#28 June 2010 - Melbourne Institute News

Melbourne Institute News June 2010

ISSN 1442-9500 (print)

ISSN 1442-9519 (online)

Print Post Approved PP381667/01204

Issue 28

Inaugural Public Lecture by Deborah Cobb-Clark

Professor Deborah Cobb-Clark, Director of the Melbourne Institute

HILDA Survey Annual Statistical Report

The latest HILDA Survey Statistical Report, Families, Incomes and Jobs, Volume 5, contains articles on aspects of household and family life covered by the HILDA Survey from 2001 to 2007.

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The Proposed Australian Resource Rent Tax Professor Ross Garnaut AO delivered a lecture on the proposed Resource Rent Tax, and addressed the transitional issues and the tax’s likely interaction with other policy issues in the resource sector.

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Melbourne Institute Social Policy Research The Melbourne Institute’s Labour Economics and Social Policy program has delivered nearly ten years of research services relevant to government policy making.

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Professor Deborah Cobb-Clark will deliver her Inaugural Public Lecture, ‘Disadvantage across the Generations: What Do We Know about Social and Economic Mobility in Australia?’, on 22 July 2010 at the University of Melbourne.

The OECD’s recent report on the intergenerational transmission of disadvantage provides clear evidence that children largely ‘inherit’ their parents’ socioeconomic status. Professor Cobb-Clark’s lecture will address the following questions: What do we know about the extent of social and economic mobility in Australia? What are the pathways through which social and economic disadvantage is passed from one generation to the next? What are the challenges for policy makers and researchers?

Professor Cobb-Clark was recently appointed Director of the Melbourne Institute and Ronald Henderson Professor at the University of Melbourne. Her research agenda centres on the effects of social policy on labour market outcomes including immigration, sexual and racial harassment, health, old-age support, education and youth transitions. In particular, she is currently leading the innovative Youth in Focus Project which is analysing the pathways through which social and economic disadvantage is transmitted from parents to children in Australia.

The lecture will be held on Thursday 22 July 2010 at 6.00pm.

To register please contact Christine Cheng on (03) 8344 3507 or email <cche@unimelb.edu.au> by 15 July 2010.

www.melbourneinstitute.com Melbourne Institute of Applied Economic and Social Research - Page 1

HILDA Survey Annual Statistical Report: Families, Incomes and Jobs, Volume 5 The latest Annual Statistical Report of the Household, Income and Labour Dynamics in Australia (HILDA) Survey, Families, Incomes and Jobs, Volume 5, contains articles on aspects of household and family life covered by the HILDA Survey from 2001 to 2007.

Released on 16 June 2010, Volume 5 of the HILDA Statistical Report contains 21 annual updates on key aspects of life in Australia, plus 11 feature articles.

Annual Update Section Articles in the Annual Update section of the report focus on changes in key aspects of life in Australia.

Households and Family Life: These articles include a description of changes in family structures; changes in marital status and marital satisfaction; parenting and work–family stress; child care issues; and people’s major life-events in the past year.

Incomes and Economic Wellbeing: Articles in this section include an assessment of people’s relative position in the distribution of household incomes; the extent and nature of poverty; people’s reliance on welfare; financial stress experienced; and expenditure on household products and services.

Labour Market Outcomes: These articles include an analysis of employed people compared with non-employed people; changes in wage levels; how often people change jobs and why; differences between hours worked and work-hours preferred by people; household joblessness; and job satisfaction.

Life Satisfaction, Health and Wellbeing: Articles in this section address respondents’ assessments of their psychological wellbeing and physical health; satisfaction with family relationships and aspects of family life; the types of people with a shortfall in their social support networks; and people’s participation in the labour force and education sector.

Feature Articles The eleven feature articles examine: • Australians’ smoking patterns compared with those of the United States and the United Kingdom; • the eating habits and health of people within different socio-economic groups; • the relationship between body weight and health; • the interactions between people’s health, disability and specific medical conditions; • the extent to which individuals feel ‘in control’ of their lives; • people’s changing religious beliefs and practices; • the association of self-assessed literacy and numeracy with people’s earnings; • the effect of work-related training on earnings; • differences in public sector and private sector wages; • people’s retirement expectations; and • retirement plans and the behaviour of people approaching retirement.

Many people are not saving enough for retirement One of the feature articles, by Associate Professor Roger Wilkins of the Melbourne Institute, found that people approaching retirement are generally not saving enough to maintain a living standard that they believe is satisfactory for their entire expected life after retirement. His article shows that, on average, people are likely to live longer after retirement than their expected savings will support them at their minimum acceptable living standard.

The study examined the adequacy of retirement savings of the ‘typical’ (median) member of various groups of people approaching retirement by estimating the gap between the number of years projected retirement savings at retirement would last, and the number of years they were projected to live after retirement.

Associate Professor Wilkins says “Most groups were found to have inadequate savings, and the gap was particularly large for single people, especially those aged

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Eating at home: a key to a healthy diet In another article in the HILDA Statistical Report, authors Ms Alison Goode and Mr Markus Hahn examine Australians’ eating habits and find that the more frequently a person eats out, the less healthy their diet tends to be. The more often people ate meals out, the lower their consumption of fruit and vegetables, the higher their consumption of snack foods, and the more likely they were to drink full cream milk.

Associate Professor Roger Wilkins, HILDA Survey Deputy Director (Research)

above 55”. For example, the projected life expectancy at retirement for a 55–59 year old single male is 17.2 years, yet calculations show that median projected savings at retirement would support the acceptable income of the median member of this group for only five years. For single women in this age range, the situation is even more dire, with median projected savings supporting only two years of the expected 20.7 years to be spent in retirement.

The study also shows that women eat fruit more often than do men: 52 per cent of women eat fruit daily, compared to only 37 per cent of men. Similarly, women eat vegetables more often than do men, and more women than men consume reduced fat (or skimmed) milk. For the less healthy types of foods, men consume snacks such as fried potatoes more frequently than do women.

How unhealthy are overweight people?

Data from the HILDA Survey confirm what has long been well known: excess weight is associated with poor health outcomes. These new findings, however, also show that a majority of overweight Australians may not be fully aware of the health risks created by their weight.

Using World Health Organization definitions, most Australians are overweight (43 per cent of men and 29 per cent of women) or obese (23 per cent of both men and women); however, many of these people still describe themselves as being of acceptable weight. Over half of overweight people, and almost 15 per cent of obese people, describe their body weight as acceptable. And it is men who are the most likely to fail to recognise that they have a weight problem.

According to the author of the research, Professor Mark Wooden (and Director of the HILDA Survey project): “Overweight people were found to be associated with a much higher incidence of diagnosed arthritis, cancer, type 2 diabetes, heart disease and other circulatory conditions.

Of course, the rates of exposure are considerably worse for the obese categories.”

About the HILDA Survey Annual Statistical Report The HILDA Statistical Report has been produced annually since 2006, presenting analysis of the HILDA Survey data with an emphasis on its longitudinal structure. The latest report, Volume 5, was prepared by Roger Wilkins, Diana Warren, Markus Hahn and Brendan Houng, all researchers at the Melbourne Institute.

The HILDA Survey and the Statistical Report are commissioned and funded by the Australian Government Department of Families, Housing, Community Services and Indigenous Affairs.

An online version of the latest HILDA Statistical Report and earlier volumes are freely available from the Melbourne Institute’s website at <www. melbourneinstitute.com/hilda/statreport.html>.

For enquiries, please contact Associate Professor Roger Wilkins on (03) 8344 2092 or email <r.wilkins@unimelb.edu.au>.

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The Proposed Australian Resource Rent Tax On 20 May 2010 Professor Ross Garnaut AO delivered a high impact lecture on the proposed Australian Resource Rent Tax. Professor Garnaut, Vice-Chancellor’s Fellow and Professorial Research Fellow at the University of Melbourne, discussed the proposed tax and addressed the transitional issues and the tax’s likely interaction with other policy issues in the resource sector. The lecture, delivered in the main lecture theatre at the Faculty of Business and Economics, received huge media interest and Professor Garnaut was interviewed by Kerry O’Brien — ABC Television: The 7.30 Report. In The Age, 25 May 2010, Tim Colebatch referred to Professor Garnaut’s lecture as a “thoughtful, fair-minded speech”.

In the lecture, Professor Garnaut referred to the proposed resource tax as a public policy issue of great complexity and importance. He spoke of the need to discuss policy proposals with clarity and rigour, and to “implement policy in the public interest”. He suggested that instead of the government’s proposal for a uniform tax, it should consider a full-loss offset in cash at the tax rate (that is, a pure Brown tax) at the exploration stage; and at the mine development and production stages, it should consider a resource rent tax in roughly the form and at the rates of the Petroleum Resource Rent Tax. A video and transcript of Professor Garnaut’s lecture are available at the Melbourne Institute’s website at <www.melbourneinstitute.com/news/ events/garnaut-lecture.html>.

The Australian Economic Review The June 2010 issue of The Australian Economic Review (vol. 43, no. 2) includes an article ‘Tax-andTransfer Tensions: Designing Direct Tax Structures’ by John Creedy.

John Creedy’s article discusses the main tensions involved in tax planning, with an emphasis on the wide range of value judgements involved in designing a tax structure. The article illustrates the difficulties of balancing different objectives, and considers why consensus regarding the design of a tax-and-transfer scheme is unlikely to be reached.

Contributed articles in the June issue are ‘The Entry Cost Shock and the Re-rating of Power Prices in New South Wales, Australia’ by Paul Simshauser, Elizabeth Molyneux and Michelle Shepherd; ‘Vacancies and Unemployment in Australia’ by Phillip Chindamo and Lawrence Uren; and ‘Australian Family Tax Reform and the Targeting Fallacy’ by Patricia Apps and Ray Rees.

The Policy Forum section on telecommunications examines the proposed National Broadband Network in a wider context than usual. The five articles in this section emphasise the potential transforming nature of the technology and regulation changes. The article ‘Telecommunications and Economic Activity’ by Ross Williams addresses how telecommunications infrastructure matters for growth but the strength of the effects depends on technology, penetration levels and the regulatory environment.

The Data Survey article in the June issue, ‘Exploring the Uses of Matched Employer–Employee Datasets’ is by Paul Jensen of the Melbourne Institute. This article discusses the rationale for the creation of matched datasets and provides a snapshot of their numerous and important uses — such as analysing wage determination, profitability and productivity.

To subscribe to The Australian Economic Review, visit <www.johnwiley.com.au/>.

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Melbourne Institute Social Policy Research The Melbourne Institute, and the Labour Economics and Social Policy program in particular, has had a long-term contract in place for delivering research services to the Australian Government for nearly ten years.

In each year of the contract, staff from the Australian Government Department involved, and the Melbourne Institute, use an iterative consultation process to determine the topics of a number of research projects to be undertaken in the next year. The first so-called Social Policy Research Services (SPRS) contract was with the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) and started in 2001. In 2005, the second contract was transferred from FaHCSIA to the Department of Education, Employment and Workplace Relations (DEEWR). In 2010, the third contract started with DEEWR. Over this time, a large number of interesting projects on a wide-ranging set of topics have been finished (83 in total, not counting the five projects currently underway).

The Director of the Labour Economics and Social Policy program, Associate Professor Guyonne Kalb, says “The purpose of this contract is to conduct research with a medium to longer term view which is relevant to the policy-making process, while at the same time aiming to have the research published in peer-reviewed journals. Due to the contract’s longer term nature, research staff have the opportunity to build expertise in specific policy areas. This benefits the quality of the research undertaken.”

As part of the contract, all research is made publicly available within one year after the final report is accepted by DEEWR. Several of the studies carried out under the SPRS contract have been presented at a wide range of conferences (to academic peer groups, and to government research staff and policy makers), and the outputs have ultimately resulted in a number of refereed journal publications, both nationally and internationally.

The range of topics explored across the projects is quite broad. For example, research can cover the span of people’s life course, in that one project examines the labour force outcomes for mature age persons and another project examines the education and employment outcomes of youth in school-towork transition. In fact, some research occasionally extends beyond an individual’s life course — for example, when the intergenerational correlation of labour market outcomes was examined in one project.

In addition to the breadth of research, the contract also provides opportunities for in-depth research through connected projects. Examples include a series of ‘stepping-stone’ projects entitled ‘Transitions from Casual Employment in Australia’ (in 2005), ‘Stepping Stones — Do Low Paid Jobs Lead to Increased Earnings and Lower Welfare Dependency over Time?’ (in 2006), and ‘The Factors that Influence Wage Progression’ (in 2007). These projects investigated whether casual work and low-paid work were stepping stones to more permanent work and higher paid work, respectively, and whether casual work and low-paid work were successful at keeping people off income support.

Some members of the Melbourne Institute Labour Economics and Social Policy program

More information and final reports for all publicly released research projects can be found on the Melbourne Institute’s website at <www.melbourneinstitute.com/labour/Social Policy Contract/social policy contract.html>.

Enquiries about the Labour Economics and Social Policy program can be made with Associate Professor Guyonne Kalb on (03) 8344 2095 or by email <g.kalb@unimelb.edu.au>.

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Workshop on the Economics of Education The University of Melbourne’s Microeconometrics Research Unit will conduct a workshop on the Economics of Education, on 23 July 2010.

This workshop will bring together academic and non-academic researchers as well as representatives from government to learn about and discuss six recent research projects in the area of the Economics of Education. One aim of the workshop is to encourage discussion among researchers and policy-makers on possible information sources and future directions for policy-relevant research into economics of education issues in Australia.

The workshop is being jointly hosted by the Microeconomics Research Unit, a joint initiative of the Department of Economics and the Melbourne Institute — both part of the Faculty of Business and Economics.

The workshop speakers and their topics are: • Deborah Cobb-Clark (Melbourne Institute): Are Young People’s Educational Outcomes Linked to Their Sense of Control?

• Cain Polidano (Melbourne Institute): Employment Outcomes from Vocational Education and Training for People with Disability.

• Moshe Justman (Department of Economics, Ben-Gurion University of the Negev): Equal Opportunity in Education: The Kibbutz Standard.

• Andrew Leigh (Research School of Economics, The Australian National University): A Survey of Australian Principals: Preliminary Results.

• Gigi Foster (Department of Economics, The University of New South Wales): The Impact of International and NESB Students on Performance Standards in Australian Higher Education.

• Michael Coelli (Department of Economics, The University of Melbourne): Parental Background and Post-Secondary Education Attendance: An Investigation.

To register for this workshop please contact Heidi Bacher on (03) 8344 3913 or by email <heidimb@unimelb.edu.au>.

Queen’s Birthday Honours 2010 Congratulations to Professor Ross Williams AM on receiving a Member of the Order of Australia honour at this year’s Queen’s Birthday Honours (16 June 2010).

The award was made for his distinguished service to education, particularly in the discipline of econometrics, through research and administrative roles, as a contributor to professional publications, and as an adviser to state and federal governments. The Order of Australia is a pre-eminent means of recognising outstanding achievement by extraordinary Australians.

Professor Williams is an Emeritus Professor at the University of Melbourne and has been a Professorial Fellow at the Melbourne Institute since 2003. He is Managing Editor of The Australian Economic Review and a member of the Commonwealth Grants Commission.

Professor Williams was Dean of the Faculty of Business and Economics from 1994 to 2002 and was a Foundation Professor of Econometrics at the University of Melbourne from 1975 to 2002.

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Melbourne Institute Economics Forums — July The Melbourne Institute is holding the next Public Economics Forum, ‘Finding the Best Model to Exploit Australia’s Inventive Talent’, at the Hyatt Hotel in Canberra on Tuesday 27 July 2010.

This topic will also be discussed at the next Economics Forum in Melbourne at the Westin Melbourne on Thursday 29 July 2010.

The topics to be addressed at the Forum will be: What is the best business model for a small and isolated economy with considerable R&D talent? Do we attempt to commercialise R&D on-shore or should we license it to overseas experts? If we choose the latter, what is the best strategy for ensuring that we receive an equitable return? If it’s the former, how can we do this better?

Three speakers will explore the Forum issues: business expert Mr Terry Stinson (CEO and Managing Director, Orbital Corporation), Intellectual Property expert Mr Terry Healy (Specialist Counsel wireless patent litigation, CSIRO), and innovation economist Associate Professor Beth Webster (Director, Intellectual Property Research Institute of Australia, The University of Melbourne).

The Chair in Canberra will be Mr Philip Noonan (Director General, IP Australia) and the Chair in Melbourne will be Mr Tony Cole (Business Leader for Investment Consulting in Asia Pacific, Mercer (Australia) Pty Ltd).

Further information is available at <www.melbourneinstitute.com/forums/pub_forums.html> or please enquire with Penny Hope on (03) 8344 2151 or by email <p.hope@unimelb.edu.au>.

Forum on Retirement Savings — April At the April 2010 Melbourne Institute Economics Forums, held in Canberra and Melbourne, the theme was ‘Retirement Savings’.

The presentation by Dr Yi-Ping Tseng, a Senior Research Fellow at the Melbourne Institute, was on savings adequacy and the incentive to save.

Dr David Knox, Worldwide Partner, Mercer (Australia) Pty Ltd, spoke on Australian retirement: where are we going and how do we compare internationally? He made a comparison of Australia to other countries using the recently developed Melbourne Mercer Global Pension Index.

Professor Ross Guest, Professor of Economics at the Griffith Business School (Griffith University), spoke on policy options for improved retirement savings.

The Public Economics Forum in Canberra was chaired by Associate Professor Guyonne Kalb from the Melbourne Institute, and at the Melbourne Forum the Chair was Mr Tony Cole, Business Leader for Investment Consulting in Asia Pacific, Mercer (Australia) Pty Ltd. Enquiries about the Melbourne Institute Forums can be made with Penny Hope on (03) 8344 2151 or by email <p.hope@unimelb. edu.au>.

The Melbourne Institute Economics Forum held at the Sofitel in Melbourne in April 2010

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Recent 2010 Melbourne Institute Working Papers 9/10 ‘Immigration Background and the Intergenerational Correlation in Education’ Deborah A. Cobb-Clark and Trong-Ha Nguyen 8/10 ‘Participation in and Completion of Vocational Education and Training for People with Disability’ Cain Polidano and Kostas Mavromaras 7/10 ‘The Causes of Profit Heterogeneity in Large Australian Firms’ Andreas Stierwald 6/10 ‘How Does a Worker’s Labour Market History Affect Job Duration?’ Jeff Borland and David Johnston 5/10 ‘Are Young People’s Educational Outcomes Linked to Their Sense of Control?’ Juan D. Barón and Deborah Cobb-Clark 4/10 ‘Bank and Official Interest Rates: How Do They Interact over Time?’ G. C. Lim, Sarantis Tsiaplias and Chew Lian Chua 3/10 ‘Determinants of Profitability: An Analysis of Large Australian Firms’, Andreas Stierwald Working Papers can be downloaded for free from <www.melbourneinstitute.com/publications/working/wp2010.cfm>. If you would like to receive an email notification when new Working Papers become available, contact the Melbourne Institute at <melb-inst@unimelb.edu.au>.

Melbourne Institute Report: Doing Business with Japan On 25 June 2010 Mr Bill Fisher, Director DFAT State Office Victoria, launched a report produced by the Melbourne Institute, Doing Business with Japan: The Perspective of Australian Companies — Findings from the Australia–Japan Business Survey 2008–09. The launch was hosted by Asialink and PricewaterhouseCoopers Melbourne.

Japan was Australia’s second-largest trading partner and export market in 2009, with two-way trade worth $59.2 billion.

The report draws on a survey of 861 Australian businesses. It was written by the Melbourne Institute’s Ms Anne Leahy, Associate Professor Beth Webster and Dr Jongsay Yong (the Project Leader) and was commissioned by the Australia– Japan Foundation, a bilateral body in the Department of Foreign Affairs and Trade.

The report can be downloaded from the Melbourne Institute’s website at <www.melbourneinstitute.com/publications/reports/>.

Forum on Growth and Global Economic Stability — July In association with the Australia China Business Council, a special Melbourne Institute Economics Forum on ‘Continuing Growth and Global Economic Stability’ will be held in Melbourne on 15 July 2010, at the Sofitel Melbourne.

The Forum speakers will be Professor Ross Garnaut (Vice-Chancellor’s Fellow and Professorial Research Fellow, The University of Melbourne), Professor Wing Thye Woo (Professor of Economics, The University of California at Davis) and Dr Ligang Song (Associate Professor and Director, China Economy and Business Program, Crawford School of Economics and Government, The Australian National University).

Dr Song will analyse macroeconomic developments since the Global Financial Crisis: the return to strong growth; the risk of overheating, asset bubbles and inflation; the decline in the current account surplus; and recent adjustments in expenditure and exchange rate policies. Professor Garnaut will focus on longer term sustainability of Chinese growth, including the external dimensions of sustainability at a time of tensions over exchange rate and climate change policies.

He will discuss the importance of these issues on the emerging shortage of labour and rapid growth in real wages in both rural and urban areas. Professor Woo will discuss how the wider political context affects the sustainability of growth. This will lead into a discussion of ways in which Chinese growth helps and challenges global economic stability.

For registration and enquiries please contact Penny Hope on (03) 8344 2151 or by email <p.hope@unimelb.edu.au>.

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: Cliff Howard tel: (03) 8344 2154, fax: (03) 8344 2111, email: howardc@unimelb.edu.au. Sub-Editor: Nellie Lentini. Contributors: Professor Ross Garnaut AO, Ms Alison Goode, Mr Markus Hahn, Ms Penny Hope, Associate Professor Beth Webster, Associate Professor Roger Wilkins, Professor Ross Williams AM, Professor Mark Wooden, Dr Jongsay Yong.

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