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Family Matters No. 35 - August 1993

Depending on parents

Peter McDonald

Abstract

The author reports on the extent to which young people depend on their parents and the incidence of economic transfer between them. Data is drawn from a study by the Australian Institute of Family Studies of living standards. It looks at transfers between parents and young people - those in secondary school and those aged less than 20 who had left school. The young people live in the middle class suburb of Box Hill and the outer area of Berwick where people are employed in blue collar and lower white collar jobs. Both Box Hill and Berwick are Melbourne suburbs. The article covers young people paying board and other occasional payments to their parents, parents giving money to young people in the form of regular allowances or irregular payments and control of the money. Young people who had left school were also asked questions about their access to motor vehicles and the payment of related expenses.

The question of dependency lies at the centre of government policies in relation to young people, especially policies relating to income support. The variable amounts paid to unemployed young people in the social security system according to their age are based on the notion that parents can be expected to provide much of the support before the young person reaches age 18, and some of the support between ages 18 and 20.

For students, until recently, Austudy was tested against parents' incomes until the young person turned 25. Now, the eligibility for independent Austudy is being progressively reduced to age 22. Among employed young people, traineeships and award wages are set at a level below that required for independent living, again presumably on the assumption that parents will take up the slack (McDonald 1991).

At the same time, with high unemployment and extension of time spent in education, young people are becoming less able to provide for their own expenses. For example, during the 1980s, retention to Year 12 rose from 34 per cent in 1980 to 64 per cent in 1990.

The one exception to this trend towards dependency has been the involvement of students in part-time work. In August 1992, 47 per cent of full-time tertiary students aged less than 25 years and 31 per cent of school students aged 15 to 19 years were in the labour force.

Overall, however, there is an increasing trend for young people to stay at home with their parents for a longer period of time. In 1992, for example, 55 per of young men aged 20-24 years were still living with their parents compared with 46 per cent at the end of the 1970s.

This situation calls into question the current approach used by the Australian Bureau of Statistics to define a dependent child. According to the ABS, a co- resident child is dependent upon parents if the child is aged less than 15 years or is aged 15-24 years and attending an educational institution on a full-time basis. Otherwise, the child is independent, and in surveys such as the Income Survey is treated by ABS as a separate income unit. Thus, an unemployed young person receiving Job Search Allowance will be treated as a separate income unit while his twin sister on Austudy is a dependent child, even though the payments they receive are the same.

Treating young people who receive substantial support from parents as separate income units can distort estimates of poverty and draw attention away from the smaller group of young people who do not receive any parental support.

Economic transfers

There is little information available regarding the extent of economic transfers between parents and young people (Hartley 1990). However, the Institute's Australian Living Standards Study has obtained some information about transfers between parents and young people for two groups of young people - those in secondary school and those aged less than 20 who had left school.

The following provides an analysis of Australian Living Standards Study data for two municipalities in Melbourne - the outer area of Berwick where parents were mainly employed in blue- and lower white-collar jobs, and the middle area of Box Hill where many parents were professionals and para-professionals. The data relate to 461 secondary students and 141 young people aged less than 20 who had left school.

Those who had left school were in a variety of circumstances (Table 1). Reflecting the differences in educational levels of their parents, young people in Box Hill, especially young women, were considerably more likely than those in Berwick to be attending a tertiary course.

Paying board

The Institute survey asked parents about two forms of financial transfer from young people to parents: the payment of regular board and any other financial contribution. Among secondary students, 4 per cent in Berwick and one per cent in Box Hill paid board. When restricted to secondary students aged 15-19 years, the percentages paying board rose to only 7 per cent in Berwick and 2 per cent in Box Hill.

The small proportions paying board are set in the context that 25 per cent of secondary school Berwick boys aged 15-19 and 41 per cent of girls had part-time jobs: the equivalent percentages for Box Hill were similar - 27 per cent for boys and 38 per cent for girls.

Thus, it is apparent that most secondary students who have part-time jobs retain their incomes for their own purposes rather than paying board to their parents. Of course, the separate incomes of these young people would enable them to be less dependent on their parents and, possibly, to offset expenditure that their parents would otherwise have made.

Payment of board was much more common for those who had left school among whom 80 per cent had income either from work or from some form of government income support (Austudy, Job Search Allowance, Sole Parent Pension). Despite the high percentage receiving income, only 48 per cent in Berwick paid board and only 24 per cent in Box Hill.

For those paying board, the mean amounts paid were similar in the two areas, being $29 per week for Berwick and $33 per week for Box Hill. These amounts could only be described as token gestures when compared with the actual costs of children of this age, although the study does not measure amounts that the young person expends on him- or herself which parents would otherwise have to expend.

School leavers aged less than 20 years in Berwick were much more likely to be working full-time (42 per cent in Berwick, 26 per cent in Box Hill). As full-time workers in both areas were very likely to pay board (83 per cent in Berwick and 75 per cent in Box Hill), this largely explained the difference in board payment between the two areas.

School leavers working part-time were much less likely to pay board; only 31 per cent paid board in Berwick and none at all in Box Hill. Thus, like secondary students, it seems that most young people working part-time retain their earnings.

Just over half of the school leavers under 20 who were not in paid employment were in receipt of a form of government income support. A minority of those on government income support paid board, but the percentage paying was much higher in the lower income area of Berwick (46 per cent) than in middle-income Box Hill (12 per cent). Not unexpectedly, the 20 per cent of school leavers who did not have income from any source did not pay board.

Occasional payments to parents

Occasional financial contributions were a little more common than the payment of board among secondary students, with 8 per cent in Berwick and 5 per cent in Box Hill making occasional financial contributions to their parents. However for school leavers, occasional payments were less common than payment of regular board, with 29 per cent of school leavers in Berwick and 24 per cent in Box Hill making occasional financial contributions to the household.

There was little overlap between payment of regular board and other transfers for those at school. The main form of transfer was occasional purchases either for themselves or for the household. Three respondents mentioned Austudy as an 'other' transfer. For those who had left school, there was considerable overlap of payment of regular board and other transfers (about half of those making other transfers also paid regular board). Besides occasional purchases for self or for the household, contributions to the phone bill were very common.

Parents giving money to young people

At this age, cash transfers can flow in either direction. A survey question asked parents to specify whether or not they provided money to each of their children and whether the payment took the form of a regular allowance, irregular payments when the young person needed the money, or amounts paid only when parents had some spare money.

Among secondary students, there is little difference between the two areas in the pattern of payments to young people by parents. Around 40 per cent received a regular allowance, around 40 per cent received money irregularly as needed, about 10 per cent received money only when parents had spare money (15 per cent in Berwick; 8 per cent in Box Hill) and about 10 per cent never received any money from their parents.

Because of the differences in participation in full-time work among school leavers in the two areas, the percentage of these young people who never received money from their parents was much higher in Berwick (68 per cent) than in Box Hill (46 per cent). Correspondingly, regular allowances were much more common for school leavers in Box Hill (21 per cent) than in Berwick (5 per cent).

Where a regular allowance was paid, for secondary school children, the amount paid depended upon their age. The mean allowance was about $5 per week for 12-13 year-olds, $8 per week for 14-15 year-olds and $13 per week for those aged 16 or more. The amount of the allowance was only slightly higher in Box Hill than in Berwick. On the other hand, where a regular allowance was paid to a school leaver, besides being four times more likely to be paid, the mean amount was almost twice as high in Box Hill as it was in Berwick ($17 in Berwick, $29 in Box Hill).

Control of the money

Parents were asked whether the young person or the parents decided how the money given by parents to their children was spent. The results differed according to whether the payment took the form of a regular allowance or an irregular payment. If it was a regular allowance, it was the child who mainly or entirely decided how the money would be used in 75 per cent of cases, it was half and half in about 10 per cent of cases and the decisions were made largely by the parents in about 15 per cent of cases. For irregular payments, however, the weight of control lay with the parents with the parents deciding how the money was spent in 55 per cent of cases with 16 per cent being a 50-50 decision.

Thus, there appear to be two styles of parental payments to young people: to pay a regular allowance and have the child decide how it is used or to pay an irregular amount as needed with the parent largely determining how the money is used. The area in which the parents lived was not a major determining factor of the style that was used. In further analysis, we can investigate which parents used which style.

Other parental assistance: school leavers

Parents of young people aged less than 20 years who had left school were also asked in what other ways they provided assistance to their children. Beyond the obvious food and shelter, other forms of assistance by parents to children are shown in Table 2.

The outstanding form of assistance is parents lending their children money. As 80 per cent of these young people received some form of income other than from their parents, there may have been some chance that the parents would get the money back. Beyond this, other types of assistance were more common in Box Hill than in Berwick, especially providing money for clothes, education, public transport and entertainment expenses.

Motor vehicles school leavers

Young people who had left school were asked questions about their access to motor vehicles and who pays the expenses. In Berwick, 49 per cent of school leavers aged less than 20 had their own car and 23 per cent used a family car. In Box Hill, the corresponding percentages were 38 per cent and 24 per cent. Most without access to a car did not have a licence.

Among those with their own car, the car had been bought for the young person by parents for 27 per cent of cases in Box Hill and 14 per cent in Berwick while for a further 27 per cent in Box Hill and 14 per cent in Berwick, the purchase price of the car had been shared between the parents and the young person.

Those using their own car or a family car were asked who paid the running expenses/petrol for the car. Results for the two areas were fairly similar with the young person paying all expenses in just over 50 per cent of cases, the parents paying all expenses in just under 20 per cent of cases and the costs were shared between parents and the young person in just over 20 per cent of cases.

Conclusion

The preliminary analysis conducted in this article indicates that young people aged less than 20 have a high degree of dependency upon parents irrespective of their circumstances. Even the minority of young people who made financial contributions to their parents, mainly those in full-time work, paid amounts which were well below the levels that the child is likely to have cost the parents. On the other hand, both financial and non-financial transfers from parents to young people were the norm for those still in secondary school and very common for those who had left school. Young people who worked part-time, whether they were still at school or had left school, were very likely not to contribute financially to the household.

There seems to be little justification, therefore, to treat these young people as separate income units in the calculation of poverty estimates. Rather, it would be more appropriate to include them and their incomes in the same income unit as their parents. This is the approach that is being taken in the Institute's Australian Living Standards Study.

References

  • Hartley, R. (1990), What Price Independence? A Report of a Study on Young People's Incomes and Living Costs, Youth Affairs Council of Victoria, Melbourne.
  • McDonald, P. (1991), 'Youth wages and poverty', Family Matters, No.28, April, Australian Institute of Family Studies, Melbourne.