I recently found myself wondering how the incomes of Newstart Allowance recipients have fared relative to the incomes of other representative individuals, like a minimum wage worker or a disability pensioner.[fn1] In short: not well. The real disposable incomes of Newstart recipients have been flat for the past couple of decades, while the real disposable incomes of minimum wage workers have increased modestly (compound annual growth rate=0.7%). Full-time workers on average earnings have seen steady real income growth (CAGR=1.7%), pulling away from minimum wage workers and from Newstart recipients.
Real disposable incomes of four representative individuals
I then wondered how those real incomes compared to the poverty line.[fn2] I compared disposable incomes to the Henderson line and the 60% of median income line. The results are shown below. You can see that DSP recipients’ incomes started out at around the Henderson poverty line and ended up at the same point, but lagged behind the line for a decade and a half or so. The gap between Newstart recipients’ income and both of the poverty lines has grown, while the gap between both lines and the income of a minimum wage worker has become smaller.
Incomes compared to two poverty lines
In short, Newstart recipients’ real incomes have been flat, while those of full-time workers and DSP recipients have grown. The gap between the incomes of people on Newstart and minimum wage workers has grown; the gap between Newstart recipients and their counterparts on DSP has grown further.
I hope that has been of interest to someone other than me!
1. In this post, when I refer to “Newstart recipients” I mean single, adult recipients with no dependants and no income other than their Newstart payment. Similarly, “DSP recipients” are single, working-age adults who are wholly reliant on their pension. By ‘minimum wage worker’ I mean a full-time employee employed for 38 hours per week at the National Minimum Wage or its historical antecedent, which I have taken to be the C14 rate in the Metals award; the worker has no other income and lives alone.
Source note: All calculations are my own. Calculations of real incomes take into account personal income tax liability, the Medicare Levy, the LITO, and the BTO. “1991” refers to September 1991, with the tax parameters for the 1991-92 fiscal year; each subsequent year uses the same timing. Payment rates from FaHCSIA. Minimum wage rates from FWA/AIRC. Personal income tax rates and thresholds from the ATO. LITO amount and thresholds from the Income Tax Assessment Act 1936. AWOTE from ABS 6302. CPI from ABS 6401. Henderson poverty line from the Melbourne Institute. Relative poverty line based on ABS 6523 (median equivalised disposable household income).