I understand what both Pesca and LJ mean. Our household income is very high - mainly because we bit the bullet and moved our family to Perth at great personal cost (no family support, no friends, and I was 5 months' pregnant with 2 kids and very much alone). But it paid off. DH works fewer hours than if we were still in Melbourne, my job requires a very small number of hours a week relative to the amount I earn so I still get to do drop offs and pick ups, etc. I see that we took a lot of risks and went through a really rough time when I know a lot of my friends who feel like they're going nowhere wouldn't do the same as it's just not something they would be prepared to do.
Yes we are now in an incredibly privileged position, and I thank the stars every day that having our income means my kids don't have to go without, will get whatever education we decide is best for them, can be seen by whatever specialists they need etc. For me having a high income means having choices, and I think that's something that I would find incredibly hard - if I didn't have those choices.
Further musings: the income they quote is after tax. I'm assuming it takes into account all of the benefits like FTA. I'll go back and take a closer look..... I'm thinking that, as a single income family, who aren't eligible for any benefits, but pay quite a large proportion of the income in tax, that, well, we aren't in fact financially better off than families with 2 incomes, lower taxes and some benefits.
Not whinging: just a fact. The difference is smaller than you might think.
In relation to not being financially better off, I referred in an earlier post to the quite small difference between the disposable income of the second and third quintiles.
However, if you look at a more in depth analysis of the two lowest quintiles it's quite a bleak picture - especially in terms of net worth. I'd argue that that is where the third quintile has a distinct advantage over the second.
I've cut and pasted from the ABS website regarding what they consider 'income' for these purposes:
CONCEPTUAL DEFINITION OF INCOME
16. The ABS conceptual definition of household income is based on the definition of household income set out in the international standards (ICLS 2004). The ABS has followed the ICLS wording except where improvements were identified or changes were required to satisfy Australian requirements.
17. The standard ABS conceptual definition of household 'income' is:
Household income consists of all current receipts, whether monetary or in kind, that are received by the household or by individual members of the household, and which are available for, or intended to support, current consumption by the household.
Household income includes receipts from:
Household income excludes capital transfers received and certain current transfers treated as offsets against expenditures. It excludes receipts that reduce the net worth of the household, through a reduction of its cash reserves, the disposal of its other financial or non-financial assets, or an increase in its liabilities. It also excludes holding / gains losses resulting from changes in the value of assets and liabilities.
- employment (employee income and income from self employment)
- investment (interest, dividends, rents and royalties)
- production of household services for own consumption (owner-occupied dwellings, unpaid domestic services)
- current transfers (pensions, annuities, benefits and allowances; transfers from non-profit institutions and other households).
- capital transfers e.g. inheritances, lump-sum retirement benefits, life insurance claims (except annuities), compensation (except for foregone earnings), loan repayments
- certain current transfers offset against expenditures e.g. lottery and other gambling winnings, non-life insurance claims, government reimbursements of expenditure such as Medicare and child care rebates
- receipts that result from a reduction in net worth e.g. sale of assets, withdrawals from savings and loans obtained.
- holding gains / losses resulting from changes in the value of financial and non-financial assets and liabilities e.g. the value of shares held.
18. Income includes:
19. Conceptually, all of thesecomponents and the elements that make them up are included in income. However, in practice, some elements cannot be included in the operational measures ofincome because they cannot be readilycaptured or modelled.
- (i) income from employment;
(ii) investment income;
(iii) income from production of household services for own consumption; and
(iv) current transfers received.
(i) Income from employment
Income from employment comprises receipts from participation in economic activities in a strictly employment-related capacity. It consists of employee income and income from self-employment.
Employee income comprises direct wages and salaries for time worked and work done, cash bonuses and gratuities, commissions and tips, directors’ fees, profit-sharing bonuses and other forms of profit-related pay, remuneration for time not worked, free or subsidised goods and services from an employer, severance and termination pay and employers' social insurance contributions. An employee may receive income from an employer or from their own incorporated business (company). It may be received in cash (monetary) or in kind.
Income from self-employment consists of the profit or loss that accrues to owners of, or partners in, their own unincorporated businesses. Profit or loss is the value of the gross output of the enterprise after the deduction of operating expenses, including depreciation and operating costs, but before income tax. Income from self-employment excludes profits from capital investments of partners who do not work in these enterprises i.e. "silent" partners. Income from self-employment includes the estimated value of goods and services produced for barter as well as goods produced for own consumption, less expenses.
(ii) Investment income
Investment income, also commonly referred to as property income, is defined as receipts that arise from the ownerships of assets (return for use of assets) that are provided to others for their use. These are returns from:
- Financial assets - interest and dividends
Interest receipts are payments from banks and other financial institutions (e.g. credit unions), for the use of funds held in accounts with them,certificates of deposit, government bonds, securities, debentures and loans to non-household members (excluding repayments of the principal). Dividends are receipts from investment in an enterprise in which the investor does not work. Dividends should be recorded net of any expenses incurred in earning them.
- Non-financial assets - rents
Rents are payments received for the use of both unproduced assets (i.e. natural resources), such as land, and for produced assets, such as houses. Rents should be included in incomenet of expenses.
Royalties are receipts receivedfrom writings, rights to make use of inventions, etc. (i.e. patented or copyright materials).
(iii) Income from household production of services for own consumption
Income from household production of services for own consumption consists of the net estimated value of:
- housing services provided by owner-occupied dwellings and subsidised rentals (i.e. imputed rent);
- unpaid domestic services; and
- services from household consumer durables (such as cars, washing machines, fridges, etc.).
(iv) Current transfers received
Transfers are receipts for which the recipient does not provideanything to the donor in direct return for the receipts. Transfers can consist of money, of goods or of services.
Current transfers include:
- Government pensions and allowances
Includes cash receipts from welfare support provided through a range of programs at all levels of government. Some government payments are excluded as they are considered to be either a capital transfer or a reimbursement of expenditure.
In deciding whether a government payment is a capital or current transfer, both the intent of the government payment and the associated eligibility criteria are considered. For example, receipts from the First Home Owner Grant Scheme are regarded as capital transfers as they are designed to help first home buyers purchase their own home while the Baby Bonus is considered a current transfer as the intention of the payment is to offset some of the extra consumption costs incurred with the birth of a child.
Government payments that are reimbursements of approved expenditures (such as the Medicare rebate, the Private Health Insurance Rebate, the Child Care Benefit and the Child Care Tax Rebate) should not be treated as current transfers in cash, rather as social transfers in kind (see 'Other current transfers' below).
- Superannuation pensions and annuities
Includes superannuation pensions and annuities. It excludes retirement lump sum benefits.
Pensions received from contributory or private-funded schemes may represent a running down of the household's assets where the underlying capital is consumed (e.g. an allocated pension). They are, however, included as income as they are considered to be income by the households receiving them, especially retired households, and areused to support consumption. Otherwise the analysis of income distribution would be affected since these households would then have little or no income.
- Other current transfers
- Transfers from non-profit institutions, including charities
- Workers compensation and payments from accident/sickness insurance, i.e. income protection insurance or life insurance annuities
- Transfers from other households in cash or in-kind. Includes alimony, child support and financial support such as between family members not living in the same household
- Social transfers in kind. Non-cash benefits and services provided by the government to households for education, health, housing, social security and welfare. It includes reimbursements of approved expenditures such as the Medicare rebate, the Private Health Insurance Rebate, the Child Care Benefit, the Child Care Tax Rebate and Commonwealth Rent Assistance.
I think that higher income earners often resent the use of the term 'privileged position' or 'lucky', as it commonly implies that the person got into that position through no effort of their own, and that it would be impossible for a lower income earner to earn more.
I know some people use it to refer to the fact that said higher income earner may have been born into a family, demographic, or country that makes it 'easier' for them, or that they may have the intelligence or skill set that another person doesn't, BUT I would be (pleasantly) surprised if that is how most use it when saying 'privileged' or 'lucky' in that context.
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