This research studies the pathways that link welfare receipt across generations in Australia. Our analysis not only calculates the intergenerational correlation in welfare, but also quantify the portion of that correlation that operates through key mechanisms. Our data come from administrative welfare records for young Australians (aged 23 – 26) and their parents over nearly two decades which have been linked to survey responses from young people at age 18.
Together, the pathways we consider jointly account for nearly a third (32.2 percent) of the intergenerational correlation in welfare participation and more than half (52.6 percent) of the link between parental welfare participation and young people’s total welfare benefits.
The primary mechanism linking welfare receipt across generations is the failure to complete high school. Young Australians in welfare-reliant families experience more disruptions in their schooling through school changes, residential mobility, school expulsions and school suspensions. They also receive less financial support from their families. Both of these negatively affect their chances of completing high school and avoiding the welfare roll.
Young Australians’ risk-taking behavior – for example, smoking, illicit drug use, delinquency and pregnancy – is also a key pathway in transmitting welfare reliance across generations. Physical and mental health, academic achievement, and work-welfare attitudes, in contrast, have a more modest role in intergenerational welfare. The lack of strong evidence that work-welfare attitudes drive the intergenerational correlation in welfare receipt is at odds with cultural explanations of intergenerational welfare which attribute welfare dependency to the values that children acquire from their parents and neighbors.
Taken together, our results present a clear focus for policy action; schools, communities and governments must find better ways to support the education of children in welfare-reliant families. The importance of parental financial support in transmitting disadvantage across generations calls into question the wisdom of Australian policies that increasingly shift the financial burden of supporting young people from the public purse to their families.