labour force” said Dr Headey.

The study, based on statistics from the Household, Income and Labour Dynamics in Australia (HILDA) Survey shows that 51.1 per cent of those who were in the top decile in 2001 remained there in 2004 and another 19.2 per cent were in the ninth decile. On the other hand, nine per cent were now in the bottom half of the income distribution.

“There is considerable mobility at the top end of household wealth” Dr Headey said.

Further findings can be found in the study entitled “Income Mobility at the Top of the Distribution” by Dr Bruce Headey.

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HILDA Statistical Report 2007

When will the kids move out?

Young adults are saving their pennies by living at the parental home for longer periods according to new research by the University of Melbourne’s, Melbourne Institute of Applied Economic and Social Research.

“On average, young people today leave home, marry, buy a house and have children at later ages than previous generations” said Dr Gary Marks, author of this particular study.

“Furthermore there are larger proportions not married and without children” he said.

‘Bad’ jobs often lead to ‘better’ jobs

The study shows that by age 30 almost all young people have left home and that only five per cent of 30 to 34 year olds are living with their parents.

‘Bad’ jobs are leading to ‘better’ jobs according to new research by the University of Melbourne’s, Melbourne Institute of Applied Economic and Social Research.

The Australian Governments’ mutual obligation scheme is forcing the unemployed into employment with the idea behind this scheme being that any job is better than none, and that ‘bad’ jobs may lead to ‘better’ jobs.

“An alternative view is that people in low-paying jobs are “trapped” in ‘dead-end’ jobs and rarely get ahead in the labour market” said Dr Bruce Headey.

The study found that prime age men who already have a low-paying full-time job are in a better position to move on to a higher paying job than those who are unemployed.

“Young people whose parents’ occupations were in the highest status quartile were less likely to be not living at home. This is partly because they are more likely to be in full-time education” said Dr Marks.

The study found that a non-English speaking background was in fact associated with having moved out. This difference was reported to be larger among women than men.

Interestingly, 70 per cent of Indigenous young women aged 15 to 30 were not living at home compared to 59 per cent of non-Indigenous women.

“Most likely this is because employers, faced with a range of job applicants, would generally prefer those who already had a job, especially if they also had good references, to those with no job” said Dr Headey.

“The findings do run counter to some research which claims that people in low-paying jobs tend to be ‘trapped’ and rarely move out of their ‘deadend’ jobs” he said.

Further findings can be found in the study entitled “Do ‘bad’ jobs lead to ‘better’ jobs? Evidence for 2001 - 2004” by Dr Bruce Headey.

The study also shows that parental occupation status is linked to whether a young person has moved out of home.

The study also found that 80 per cent of those aged 15 to 30 whose parents had divorced or separated were not living at home, compared to about 50 per cent of those whose parents had not divorced or separated.

“A pattern found for both sexes was that young people who had attended a Catholic school were more likely to be living at home than those who had attended a government or independent school” said Dr Marks.

Further findings can be found in the study entitled “Transitions to adulthood: Leaving home and partnering” by Dr Gary Marks.

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Recent Melbourne Institute Working Papers 35/2007 - ‘Delays in International Patent Application Outcomes’, Paul H. Jensen, Alfons Palangkaraya and Elizabeth Webster 34/2007 - ‘What Drives Worker Flows?’, Chew Lian Chua, Robert Dixon and G.C. Lim 33/2007 - ‘The Problem of Overskilling in Australia and Britain’, Kostas Mavromaras, Seamus McGuinness, Nigel O’Leary, Peter Sloane and Yin King Fok 32/2007 - ‘Assessing the Incidence and Wage Effects of Over-skilling in the Australian Labour Market’, Kostas Mavromaras, Seamus McGuinness and Yin King Fok 31/2007 - ‘Hospital Type and Patient Outcomes: An Empirical Examination Using AMI Re-admission and Mortality Records’, Paul H. Jensen, Elizabeth Webster and Julia Witt 30/2007 - ‘Severity of Work Disability and Work’, Umut Oguzoglu 29/2007 - ‘Working Time Mismatch and Subjective Well-Being’, Mark Wooden, Diana Warren and Robert Drago 28/2007 - ‘Well-Being and Ill-Being: A Bivariate Panel Data Analysis’, Wang-Sheng Lee and Umut Oguzoglu 27/2007 - ‘The Case for Labour Supply Incentives: A Comparison of Family Policies in Australia and Norway’, Guyonne Kalb and Thor O. Thoresen 26/2007 - ‘In the Shadow of the China–Australia FTA Negotiations: What Australian Business Thinks about IP’, Anne Leahy, Donald MacLaren, David Morgan, Kimberlee Weatherall, Elizabeth Webster and Jongsay Yong Working papers can be downloaded for free from www.melbourneinstitute.com.

Upcoming Forum The next Melbourne Institute Economic Forum will be held in April 2008.

Canberra - 29th April, 2008; Chair, Dr Ken Henry, Hyatt Hotel, Canberra For further details, please check our website www.melbourneinstitute.com or contact Penny Hope, Functions Manager on 03 8344 2151.

Melbourne Institute News Views expressed by the contributors to Melbourne Institute News are not necessarily endorsed or approved by the Melbourne Institute. Neither the Melbourne Institute nor the Editor of Melbourne Institute News accepts any responsibility for the content or accuracy of information contained in this publication. Editor: Laura A’Bell, tel: 8344 2154, fax: 8344 2111, email: labell@unimelb.edu.au. Contributors: Dr Bruce Headey, Dr Wang-Sheng Lee, Dr Gary Marks, Dr Umut Oguzoglu, Professor Stephen Sedgwick, Ms Diana Warren, Dr Roger Wilkins.

Level 7, Alan Gilbert Building, The University of Melbourne P: (613) 8344 2100 F: (613) 8344 2111 www.melbourneinstitute.com