I’ve written a new version of this post with updated numbers for 2013, which can be found here.
There are a couple of pieces in the News Ltd papers today which advance the view that the Government is practising unconscionable ‘class warfare’ by reducing the benefits paid to families with incomes above $150 000 a year. In The Australian’s piece, a couple on $200 000 a year (who admit they pay only 18% tax) complain that they may be forced to get a nanny if their childcare subsidy is reduced.
Now, The Australian itself has called for reductions in ‘middle class welfare’, so either the editors have changed their mind, or they have a misguided sense of what constitutes a middle income in modern Australia.
I don’t doubt that the family featured in The Australian’s story genuinely thinks they’re more or less typical, but they’re wrong. We all tend to judge what’s normal, or typical, with reference to those we work and socialise with. This leads the poor to underestimate the wealth of the rich, and leads the rich to overestimate the wealth of the poor. It also means that a lot of us tend to think we’re ‘middle class’ when we’re not.
Andrew Leigh (before he was an MP) wrote a great little paper on the effect that this misperception has on our public debate, called The Political Economy of Tax Reform in Australia. In it, he argued that
opinion leaders [do] not properly appreciate the distribution of income in Australia. For the most part, the taxation rates applying to most politicians, journalists, business executives and think-tank staffers (and indeed, to academic economists) are not those that apply to the average voter. In all these professions, six-figure salaries are common. Yet only 4.5 per cent of Australian adults have an income that exceeds $100,000 per year, and only 1.5 per cent have an income that exceeds $150,000 per year.
(The paper is from 2006, so the figures are a little out of date, but the principle hasn’t changed).
Leigh also, correctly, notes that “reporting of ‘average’ income in Australia focuses on a measure of earnings which is not that of the typical voter.” Journalists often use average weekly ordinary time earnings for full time adults (AWOTE) as a measure of a typical income. This is misleading for several reasons.
First, not everyone works. AWOTE measures only those who have earned income. Second, people have sources of income other than employment (transfers from the Government, dividends, rent, capital gains). Third, AWOTE excludes part time workers, and therefore excludes a lot of low-income earners.
Fourth, AWOTE represents mean earnings, not median earnings. This is a very important point. The mean income of drinkers in a pub goes through the roof if Bill Gates walks through the door, but the typical drinker has become no better off. For this reason, the median is a much better measure of a typical person’s income, as it is not distorted upwards (or downwards) by large changes in the tails of the distribution. This is a point that we all should recall from Year 8 maths, but for some it is apparently a difficult point to grasp.
So, what does the typical Australian worker earn?
If we’re only interested in wages, and only interested in people who work, then that’s a fairly easy question to answer. AWOTE is $66 445 per year. However, we know that’s a problematic measure of the earnings of the typical person. Instead, we can look at the median earnings of all full time workers, which is $54 750 per year.
See how much the figure drops just by looking at the median instead of the mean? In case the whole mean vs median thing hasn’t sunk in, this figure means that half (50%!) of all full time workers in Australia earn less than $54 750 per year, or at least they did in August 2010 when this survey was taken.
What if we broaden our scope a little, to look at all employees? After all, politicians aren’t only concerned about full time workers. Well, the median earnings of all employees is $44 146 per year. Half of all workers earn less than $44 146 per year.
However, we don’t all work. In fact, a lot of us don’t.
So, what is the typical Australian’s income?
To answer this question, I like to use the tax statistics from the ATO.
Half of all Australian taxpayers had taxable incomes below $44 546 in 2008-09.
It’s starting to seem as if $200 000 is quite a lot of money, isn’t it? In fact, 98% of taxpayers have incomes below $180 000. Mr Gray, the man in the Daily Telegraph’s story, earns $150 000, which would put him in the top 3% of taxpayers by income (or at least it would’ve in 08-09). Quite how this makes Mr Gray a “middle income earner” escapes me.
One objection at this point would be that I’ve been talking about individuals’ earnings or incomes, rather than households. After all, families tend to pool their resources and spread their costs.
So, what is the typical Australian family’s income?
The latest ABS figures on the distribution of household incomes are for 2007-08. They show that the median gross household income was $67 003 a year, less than half what the $150k-$200k “battlers” of News Ltd’s imagination scrape by on.
Note that the mean gross household income was $85 983, which shows you again that using the ‘average’ can give you a very distorted idea of what is typical or ‘middle’.
However, there’s a problem with using these figures. The problem is that these ‘gross’ household income figures don’t take into account the fact that we all live in households of very different sizes. A household with two adults and no kids will face lower costs and have a higher standard of living than a household with two adults and two kids, even if their incomes are the same.
We need a way to compare the living standards of people across different household types, to get a measure of how much income a person would need to maintain the living standard of the typical (median) Australian. This is known as equivalised household disposable income.
So, what is the median equivalised disposable income of Australian households?
The median equivalised disposable household income for Australia in 2007-08 was $36 082 according to the ABS, and $35 664 according the Melbourne Institute’s HILDA survey.
This means a single person, living alone, would need around $36 000 in disposable income to sustain the typical Australian’s standard of living. Following a widely-accepted methodology, each additional adult adds $18 000 to this figure, so a childless couple would need a disposable income of $54 000 a year to enjoy a median standard of living. Each child adds $10 800 to this figure.
A couple family with two children would therefore have needed $75 600 disposable income in 2007-08 to have the same standard of living as the typical Australian. The family in The Australian’s story has a gross income well over double this amount, and disposable income that is still more than double the median. They are far from typical.
Bravo Matt. An authoritative and important contribution to a discussion with serious implications for our society.
Cheers TIm
I did an estimate based on ABS stats for a median wage individual a few years ago and could only come to around $26k
THATS SOUND MORE LIKE IT! I would have suggested a figure to be 25-27K a year. Phuff! hardly what you would call an income by what is called ‘fair and forward Australia’….
Remember the good old “Henderson Report” 1967? Oh yes-sir-ree that absolutely blow me away….. gosh I was under the impression that we were a rich country, a land of plenty… Hey if that was back in the boom time god help us know!
Well of I have got to say is “give me the money honey” and “stick the fancy rhetoric for the very, very, very rich”…. god bless.
Senexx and Sonya, you are both right. I did some checking with ABS too, as well as checking out income data specific to many of the rich suburbs. I was surprised to see such low income for suburbs that have properties in the 450k and above. I think most of Australia’s ‘wealth’ come from mining and inflated house prices, all of which are disproportionately distributed.
Great post. I had a baby last year and was surprised by how much “middle class welfare” I got access to. Baby bonus, childcare subsidies etc – a significant amount of cash really. I worked in market research and generally we referred to high income earners as HOUSEHOLDS (not individuals) earning over 50K a year. How 2% of the population started to be referred to as middle income earners I have no idea. But there is a trend in marketing as well to begin to start to reflect your own high-income earning values on everyone – it seems the same is happening in “journalism” in Australia as well.
ABS household income data table for 2007-8, relevant cells highlighted: http://yfrog.com/hsum8jp
I was interested to see that 23.2% of the income is derived from Government Pensions and Allowances – which explains why the pension ages are being increased. According to signs posted by HSBC in the US, 3/4 of all the people who have lived to age 65, ever, are alive NOW,
Only 5.7% comes from Unincorporated business.
The Salaries and Wages component (61.5%) must include the salaries that are paid to business owners who are incorporated – which distorts the numbers for true employees – opposed to those who employ themselves through corporate structures for tax purposes.
Raw data like this always needs some additional research and understanding.
I expect that a lot of this misrepresentation is due to journalists and editors wanting to believe that they represent normal Australian values. Journalists that make 150K will therefore be predisposed to assume that they are Middle Class, and thus that 150K is Middle Class.
Not sure any journalists are on 150K dude.
I really appreciate your efforts putting this report together. I found some solace in the figures following a day of, I think, deliberate confusion reporting from some in the media.
Great article
Glad you did that post and not sure why you may have hesitated. Excuse the pun, it’s on the money. Thanks
Fantastic corrective to the tide of bullshit today. Thanks Matt.
Anyone who has ever signed off on their annual tax return knows that “taxable income” is hardly an accurate gauge of a person’s gross income. So it’s not surprising the average taxable income cited here would be relatively low.
In any event, however, one of the nuances that is lost in this kind of debate is the failure to acknowledge the differing cost of living in certain cities in Australia. I don’t see how much longer successive federal governments can turn a blind eye to the increased cost of living in somewhere like Sydney to the rest of the population. In all fairness I think that is the point much of the media response today was trying to express: that being “rich” in Sydney aint what it seems to be. You don’t need to be earning 150K a year (which, for the record, I do not) to concede that.
two things – no-one puts a gun to a sydneysider’s head and says ‘you must live here’. Not everyone who wants to live in Sydney can afford to.
Secondly, there must be some reason (which will forever elude me, because I’ve been to Sydney) why so many people want to live there. It must be the most happening, or most desirable, or sexiest city in all of Australia for so many people to want to live there. This means that anyone who pays more to live in Sydney, while they don’t have their money anymore, does have the enjoyment of having lived in Sydney.
You get what you pay for.
THANK YOU.
Excellent post. This is political blogging at its best.
Brilliant work Matt.
Thank you for this. Thank you a lot. Whenever I read an article like the one that appeared today, I make a few half-hearted attempts to find out for myself the answers to such questions as, ‘What is a high income? What is the average income?’ and have never really found a good answer. Shall come back tomorrow and read it again.
@Brett we all can acknowledge that the costs of living vary between cities but, even allowing for that, this article highlights how ridiculous the ‘$150k/yr == “middle class”‘ message is. The important point here is that a family of 2 adults and 2 kids would need roughly $75k/yr to live like a “typical Aussie family” and if you can’t survive on more than twice that than you a living beyond your means.
Great post. What is disappointing about the political debate is that there are reasonable arguments in favour of ‘middle-class welfare’ – productivity etc – but instead we’re all having a boneheaded debate about the definition of ‘wealthy’. It almost takes on absurd existential dimensions – what does it *feel* like to be wealthy? Am I wealthy, when I feel so average? – when in fact its something thats easy enough to resolve through 10 minutes on the ABS website and some Year 8 maths. Shame more MSM journos can’t be bothered trying it out.
Excellent article and it should be compulsory reading. Thank you so much for this.
[...] What is the typical Australian’s income? « We are all dead. An interesting dissection of what makes a person 'middle class' in Australia. How much to they have to earn. And that the average person misunderstands what makes middle class. (Not to mention that some earning $150,000 thinking they are middle class is nuts) (tags: Australia income mean median middle-class TheAustralian Wearealldead mattcowgill) [...]
@Brett: The people trying to live in (Inner) Sydney on a median income might be genuinely considered battlers (I earn less than the median, like 50% of Australians), but people on double or triple that? Get real.
@Brett.
I live in Sydney. $150k is a lot of money. My entire family lived on less than a third of that for years. We never complained about doing it “tough”. It must be a yuppie thing.
totally explains why my household is so piss poor and deviating from the strict family budget by even $20 a fortnight can really fuck us up!
Matt, this article in the Oz quotes the Household, Income and Labor Dynamics in Australia survey. According to this, $150k places in top 13.5% of HHs – elsewhere I’d read ABS stats placing an $150k HH in top 8%.
http://www.theaustralian.com.au/national-affairs/were-not-rich-but-wealthier-than-most-sydney-family/story-fn8gf1nz-1226054297260
???
Hi Jonathon,
Yes, when I said that $150k put someone in the top ~3% of taxpayers, I was referring to individuals, not households
I was just reading Grog’s Gamut, and had decided to do my own numbers. This was before I got to his link to you at the bottom!
Using Household Income and Income Distribution 2007-08, I annualised gross income, and inflated it using CPI. (I know I should have used AWOTE, but I’m having breakfast and not thinking). The percentiles are below, showing that $150K is well above the P80.
Anyway, as Grogs points out, $150K is a bullsh*t number that doesn’t mean anything.
10th (P10) $18,811
20th (P20) $31,400
30th (P30) $43,756
40th (P40) $58,501
50th (P50) $74,678
60th (P60) $91,599
70th (P70) $112,278
80th (P80) $138,857
90th (P90) $185,436
This is an excellent post. It’s always wonderful to see someone talk financial sense, especially someone who can write with clarity. :)
-A
Jonathon,
That may well be right. I don’t have access to HILDA data. I referred to 2007 HILDA data from their published report in my post. Thanks for the link.
Jose,
I had actually intended to inflate all these numbers to the present day, but I ran out of steam at the end there. I would inflate the numbers using the National Accounts measure of disposable household income. This is not perfect, but it is a widely accepted methodology (for instance, the Melbourne Institute uses it to calculate changes in the poverty line over time).
Thank you all for your kind comments!
Hi matt| hope your well. Great post.
My 6 year old asked me if we were rich yesterday. Luckily I said yes.
2 critical points I’d like to make.
The median Journalists doesn’t get paid anything like 6 figures.
Growing up in suburbia most mums were robbed of the opportunity of having a self sufficient income because they were forced out of the professional/white collar work from conception. Child care subsidies offer the chance to stop that from happening
[...] So, what does the typical Australian worker earn? [...]
So pleased you published this, I’ve been looking around for ages for someone to refute this bullshit. When did we all start feeling so entitled?
I was talking to the missis last night and firmly believe the problem is the “aspiration” of the middle class, so they buy the 4 3 3 (garages) house and the $60k car, rather than understand their actual disposable income before they do this.
So to help me understand that, does your article mean we have to EARN $75k per year to maintain “average” standard of living for a 2 2 family, or TAKE HOME $75k per year?
Also the older kids, the higher the costs surely?
Have these been included in the stats?
I’m not sure whether the words I’m looking for are “compulsive reading” or “compulsory reading”. I think this post should be compulsory reading for all journos and journalism students.
Franksting,
That $75k figure is disposable income, so that would be your income after taxes and transfers (remember to take Govt payments into account as well as taxes). Bear in mind that that figure is for 2007-08, so it should be adjusted upwards a little.
The OECD equivalence scales that are used to come to that figure assume that the first adult in a household requires 1.0 x the median equivalised disposable income to maintain a typical standard of living; each additional adult (person over 15) requires 0.5 x the median; and each child under 15 requires 0.3 x the median.
So, a family with 2 adults and 2 kids under 15 requires 2.1 times the median equivalised household disposable income (1 + 0.5 + 0.3 + 0.3) to attain the material standard of living of the median Australian.
Helen,
Thanks!
Excellent post. Thanks for bringing some facts to the debate.
Matt
Thanks! I’ll be sure to advise the Missus when she next wants to buy this seasons winter black fashions to the detriment of my 2006 Shiraz!
Wonderful post. Thanks for the clear explanation of the reality of the numbers.
[...] What is the typical Australian’s income? There are a couple of pieces in the News Ltd papers today which advance the view that the Government is practising [...] [...]
Great piece!
I think you’re missing the point by saying that 98% of workes have an income below $180,000.
The new Government standard is $150,000 per household. I.e. two incomes combined.
Emily, a lot of the discussion around the $150 000 threshold concern Family Tax Benefit Part B.
FTB B is based on the income of the primary earner, not the household. See here: http://www.centrelink.gov.au/internet/internet.nsf/payments/ftb_b_iat.htm
Excellent post Matt. I never thought of it in the way you have outlined.
Matt – Based on your comment #420,
If a family unit consists of 3 adults, you’d roughly expect, to maintain a ‘standard’ of living, a requirement for about 150K, lets call it 155 for adjustment?
And that should be post-taxation?
Hi,
No. The median equivalised household disposable income was ~$36000 in 2007-08. A household consisting of 3 adults would require twice this amount (1 + 0.5 + 0.5), so $72000, to attain the standard of living of the median Australian. This should be inflated a little to express it in 2011 dollars. Yes, this is post-taxes and transfers.
How much are any of these income numbers skewed downwards by the self-employed gifting themselves and their families salaries in low tax brackets while writing off personal expenses to company accounts? Just a little?
Thanks for this – I’ve always had a little bit of knowledge of these numbers, but not enough to write it up as succinctly and convincingly as you have.
I’ve always been surprised at the so called “average” income is significantly higher than my own. I’m educated, earning at least as much (if not more) than my peers – surprise surprise, my wage is almost exactly the median you’ve posted, which makes a lot of sense to me.
It’s a good thing you’re hosted on WordPress – I have a feeling this article is going to see a LOT of traffic. :-)
I pity those scraping by in the inner suburbs of Sydney on such a paltry wage. It must be tough.
If someone earning 150K is considered ‘middle-class’, does that make the other 98% of the Australian population ‘working poor’?
Good to see someone *finally* putting the facts out there, rather than News Ltd propaganda. Its funny how The Australian’s seemingly genuine belief in the need to reduce Middle Class welfare conflicts with their need to oppose *anything* done by a Labor Government-& especially their need to agree with anything that Tony Abbott says.
Well said!
For the record. My pre-tax income is just a smidgeon above $60,000 per annum, & I have always considered myself Upper Middle Income-in that I’m at the very upper band of the Middle Income range as per 2009. I have certainly never considered myself Middle Income & definitely not low income. Yet somehow I’ve managed to survive these last 11 years without one red cent of government assistance (as I *refuse* to buy tax-payer subsidised Health Insurance). I even manage to put a decent amount of money away each month, so how come people on almost 3 times my income are complaining that they’re “struggling”? They must just be living beyond their means-which is fine, as long as the government isn’t encouraging it at *our* expense.
One last thing. I believe my attitude towards wealth is down to the fact that for 5 years-off & on-I had to survive on nothing more than either the dole (about $320/fortnight) or part-time employment (which often left me worse off, due to the ludicrously high effective tax rates). This is bound to give a person a *very* keen insight into what denotes *struggling*.
Well said. I also keenly remember living off the dole and/or casual income thus until someone has tried to live (more like barely survive) on the dole you better quit your bitching IMO
@Marcus: I totally agree with your point there. I too have spent pretty much all my time since uni (10 years!) continuing to ‘live like a student’ in the financial sense. When the GFC hit we had nothing to cut down on as we already took our lunches to work and cooked stews! Now we have a baby and I am not working and I’m not ashamed to say we are accepting some government benefits to help us get by until I get back to (probably part-time) work. I’m sure that then we will be able to survive in the same way we always have – on the bus and eating at home with a special treat of some take-away beers at home on a Friday or some friends over for dinner on a Saturday.
I don’t think we’re ‘struggling’, but things are certainly tight. Anyway it makes me angry too to hear about people on $150,000 who might have to hire a nanny for their child… at the moment for us childcare isn’t even an option! There is more to add about women getting back into the workforce but that’s a whole different issue:)
[...] Posted by Chris, on May 12th, 2011 Families earning $150k+ are not doing it tough. Perhaps they should spend less time whining, more ti… [...]
Great article! Quick question though – are the figures quoted above gross (as in including tax/super) or net (after tax/super have been taken out). I’m sure the answers are in the links somewhere, but I’m at work!
Janette,
All the figures are gross apart from the equivalised disposable household income, which is net of taxes and transfers.
Going to uni with lots of rich kids, I am so tired of hearing endless bitching about not being eligible for Centrelink payments. I can’t help but think that now their parents have struck up the same tune, largely replacing the usual complaining about “those bludgers on welfare”… but I’m sure they’ll return to that sooner or later.
Hi Matt
fantastic article, delightful work thankyou
cheers
A refreshing, informative article Matt. Have you sent it to News Ltd?
Matt, the problem is 98 percent of journalists are innumerate. In fact, the reason most of us ended up in journalism was we were hopeless at maths. So you need to explain to them simple concepts like the difference between the median and the average and the mean.
Unfortutunately, even if you do explain it to them, it will quickly be forgotten because a ‘survey’ will hit their desk saying “The average Australian household is struggling to make ends meet on $150K a year….”. At that point, the lure of the story is bigger than the painful need to get their heads around the data.
In fact, the normal response among journalists, when confronted with data-based analysis, is to cut and paste and put their names on top.
and dont forget that 67% of statistics are made up by journo’s on the spot :)
Just to weigh in – I’m a journalist with nine years’ experience and barely make over $50k a year. Many journalists earn bugger all. I’d LOVE to get this “six-figure salary” that’s apparently common.
I’m sure it’s probably all my own fault, but I wanted to weigh in. We’re not all sipping G&Ts and shopping at Prada, us “trendy media types”. ;)
Just work for News Ltd. Leave your soul at the door though.
I’m also a journo with 8 yrs experience and I’m yet to make it over the $50k mark. In my experience, working for both small and large publications, very few make the money you’re talking about.
Brilliant article though!
Jesus…why would anyone be a journo? Your pay is shit, especially considering the hours you guys do!
Thanks so much for this excellent analysis. I will trumpet it to the world, to the limited extent that I can.
Individual ‘wealthy middle class’ incomes are also underestimated as a result of Australia’s archaic attitude to maternity/paternity leave: In most families with incomes over $150,000 the salary is in fact being earned by one adult not two, and a male one at that. In order to get to this kind of often corporate salary, an employee with children needs to rely massively on the support of mothers who look after their offspring. Once these salaries are reached they increase exponentially leaving women in a weaker and weaker economic position especially post separation (which becomes almost an inevitable consequence of the absurd employment conditions demanded to earn these salaries). Then, the government Child support agency won’t even acknowledge this probability: After separation their child support rates are based on a top salary of around $150,000. So male ‘middle income’ earners can get away with squirrelling away anything above that, leaving women and children poorer. That is also how such gross inequity grows.
Um, the solution here is clear, Rebecca. Don’t divorce your husband and steal his children from him and you won’t have anything to worry about.
Ignore Chris, women come out worse off thoughout the workforce if they choose to have children- we’re still dealing with a patriarchael capitalist society and women will continue to be the ones who compromise either their children or their career until that changes. Everything else from the government is a bandaid solution and doesn’t address the underlying problem. Not to make this a work/children issue.
This is terrific. Using real data to support a thesis – imagine that! I’m subscribing to your blog feed on the basis of this post.
I was vaguely aware of the figures. I distinctly remember reading a Gittins article where he mentioned the average income at 60K. I was aware then that what he was trying to say about typical Australians required the median, which I was aware was in the 40ks. But you’ve really nailed it here. A great paper. I particularly remember Gittins at a book industry conference shocked to learn that most of the people he was speaking to – including much of management – were well below the average. It is that odd delusion about the lives of others. But I think this reinforces the diversity of ‘worlds’ that are out on the street everyday. Some people have my whole annual income as savings, or money for holidays, &c, or when they get a new job, that is the bump in income. The really appalling thing is when people who are obviously in the very top bracket talk about their money woes in the company of people in the bottom, say, 20%. Some of that is perhaps coming out in that News story.
My real question is the political implications of all this. I don’t have any immediate thoughts. But it shows massive inequality of access to wealth. And I think that access has implications for feelings of empowerment. If the world isn’t so available, changing it is even less available.
Excellent article -great to see someone following up these facts and figures and telling how it really is!! We all wish we were bringing in $200,000 per annum like the family mentioned but reality is far from this figure.
Great article however there is one huge group of people that wasn’t really included (I’m guessing based on lack of data?) ….. self-employed ?
We earn our money, get deductions then are taxed. I earnt around $50K one year yet after deductions qualified for the low income benefit.
So… middle class is anyone who earns around 30-40K before tax ??
This is an excellent post! So many news sources don’t actually go into details properly and just get swung by sentiment. It’s very interesting to read the actual figures involved here.
Great article: I earn less than the ‘average/ median’ wage. I wonder though if the amount of income required includes the increases in living costs that have significantly risen over the last 2 years and the expected rises this year in electricity, water, council rates and interest rates.
We make do, but without the FTB and ChildCare rebate, I would not be able to return to work as it would cost me more to send my child to day care than what I earn in a day.
Food for thought…
Let us also not forget the appalling practice in this country of not including salary brackets in job advertisements, which allows interviewers to answer (awkward) questions of “So what does the job pay?” with “What do you think you are worth?”
If there is so much secrecy about what others are earning, it is so much easier to be underpaid.
There should be a standardized system of earnings brackets and bands for each employment sector, creating full transparency. Otherwise the low earnings for the “working poor” will continue…
I believe that we should have legislation in place requiring all positions advertised to include a salary range. It’s unfair on applicants to not know whether or not they’re wasting their time applying.
Thank you so much for putting this together, I have been shouting on about medians and averages for ages and now I can just link for people.
On a side note, as a freelance writer, most journo’s I know are well under the six figure bracket. Someday I’d love to think 100k a year is a normal wage…
But when that becomes ‘normal’ the cost of living will far exceed it, so it still wont be enough! :-(
Cripes, I’m dead!
Existing on the DSP at approx. $18.500pa, single, having arrived here via a reasonably well paid job ($60.000pa) a couple of years ago.
Fantastic article, glad I looked, thanks.
Thank you for the great dissection here – I have been looking around for some hard numbers on this.
It’s ironic how reducing “middle class” welfare for those who earn $100,000/year is “robbing the battlers” but making it harder to receive the $17,500/year disability pension is apparently fair game …
Regards,
DSP Recipient
well said. it still amazes me how many people can in one breath complain about all the ‘bludgers’ receiving government support and the in the next complain about any moves to limit their access to things like the baby bonus and family tax benefits.
I was linked to this post through @leighsales on Twitter. Very handy analysis, well done.
I’m beginning to think we should be working the other way and finding out what the minimum cost of living is. I’m currently looking for work and in my situation (sole parent of 13yo and 10yo who receives no child support from other parent) I have had to draw a line and say that even if I was earning less than $50K/year I would qualify yet again for a Health Care Card and/or Pension Card, I would rather be able to meet my pretty lean budget and earn around $55/year. Ideally I would love to be able to do a 1-2year post grad diploma or degree to better my employment chances but I simply cannot afford to do so.
[...] Cowgill is an Australian trade unionist who blogs at We are all dead and on Twitter @MattCowgill. He debunked the myth that the Government is practicing unconscionable [...]
Well written mate!
I think it’s funny how you think News Ltd would ever have a consistent narrative. They don’t have to bother because of the short attention span of their regular readers! hahahaha.
Reading this from a hotel room in Detroit MI USA and listening to the local financial news. The commentators are making the point that small employers cannot afford to pay employees TEN DOLLARS AN HOUR.
How many Australians are working for less than $10:00 ph? In the US – two weeks annual leave, no leave loading is the norm. Very few get four weeks.
Hi Lesley,
The National Minimum Wage in Australia is $15 per hour. ABS stats show that around 8% of employees earn less than this amount (there are various explanations for this).
Excellent post, by the way.
Statistics are so easily and often abused, twisted to fit the desired outcome of the people paying the bill. It is good to see a statistical analysis laid out bare such as this one is. Clearly explained and transparent, as a good and honest statistic should be. Thank you. This should get more exposure.
great use of informative stats – very enlightening, well-written and thought out
This is not only confined to Australia alone, in the UK, the government is also considering removing child benefit from the middle class and high earners. Come to think of it, it looks as though these people are being punished for working hard.
I don’t support any government cutting people’s benefit because of the increase in the earning.
Nice piece BTW.
How can our Government be so far removed from these facts? They are either ignorant or in denial. The discrepancy between what is average (a statistic they conveniently use) and what is median is absurd. They need to start using the accurate figures, not the skewed ones. We know what we earn, and for the majority of us, it is well below the ‘average’!
Having said that, benefits come from our taxes, something we all pay. Regardless of what you earn, you have contributed your tax, and are therefore just as entitled to benefits as any other tax payer.
Great post – I just wish those clowns in Parliament would read it!
I’m a single, living in Sydney (an inner suburb apartment), I earn about $45,000 a year, and I consider myself well off.
I don’t have a lot of money to spend on additional luxuries once I’ve paid rent, electricity, internet, phone, groceries. You know – only maybe one night out at a pub in a fortnight, takeaway lunches every day, a treat for myself or a present for a friend’s occasion of some sort.
So you know. I actually have shit loads of money to spend on things that are not essential at all.
When people say “electricity bills are crazy, we paid $1000 last quarter”, I look at the size of their family and think – that arithmetic isn’t right. I’m no thrifty user of kWh, I mean I always use my dryer in the height of summer. How big is your house to generate those kinds of heating costs? What’s the size of your plasma screen TV?
When people say “oh but costs of living are so high in Sydney, I earn $100,000 and my partner earns similar but we struggle to pay the bills”, I think, surely I should be fucking dead in a gutter by now if Sydney is that expensive to live in.
I mean I don’t have any kids to pay for I’ll admit, but I do have a chronic mental illness which makes life a little tougher.
And yet I consider myself extraordinarily privileged, and can’t help but worry at the selfishness that makes my charitable giving only spasmodic instead of regular.
What’s wrong with these people? :-( Well I think I can guess the answer, but it makes me very sad for them. It must be a horrible thing to be so completely blind to your own blessings.
I earn a similar amount, and share a small apt with my partner (that we have a mortgage on) near Redfern and yes, in my current situation, I feel pretty happy financially. We don’t have a car, which I suspect helps, but we don’t need one as we live near public transport and have no kids. Our bills are reasonable, we can afford to eat out and visit friends, and we get breaks, holidays, clothes as we need them. I’d prefer it if a major appliance didn’t break tomorrow, but if it does, we’ll be able to replace it without too much drama. Basically, we’re very comfortable.
I’d love a pony and all but I know I’m not badly off. I know people in a similar situation who are earning double what I make and claim to feel “poor” and I just wonder where they are spending their cash.
A semi decent house here in Canberra is over half a million dollars. My fiancee and I are on about 150k (including all my overtime and penalties) but it’s still going to take us 10 years to pay that off. You need a higher than average income to buy a house or pay the exorbitant rents!
Oh poor baby, some people never own a home let alone be able to pay it off in just 10 years!
But Chris, you (as do I) choose to live in Canberra, at least in part because it allows you to earn as high a salary as we do.
Funnily enough, high median salaries push up house prices.
You could live on a lot less if you lived somewhere else. Of course you’d earn a lot less too.
We (2 adults, 2 kids) lived on $50-$60k in Canberra for most of the last 7 years. We were still what I would consider very well off (indeed, looking at the numbers above I see this belief was quite justified).
The trick is to match your purchasing to your wallet. If you can’t afford the house you would like to have, either you rent (like we did and still do) or you buy a house you can afford.
10 years to pay off a mortgage is fast.
I sincerely hope this comment was simply trolling. Complaining that the house you choose to buy will be paid off in 10 years???
Considering most people take out loans for 25-30 years for a standard home means you are well above middle class “struggle”.
And when you start thinking globally, this entire conversation just becomes laughable!!! 99% of “true” Aussie battlers would be wildly better off than oh, say, 90% of the global population?
Those guesstimates seem disrespectful to the statistical care taken in the above article, but finer minds than mine can work out the exact numbers!
[...] What is the typical Australian’s income? Is the Gillard government mercilessly assaulting ordinary working families struggling on $150,000 a year? Matt Cowgill looks at the data and concludes that $150,000 plus is hardly typical for a couple with two kids. According to Mr Denmore: "the problem is 98 percent of journalists are innumerate." [...]
If you then take these figures and compare them to what Centrelink considers to be a high income, then deduct from your payments based on partners income, then get taxed on combined income.. peaople are hurting and badly at that.
Then Julia G comes riding in on her white horse to rescue us from all those dole bludging single mums leeching the country dry… nice one Julia.. target the most vulnerable who have small babies to care for and no combined income in a world where everying is priced based on a dual income (rent for example) .. the dole is a pittance even at its highest rates and their support systems are woefull (for those that dont know they actually dont directly help people get work anymore, they send them to an agency who is paid by the government to get them to go through news paper adds and re-write resumes [so the agency barely does anything either])
I think it has already been said. The problem is that most people do not understand simple mathematical concepts. For instance, the mean AND median are both averages. They both give you a TYPICAL value for the data set you are looking at. The MEAN IS affected by extreme values, the MEDIAN IS NOT. However, in REAL statistical analysis the MEAN would appear with the STANDARD DEVIATION. The two together allow you to see the “average” value, as well as the “average spread” of the values. This is much more useful than the median, which tells you nothing about the “average spread” of the values.
For the layman, the data you have given is fine, and valid. However there is nothing wrong with using the mean. Please stop picking on the mean.
Hi Paul, sorry I have to correct this. And this is a really important point in the discussion of the properties of income distributions.
Your interpretation of standard deviation is a little off when it comes to incomes. Its not as informative as you may think. Turns out incomes aren’t normally distributed and this is a pain in the ass. Now, log incomes are ‘nearly’ normally distributed, and if this is the case then the entire distribution is wholly defined by its standard deviation and mean. Let’s assume this and ignore the possibility of higher order moments (skewness,kurtosis,…)
So…if you want an accurate look at ‘spread’ then something that is meaningful is the variance of logs of income (this is the commonly used measure of ‘inequality’ macroeconomics). But then we have another problem…e^(mean(log(income))) [Hilda gives $57,000] is less than mean(income) [HILDA gives $69,000]. [A direct result of the concavity of the log function]. So we have this bind, the spread that is meaningful is associated with a mean which is not!
This is why it is common to consider the median and in a sense good practice to pick on the mean.
The same is true for houseprices and other log-normally distributed variables. As opposed to, say, height which is normally distributed and mean / standard deviations tell us a lot.
I’d actually really like to know the mode- the most common income as I think that would be an excellent average for this concept too.
Ms Fifikins,
The mode is OK. But looking at the mode means that we *have* to put people into income bins. As income is a continuous variable then in some sense there doesn’t exist a mode. I.e. $62,543.83 can’t be the most common income as only one person will earn it. We can put people into say the $60-65,000 income bin and do similarly for all $5,000 increments and then say which bin has the most and call this the mode…but then depending on how you bin incomes you will arrive at different results.
Hence the mode becomes a measure which can easily be gamed by the person working with the data.
Enjoy an intelligent read
Whatever statistical method you use the notion of “battler” is far below $150,000 p.a. Most helpful. Many thanks.
Thanks for this article! Its really a great and informative read. There was an earlier comment regarding the sense of entitlement that australians seem to have, especially in regards to property ownership and earnings. I think this is a major area for concern to our society as a whole and is related to (perhaps a cause of) our growing sense of nationalism and elitism. Australia is a great place to live but I feel that we would be better off being thankful for what we do have rather than aspiring for what we think we deserve (I work PT and am on 35k).
Hi,
I got sent a link to this… great article. The Australian has for many years really not got its head around how the majority of Australians live. Still, when your advertising depends on BMW’s, expensive overseas holidays, etc. it is in their interests to promote the idea that people who can afford these things are “normal”.
Here is an idea from Sweden – here you only pay income tax if you earn ABOVE THE AVERAGE INCOME….
If you need $36,000 just to live in Australia for a year (which sounds about right to me) then why for Gods sake is our tax free threshold only about $12,000 ?
It means then you have to take money off people who really need it for essentials and then spend a lot of money on administration trying to shuffle it back to them (not always very successfully) so they can live.
Raise the tax free threshold by $20,000 or so….
Ummm the tax free threshold is about $34,000. You are forgetting the low income tax offset.
The tax free threshold remains $6000. If you incorporate the LITO, a single adult does not pay income tax until his or her taxable income exceeds $16000.
Just had to leave a message to say what a great piece. So much information. Thank you.
By the way, a rather similar (but less in-depth) article appeared in the SMH a day after yours – http://www.smh.com.au/national/tax-benefit-anger-wasted-on-those-earning-150000-20110513-1emg2.html.
Thank you! I really enjoyed this article.
[...] Oz as well in many respects following on from the outstanding work by Matt Cowgill yesterday, produced a report that again featured a family, but this time didn’t play the sob [...]
The media around this subject has put it out there that six figure incomes are readily available. This article broke it down to make it easier for people to understand that their income is actually acceptable.
We are a single income family (My partner is a stay at home Dad), there are 6 mouths to feed and our income is just below $80,000 per year. I have a fantastic job given that it is full-time and with full entitlements.
Prior to getting my job 2 years ago, I studied for 4 years after concluding that my partner was not going to be able to get a sustainable job. All up we spent nearly 8 years on Centrelink benefits. It made us sick to try and survive and be constantly criticized for being dole bludgers.
Our income has doubled with my work and I am thankful that I am able to have the lifestyle that we have now. I am proud to pay tax and contribute to the society that supported us for so long. If I ever gain employment that has 6 figures I would be glad to contribute because I know that for the 6 of us to live our lives comfortably it would only cost us a maximum $100,000 per year. And that income would actually support us to purchase a home which we are currently not in a financial position to do.
Row, your post is probably the most decent and deeply felt in the thread, and I’ve read most of it… It’s great to see that the welfare help can get people out of the hole, as it is supposed to, and that you are so grateful for the opportunity it gave you.
The article was a great read, too, including good responses about stats.
Raw numbers always have a stretched relevance to reality. Accommodation costs (for rent and purchase) vary wildly depending on location. Incomes in cities are usually higher than outside, which drives up accommodation costs. The growth of cities drives/is caused by the persistent growth of income and costs. This is how you get incomes and house prices in major cities that bear so little resemblance to the rest of the country except a few other major cities. Combine this with a virtually non existent public transport system in Sydney and this massively drives up the value of inner city housing.
It gets the point where “average” or “median” across the country doesn’t really mean much any more. Take capital cities out of the picture, compare them to each other and the rest of the country to each other. That would be an interesting study.
I seem to remember a while back the Australian government going on about trying to encourage people to have kids. I thought the baby welfare payments were partly brought about to encourage people to have kids, effectively being an investment in the future of the country and providing more tax payers to pay for the aging population. And also to combat dwindling birth rates (see http://www.indexmundi.com/g/g.aspx?c=as&v=25). From this angle, if the baby bonuses are incentives to breed, then you have to think about who will be most lured by the incentives. By means testing the relief, the plan is effecitvely providing the most incentive to those with the least income or the lowest standard of living.
Now this may be more to aid people on low income in their “human right” to have kids, and I don’t have a problem with this. However the result for the country in the long term is the increase in birth rate of kids into families that have the least amount of money to provide opportunities for them. At the very least, in 18+ years time, this is likely to lead to an increase in the number of people who need welfare for education, health services, etc. This makes it very important for the country to get these kids into good education and help low income parents make better opportunities for them, otherwise the long term result is a growing number of people on low incomes or with low standards of living.
From this angle, if the birth rate of the middle class or wealthy can be increased, it is likely to result in less future welfare needed from the state, and higher tax income for the state from kids who have had better opportunities.
Now obviously the “fair” thing to do is to strive to provide the same opportunities to those on low income as those who are wealthy. However, with university and health care fees increasing, this is not really the reality in Australia. The fact that those who can afford to pay their university fees upfront get a 20% discount also adds to this – the richer students pay less to go to university!
Tax breaks on property investment in Australia are another problem. The higher the tax rate you pay (the more you earn), the more benefit you get from investing in property, because you write off property expenses and interest against your personal income. The end result of this is that you give the people with the most purchasing power even more purchasing power. House prices increase because the wealthy are competing with the wealthy for houses to rent to the not so wealthy, and rents naturally follow the house prices. Property investment tax breaks advantage the wealthy and disadvantage those on low income the most. This is the elephant in the room in Australia – it’s effectively the wealthy being subsidised to take income from those beneath them on the income scale. We don’t give personal income tax subsidies to people for selling other basic needs such as food, water, etc to low income earners – so why do we do it for housing, which is the most expensive basic need?
Anyway, I’ve come far from the point, which is that you can play the same game of “these numbers” aren’t the real story with this article because you haven’t had an effective look at the cost of housing. I would wager that a high proportion of those earning significantly above the mean wage level are paying for housing significantly above the level of those on lower income pay for the same standard of housing. Wealthy is still wealthy, but it’s not so black and white.
The other point is that welfare like baby bonuses are not just about helping people who have lower incomes to pay the bills – they are about the growth of the country.
[...] is the most excellent blog article here that actually crunches the numbers and tells it like it really is for income earners in [...]
[...] 70 percent) earn below the average wage. Indeed many earn well below the average wage. According to We are all dead the median earnings of all full time workers is $54 750 per [...]
[...] wonder whether “adrift in ocean of debt and despair” isn’t over-egging it a bit. Half of all workers earn less than $44,146 per year. Shouldn’t you be interviewing one of them? I mean, they’re taking money away from [...]
So this is what they mean by “nanny state”?
thanks for the article,
Very educational, and reminds me that I should be grateful for what I am earning, It is easy to think you are not well off when utility bills are going up all the time , groceries seem to be getting more expensive every week and the mortgage needs to be paid.
I worked out the other night that my husband and I do cross the magical $150k on combined income, (barely) but if one of us stops working we drop significantly.
We don’t own a house (can’t afford one !), have only one (small and cheap but admittedly fairly new) car and don’t live particularly extravagant lives. Our tv is not a flatscreen, we have a washer but not a dryer and we rent at the cheaper end of the scale.
We do struggle to some extent, but then again, we pay our full complement of taxes (no investments to write tax off with). I don’t have a problem with paying my fair share of taxes, I do recognise that I am reasonably lucky. The only “middle class welfare” we receive is the 30% rebate on private health. Quite happy to lose that if the corollary is that the government removes the corporate welfare provision- the surcharge for not having the private care over a certain threshold. If the insurers didn’t have instant bonanza in the form of anyone with income over $60k needing policies to avoid the threshold, premiums might be competetive and that 30% rebate may not be necessary. Removing the rebate and requiring that the surcharge be paid is not going to be workable. I would have to choose to drop the cover then, and be more dependent on Medicare (might as well, I am paying for it) as I can’t really afford both.
Childcare is more difficult- costs are going to rise, as government required staffing levels rise. At some point, it isn’t worth it to work because it doesn’t cover the cost of care, so government subsidy kind of makes sense. If employers were offered tax breaks to subsidise their employees costs, rather than FBT penalties, there could be changes.
What puzzles me is I see people in my industry, doing very similar jobs jetting off to Europe for 6 weeks, buying new tvs (the full entertainment package) and new cars (and not the little cheapies) and I don’t understand how they can afford all of this. If I don’t have much discretionary income at the end of the pay packet (after rent and bills) where the heck does theirs come from?
My 2c – Nice article, but the thing i note is that regardless of the income you have (and are used to) you live within your means. Somebody earning 150, 200+ is going to be affected by any change. They are living inner-city with larger mortgages, kids planned for private school, larger cars with more reg/insurance, bigger homes with rates/insurance/heating bills and these changes make it hard for them too. It’s harder to get out of poverty, it’s also not so easy to get to the second step, this makes the third step further away than ever before, and those at step 5 seem to be doing it easier than ever.
[...] to Jess over at Never Mind the Distance who shared this gem with me. In the wake of the 2011-12 Budget the pathetic plaints of the sad buggers struggling to [...]
Wow! I have always thought that our family receives far too much government subsidy with 2A + 2C and only one income earner @$75,000. I knew that was well over the average individual income and thought, based on that, that the government gives far too much with family assistance A + B, supplements at the end of the financial year, and childcare (which we don’t use) subsidies. However, now that I’ve seen your stats I appreciate why we don’t seem to live to the median standard, despite our one income earner being compensated quite well for his hours/skills! The best thing about your article however is that you’ve substantiated everything. Well done.
a great piece… so little critical thought and analysis goes on in what passes for political discourse in this country; thankyou for making plain the absolute inadequacy of the value of “averages”. it is interesting how many australians prefer to think of themselves as middle-class;due to prejudice and insecurity they eschew any notion of “working class” identification, yet the mythological egalitarianism that is described as a core australian value at many education levels, persists within the psyche and discourages people from accepting that they are actually very well-off, and are more realistically “upper class”. it is to a large extent unconscious, and self-centred definitions of what “class” one is that enable the mainstream media to influence, obtain and then disseminate public opinions that suit their agendas, which helps to prevent an evolution of the social and personal understandings of inequity in australia.
Terrific article. Added to my RSS feed.
[...] true that Australian political journalism could be a lot better. Not long ago blogger Matt Cowgill used ABS statistics to show how silly some of News Limited’s budget coverage was. No doubt there’ll be more [...]
[...] fall into this category and claims them for journalism (the examples are from Possum Comitatus, Matt Cowgill, and Greg Jericho). But in the end he dismisses the question whether blogging is better than [...]
[...] What is the average Australian’s yearly income? [...]
[...] few other textey things were this great page on the typical Australian’s income, and if you’ve seen this floating around in the tubes: …then read this excellent blog [...]
The thing that bugs me are the people running businesses and being able to deduct expenses – the fact that the system is in place to allow people to send their kids to private school and still receive full FTB? We live in the lucky country where we are all able to earn a decent living. We should all feel obligated to pay our share of taxes and receive our share of support when needed. It doesn’t matter whether we are high-end or ‘battlers’ – we all need to contribute.
[...] out of pocket, therefore this is a disaster for everyone. In fact, half of all Australians earned less than $44,222 in 2008/09 and will be overcompensated with these reforms. Similarly specious is to cling to the position [...]
I think there is a general misunderstanding in Australia about the issue of family payments, which is what I assume this article is supposed to be about. You can read about it here.
http://www.centreblog.com.au/2011/03/07/rhetoric-on-family-payments-misses-the-point/
[...] the whole thing I’ve been doing some reading. And I came across this very well written post, What is the typical Australians income? Sounds pretty dry [...]
[...] few months ago I wrote a post about Australian incomes that used various statistics to try to answer the question “what is the typical [...]
[...] cost of living are reporting a largely imagined problem. People with upper-middle and high incomes seem increasingly willing to conceive of themselves as hard-done-by battlers, deserving of assistance by governments. [...]
With an income over $100,000 I am doing pretty well, and when John Howard came to power and gave my family all sorts of handouts, it was brilliant! Of course I don’t vote for the Liberals, but I am really surprised that many people on lower incomes continue to vote for the Liberals. But let’s face it, the Liberals represent the interests of big business, so of course they will do whatever they can to appease big business, e.g. make it easier for them to fire workers (WorkChoices), lowering taxes for rich people, and so forth. I think it is fair for rich people to pay higher taxes to support those in society who are doing it tough, but low income people need to actually vote for it if they want to get it. They cannot be distracted by silly, pointless fear mongering that the Liberals bring up, e.g. boat people.
Very interesting and informative read. I just had one question though: what do you define as disposable income? Is this gross salary less taxes, or does it also include necessities like rent/mortgage etc. We are a couple with no children and have to agree with your comment about 200k not being typical – we could only ever dream of earning this and none of our friends do either!
Hi,
For these statistics, disposable income is gross income minus taxes. Gross income includes wages/salary, plus other sources of income like government payments, dividends, rent on properties owned, interest on savings, etc.
excellent post Matt.. Can I live beyond standard Oz livin with 36000 pa in Australia? especially in Melb.
Hi,
Bear in mind that the $36000 figure is for disposable income, in other words it’s income after tax. That figure is also a few years old now.
Matt,
As you’re quite the whiz with stats and graphs, I thought maybe you’d be able to offer some help to these guys:
http://thisistherealstory.com.au/index.php
The author of the site is The Roast, but the comments are accurate. they just needs some graphs and stats to strengthened the site. It may seem like odd bedfellows for an ACTU man like yourself, but so necessity makes of the Manufacturing sector the ACTU: each needs the other to survive; each has more in common with the other than either do with the mining sector, just by the 5:1 ratio of workers in each industry, never mind the value-added nature of both unionization and manufacturing.
[...] a brief moment in May when one post got all kinds of attention, my blog seems to have returned to what it always was – a poorly [...]
[...] [...]