Old, single and poor: using microsimulation and microdata to analyse poverty and the impact of policy change among older Australians

Old, single and poor: using microsimulation and microdata to analyse poverty and the impact of policy change among older Australians

How improved data provision can assist pension policy

In recent months in Australia there has been extended debate about the adequacy of the old age pension to provide an acceptable standard of living. Projected increases in the number of age pension recipients in the future, as well as concerns about the current wellbeing of age pensioners, particularly in light of increasing costs of living, has prompted debate about the current level of payments. In particular, concerns have focused on the situation of people receiving the single (rather than the couple) rate of age pension.

This paper uses microdata and NATSEM’s microsimulation models to examine the spatial distribution of poverty among older single people and to test the likely impact upon national and small area poverty rates of an increase in the single age pension rate.

The authors show that the cost of increasing the single age pension to 66 per cent of the couple age pension rate would be about $A1.3 billion and would benefit about 824,000 single age pensioners. Further, it would reduce the poverty rates for lone older persons by a 10 percentage point reduction.

This authors conclude that they demonstrate two significant developments in poverty analysis in Australia. The first is the use of static microsimulation models to assess the effect of a proposed policy change on poverty rates for a population sub-group at a national level, a type of analysis which has been done in Australia by NATSEM for a significant period of time. The second, more recent, innovation is the linking of this policy change to a spatial microsimulation model that allows the small area effect of the policy change to be estimated. This small area effect provides substantial extra information to policy makers, allowing them to see what effect the policy will have on capital cities, remote areas, and disadvantaged suburbs surrounding cities.