One critical factor helping Australians earn more than generations past was education. The report found that on average, someone with a bachelor’s degree or higher earned 23 per cent more than someone who completed up to year 12, and 35 per cent more than a person who reached year 11 or below.
Long-term economic growth has also been key to helping each generation earn more than before, Wood said.
“There’s much more opportunity for young people to get in and to start their career and to move up in their career in a world where the economy is growing strongly compared to where it’s stagnant,” she said.
While most people end up in the big movable middle, Wood said people at the extreme ends of the income spectrum were less likely to be mobile, which was “a little bit Downton Abbey”.
“If your parents were very well-off, you’re more likely to be very well-off. Conversely, if your parents were poor or in poverty, you’re more likely to end up there,” she said.
Wood said many people end up in poverty temporarily, but some get stuck in a poverty cycle, with renters, people with poor health or those living in poor areas, women or older people more at risk. The report found that poverty could be inherited.
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“Younger people whose parents were on income support payments are twice as likely to end up on income support payments themselves, compared to others,” she said.
At the opposite end of the spectrum, people whose parents were in the top income bracket were more likely to remain there, and wealth – more than income – kept younger generations in the top brackets.
Wood said wealthier parents have a greater capacity to invest in their children’s education and could also help their children build wealth by helping them into the housing market or through inheritances.
“Wealth seems to be more important in cementing cross-generational privilege, so even though we found that income is pretty mobile, wealth is a lot more sticky,” Wood said.
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While most generations have enjoyed higher incomes than their predecessors, slow economic growth has meant Millennials born in the 1990s are the first group that haven’t seen their incomes rise relative to those born in the 1980s.
Wood said those Millennials have suffered because Australia experienced really sluggish wage growth in the decade following the GFC.
“This generation-on-generation progress is premised on the idea that we have healthy income growth that allows this generation to be better off, and that has fallen away with the younger Millennials,” she said.
It was too early to say how much this would affect Millennials and younger generations in the future, but she said there were concerning signs about income mobility.
“I think there’s definitely a risk that we become less mobile over time,” she said.
“How future generations fare will depend on how successful we are at keeping a healthy labour market and keeping real wages growing.”
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