7. Discussion
A striking finding from these analyses is the protective role of marriage and, to a lesser extent, de facto relationships. Marriage strongly reduces the odds of income poverty, subjective poverty and financial stress. This is due in part to a second adult who can provide additional income. However, the benefits of marriage appear to be more than just higher incomes and greater wealth since it has strong effects on both subjective poverty and financial stress even when these factors are taken into account.9 It appears that marriage is also associated with a set of attitudes and behaviours that mitigate against financial disadvantage.
Another important finding is the strong relationship between age and financial stress. Financial stress is highest in the youngest cohort, and declines in successively older cohorts. The negative influence of age was apparent in the final model, which included controls for education, marital status, labour market experiences, wealth and income. This finding may be due to an ageing effect: young people are less experienced in financial management, but as they get older they become more skilled at organising their finances. An alternative explanation is that it is a cohort effect, in other words, that it is due to a range of factors influencing young people today. For example, perhaps the availability of credit and expensive consumer goods such as mobile phones, and pressures to spend rather than save, have caused an enduring change in young people's attitude toward finances. If the second explanation proves correct, efforts should be made to improve the financial literacy of young people.
These analyses of the HILDA data show that the proportion in income poverty in successive years is much lower than the proportion in a single year. Such movement out of income poverty is well established for other countries. There is also considerable movement into and out of subjective poverty and financial stress. This indicates that financial disadvantage for many households is transitory rather than permanent. Analyses of future HILDA waves will show the proportions of 'movers' going back into poverty and financial stress. Furthermore, it is important to determine what factors are associated with staying in and moving out of financial disadvantage. Prime candidates are relationship formation (and dissolution), further education and training, health and changes in labour force participation.
When performing analyses of poverty data, it is important to be aware of the differences between the before and after-housing income poverty measures. Although the before-housing measure is increasingly used in poverty research, the results it gives must be approached with caution. For example, the before-housing measure indicates high poverty rates among those aged over 70, single people, and widows and widowers. However, this is very likely to be misleading since sizeable proportions of these groups have little or no housing costs and so have relatively high discretionary incomes. On the after-housing measure, these groups do not have particularly high levels of poverty. Further evidence that these groups are not facing particularly severe financial difficulties was shown by the low proportion of the 70-plus age group and widows and widowers who viewed themselves as poor or very poor, or who were suffering financial stress. Thus, relying on the before-housing measure of income poverty in these instances can be misleading.
More generally, poverty research needs to move away from reliance upon a single indicator. All indicators can be criticised—for being absolute or relative, for setting the poverty line too high or too low, for the weights assigned to second adults or children, for taking or not taking into account costs and expenditures, or for including or not including cash flow problems, to name a few. Almost all criticisms of an individual indicator make valid points. Although a large body of research literature has been built up over the last 30 years, it is unlikely that any consensus will be reached on the conceptualisation and measurement of poverty. While it may be convenient to have a single indicator, a better understanding of poverty can be gained from examining a range of indicators with different criteria and evaluating whether they support the same conclusions.
An initial understanding was that subjective poverty and financial stress are both indicators of financial disadvantage that when combined with measures of income poverty would more accurately identify the 'truly' disadvantaged. However, these three dimensions do not appear to be indicators of the same underlying concept. For a start, their correspondence is not as strong as would be expected if they were indicators of the same concept. Furthermore, their relationships with social background, demographic, work-related and other variables are in many instances very different.
Income poverty is about having an income less than that defined by the poverty line. Its relationships with other variables are similar to those for income. It is associated with some social background variables, a non-English speaking background and Indigenous status, and is strongly associated with education, marital status and experiences in the labour market. Households that are in income poverty do not have high levels of debt. In contrast, subjective poverty, which is a personal judgement of one's level of prosperity, is much less associated with education and more strongly associated with wealth. It is a psychological judgement that probably involves a range of other factors such as type and standard of housing, area of residence, social networks and future prospects.
Finally, financial stress is about a shortage of cash. It is much more strongly associated with age and number of children than either income poverty or subjective poverty. A shortage of cash may result from inexperience in the management of expenses (or lack of financial literacy), large debts or unforeseen expenses. It is possible to have a moderate or even high household income and experience financial stress. Therefore, these three indicators of financial disadvantage are quite distinct concepts and should be understood and treated as such.