Work and education key to escaping poverty and pandemic recovery

People who lose their job are more likely to enter poverty and remain in poverty over time, according to the latest Breaking Down Barriers report.

Using Census data across 10 years to examine Australians’ experiences of poverty, the report also shows that education plays a significant role in escaping poverty.

Conducted by the Melbourne Institute: Applied Economic & Social Research at the University of Melbourne with the support of the Paul Ramsay Foundation, the report raises concerns for those most affected by the COVID-19 recession.

Professor A. Abigail Payne, Director of the Melbourne Institute and co-author of the report, said the analysis highlights the likely long-lasting effects of the pandemic on some people.

Eighty-five per cent of Australians were not in poverty in 2006. Of those 12.3 per cent had become poor by 2011, and nearly a third of those had lost work.

“Unemployment is clearly a short-term driver of people’s experience with poverty, but the longer a person remains unemployed the more challenging it becomes to get a job. Our analysis suggests that entering unemployment could bring long-lasting negative impacts on a person’s capacity of move out of poverty,” Professor Payne said.

“While not triggering a recession in Australia, the Global Financial Crisis had a clear dis-employment effect on the most vulnerable groups. Therefore, we cannot assume that people who lose their jobs because of the pandemic will become employed again when things return to normal.”

The report found strong associations between higher levels of education and breaking this cycle of poverty.

In 2016, people who didn’t finish high school made up 26 per cent of the population, and 40 per cent of those in poverty. Australians with bachelor’s degrees made up 25 per cent of the population, but only 10.5 per cent of people in poverty.

The data also found that education and reskilling are important drivers in securing employment and should be a significant policy focus of the pandemic recovery.

Of the 9.5 per cent of working age people (those aged 15-40 in 2006) who were poor in 2006, 62.3 per cent had left poverty by 2011. Of these people 20.6 cent had gained a higher level of education, and 40.4 per cent gained work.

“In the long-term we should be looking at the way we reskill to ensure that people have access to reskilling opportunities, and that they are getting the value they need out of this education,” Professor Payne said.

Professor Glyn Davis, CEO of the Paul Ramsay Foundation, said the report illustrates the importance of understanding the cyclical nature of poverty in developing policy responses.

“As we respond to the pandemic-induced employment challenges, policymakers should be concerned that longer periods of unemployment will have long lasting effects that increase poverty,” Professor Davis said.

“The report offers us insights into the long-term pathways to recovery beyond the pandemic, finding that education and training is a proven tool to gain employment and leave poverty behind.”

The report uses Census data to follow 350,000 people in 2006, 2011 and 2016. Poverty is defined as people who live in households that earn less than 60 per cent of the national median income.

The report is the final of three released in 2020 by the Melbourne Institute in partnership with the Paul Ramsay Foundation.

Media are invited to attend a virtual colloquium for the launch of the report at 12pm on Tuesday, 8 December. Register here.