Sunday, March 18, 2018

Australia. It depends on where you live

Woody Allen was right when he said 80 per cent of success was showing up. But only for some of us.

If you are born in Blacktown in Sydney or Broadmeadows in Melbourne, showing up probably won’t do. But showing up is about all you’ll need if you are born in Pennant Hills or Glen Iris.

It’s a shocking thought, and until now there’s been no evidence for it. It is well-known that people who are born in poor suburbs do more poorly later in life, but until now it has been thought that it's because of who they are rather than where they are.

It’s been hard to disentangle the two. Families with low aspirations and little education tend to congregate in the same suburbs. That their children do poorly could well be because of them, rather than the families and conditions that surround them.

Now Australian National University researcher Nathan Deutscher come up with an ingenious way to seperate the them. He got the Tax Office to match taxpayers born between 1978 and 1991 to their parents using the home addresses they first quoted when they applied for their tax file numbers. He compared their incomes at age 24 to those of their parents and also to the parents of their peers in the same postcodes.

Then he got clever. Some of those parents moved home while their children were growing up, to suburbs more than 15 kilometres away.

He examined what happened to the eventual incomes of the children who moved compared to the eventual incomes of the children with similarly well off parents who stayed put.

Moving out of a poor suburb helped them even when their parents’ incomes didn’t change. Unsurprisingly, it helped them more the earlier they left. But here’s what is surprising. When they moved didn’t matter much before the age of 11. Nor did it matter much after the age of 20. It mattered an awful lot in the teenage years. Every year that a teenager delayed moving to a higher income suburb cost them 4 per cent of the eventual boost to their income.

It’s as if it’s our teenage years most determine who we are, rather than the earlier ones or the later ones. That’s certainly how it is for our taste in music, and also for our ability to learn languages when we move between countries. Every teenage year delayed matters a lot more than each early childhood year delayed.

Deutscher is quick to point out this doesn’t mean our early childhood years aren’t critical. It’s just that there’s less variation in them suburb by suburb, after taking into account income. Parents that move don’t deliver particularly different early childhood experiences.

What is it about location that matters so much during our teenage years? Roughly half of it is because it’s where we live in those years that will most likely determine where we look for a job and try to settle down. It's where our friends are. It’s also where we are likely to develop the connections that will help us look for that job. It’s why Adelaide turns out to have been a less than good place for many to have spent teenage years. It’s also why during the mining boom Western Australia and Queensland turned out to be good places, although less so afterwards.

Much of the rest of it is to do with our peers – our friends in our teenage years. Deutscher gets at this by comparing the income of their parents (actually the income of all parents of children born in the same year in that postcode) to eventual personal incomes. The poorer our friends' parents, the poorer we will be ourselves. Naturally, the income of our parents matters more. But the income of our friends' parents matters quite a bit. It has about a quarter the weight of the income of our own parents.

Added to that would be the impact of our teachers, what’s available in the community and what seems possible in the community. All of this might be something many parents already know, which might be why so many of them spend so long obsessing about bringing up children in the right suburb. And it might be what pushes up prices in those suburbs and makes the distinction between high priced and low priced suburbs more extreme.

As would intermarriage. The Productivity Commission reported a few years back that two thirds of Australia’s high earners were married to other high earners. A decade earlier it was half.

We are increasingly less likely to move out of the circumstances in which we are born, unless our parents up stumps and move, which is itself increasingly difficult.

Australia is a far less equal place than it was in the 1980s. But that’s not all. There’s also less equality of opportunity. Just showing up is just about good enough for some, nowhere near good enough for others.

In The Age and Sydney Morning Herald