Australian children from disadvantaged backgrounds are much more likely to end up in high-income jobs than their counterparts in the United States, an Australian Treasury study has found.
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While stagnant wages, soaring house prices and big company profits have fuelled wealth inequality, the report, Intergenerational income mobility in Australia by Treasury economist Nathan Deutscher, shows Australia remains a good place for those keen to get ahead.
Using Australian Taxation Office data, the study found that 12.3 per cent of Australian children born to households in the bottom 20 per cent of income earners would reach the top 20 per cent income bracket, compared with just 7.5 per cent of those born in similar circumstances in the US.
According to the report, education, strong labour markets and peers and role models all play a role in helping people attain high incomes.
It put much of the "striking success" of children of migrants down to high educational aspirations and attainment.
"Migrant upward income mobility tends to reflect upward educational mobility," it said.
"Where a child grows up can also matter because it influences who they grow up with," the study found.
"Being born into a higher income peer group is associated with higher income in later life, with the influence of the peer group up to a fifth of your own parents."
Where a child grows up can also be important because of the employment opportunities they can access.
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Moving far from home is uncommon in Australia, the study found, so those growing up in areas with strong labour markets - like Queensland and Western Australia during last decade's commodity boom - can benefit from commensurate high incomes.
Treasurer Jim Chalmers said the findings underlined the importance of mobility to prosperity.
"We don't want Australians' prospects determined solely by where they're born or who their parents are. That's why mobility is important," Dr Chalmers said.
"Mobility is one way to measure our ability to create opportunities for people.
"Social and economic mobility is the secret to a stronger, more sustainable and more inclusive economy in the future."
Dr Chalmers said the government's agenda was focused on giving people the skills needed to attain high-wage jobs and to tackle entrenched disadvantage.
But while Australia still remains a land of opportunity by international standards, the study warned that the picture is not as bright as it was several years ago.
It cited research showing that around 66 per cent of Australian currently in their early 30s had higher real incomes than their parents did.
While this compares favourably with the US, where the proportion is closer to 50 per cent, it is well down from the 80 per cent of Baby Boomers whose earnings exceeded those of their parents art the same age.
University of Technology Sydney professor of economics Peter Siminski, an expert in intergenerational income inequality, said that although Australia fared well internationally by many measures, most analysis does not take into account the effect of housing costs and affordability.
He said a study undertaken by one of his students found that, once housing costs were taken into account Australia's performance was not as striking.
"It makes a big difference," Professor Siminski said. "We don't look as near as good once you take that into account."
He warned that unless income growth picked up, the proportion of Australians from lower income backgrounds who were able to move into higher income brackets was likely to continue to decline, exacerbating inequality in the country.
The federal government has made achieving income growth one of its top priorities.
Following last year's jobs summit it pushed through controversial legislation
The Secure Jobs, Better Pay legislation has paved the for multi-employer bargaining in a move the government said would see "more workplace agreements ... better productivity and flexibility for employers and better pay and conditions for workers".
The legislation has been welcomed by unions as a way to reinvigorate wage growth following a decade of stagnation.
But some employer groups have warned the legislation could discourage investment and reduce economic growth, productivity and wages.
Adrian Rollins
Adrian Rollins is economics correspondent for the Canberra Times
Adrian Rollins is economics correspondent for the Canberra Times
