Home leaving age in Australia; determinants, and the effect on labour market & social outcomes

Abstract

Leaving the parental home is a choice that everyone makes at some point in their life. The decision that all individuals make is choosing the optimal age to move from co-residence to independent living. It is well established that there are costs which children have to endure when this decision is made. These could be financial (Aassve et al. 2007; Holdsworth 2000) or emotional (De Jong Gierveld et al. 1991; Blaauboer and Mulder 2010). In this thesis I build on the work done by Ribar (2013), which examines whether leaving home leads to greater financial hardship in the following years. Specifically, I build on this study by examining what characteristics of the individual and their background influence the age they decide to leave home. Then I examine what effect leaving home at different ages has on short-run labour market and social outcomes. As in Ribar (2013), the Household, Income and Labour Dynamics in Australia (HILDA) survey data are used in this analysis. This is an annual longitudinal survey which began in 2001. The main sample of individuals used in my analysis are those who I observe co-residing with their parents in the first wave of the survey and then outside the parental home in a later wave. Thus, I am able to examine what factors influence the age that individuals decide to leave their parents’ home. It is interesting to note that many factors influence the individuals’ decision to leave home such as; relationship with parents, region and remoteness of location the individual grew up in, personality and relative household income. This analysis confirms what has been observed in the existing literature. The focus of this thesis is examining how the age an individual leaves home impacts their labour market and social outcomes in later waves of the HILDA survey. The labour market outcomes which I examine are employment status and real hourly wage rate. The social outcomes that I examine are the relationship status of individual, defined as being in a relationship (married or de-facto) and completing education beyond the end of high school. These outcomes are examined using three different measures of home leaving age; a continuous variable, a zero/one dummy variable indicating leaving home aged 20 years or younger compared to leaving home aged 21 and older and finally, a categorical variable that splits the individuals into four groups. These four groups are aged 15-18 (young leavers), 18-20 (common ages), 21-22 (late leavers) and 23-28 (extreme late leavers). My results can be best summarized as follows: first, the age men and women decide to leave home is determined by a vast range of variables. As such these variables need to be included in the labour market and social outcomes analysis to avoid omitted variables bias. Second, the age that men leave home, has no statistically significant impact on any of the short-run labour market and social outcomes examined. Third, females who leave home later receive a statistically significantly lower hourly wage rate and have a lower probability of being in a relationship in the latter waves of the HILDA survey. The majority of this difference is driven by females who leave home aged 21-22 compared to 19-20. I observe no difference in these outcomes for females who leave home very late (23-28) compared to the reference category (19-20), this may due to individuals misunderstanding the question on the age they first left their parents’ home.