The Australian National University
Centre for Economic Policy Research
DISCUSSION PAPER
Leaving Home: What Economics Has to Say about the
Living Arrangements of Young Australians
Deborah A. Cobb-Clark*
DISCUSSION PAPER NO. 568
January 2008
ISSN: 1442-8636
ISBN: 1 921262 39 7
*Deborah Cobb-Clark, Economics Program, Research School of Social Sciences, Australian National
University
Email: deborah.cobb-clark@anu.edu.au
.
Abstract
Like their counterparts elsewhere, more young Australians than ever are delaying the
move to establish residential independence from their parents. This paper reviews the
developing economics literature surrounding young people’s decisions to continue living
in their parents’ homes in order to begin to assess the causes and consequences of this
decision. In particular, co-residence with parents appears to be an important form of
intergenerational support for young adults. It is important to understand the extent to
which young people rely on this form of support as they complete their education, enter
the labour market, and establish themselves as independent adults. Specific attention is
paid to the ways in which Australian income-support, education, and housing policies
may influence these patterns.
JEL: J11, J13
Keywords: Economics of the family, Household decision-making
ii
‘However painful the process of leaving home, for parents and for
children, the really frightening thing for both would be the prospect of the
child never leaving home.’
Bellah et al. (1996, p. 58)
Around the world, young people are delaying taking what is commonly regarded as
the first step in an independent adult life – moving out of their parents’ home. This
trend has received the most attention in Mediterranean Europe where the majority of
men now continue to live at home with their parents well into their early thirties (e.g.,
Becker, et al. 2005a), but has been also observed in the United States (DaVanzo and
Goldscheider, 1990; Whittingon and Peters, 1996) and in Australia (Hartley, 1993;
Weston, et al., 2001). The Australian Bureau of Statistics (ABS), for example, reports
that the proportion of young people aged 20 to 29 living with their parents increased
from 20.7 to 29.9 per cent between 1976 and 2001 (ABS 2005).
Relative to other demographic phenomena – for example, population aging,
the increased prevalence of family breakdown and the rise in single-headed
households, or the large-scale movement of people across international borders –
young people’s living arrangements remain a relatively understudied issue. This is
unfortunate as young adults’ decisions about where (and with whom) to live are
intricately bound up with other decisions regarding partnering and childbearing.
Moreover, co-residence serves as an important mechanism through which parents
transfer resources to their adult children. These resources are fundamental in enabling
young people to complete their education, enter the labour market, and establish
families of their own. The current trends leave little doubt that young people are
prolonging the period during which they are financially dependent upon their parents
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(see for example, Hartley 1993; Whittington and Peters 1996; Schneider 1999;
Weston et al. 2001). For these reasons, researchers increasingly see the decision to
leave home as fundamental to understanding the life course, intergenerational
relationships and the structure of the family (Goldscheider et al. 1993).
This paper reviews the international and domestic research analysing young
people’s decisions to leave the parental home.
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The objectives are threefold. First, we
are interested in drawing inferences from the literature regarding both the possible
causes and consequences of young Australians’ decisions to live away from their
parents. In particular, how do co-residence patterns vary with family characteristics
like age, household income, and family structure? To what extent might young
Australians be reliant on co-residence with and financial transfers from parents in
completing their education, entering the labour market, and establishing themselves as
independent adults? What can we say about the consequences for parents of providing
this support? Second, we are interested in understanding how Australian education,
income-support, housing, and labour market policy might influence young people’s
living arrangements. Finally, we are interested in identifying the most pressing areas
for future research.
I. Leaving Home: The Big Picture
Demographers have consistently pointed to the close relationship that historically
existed between leaving home and marriage, especially for women. With the
exception of brief periods away to accommodate further study or military service,
few young people left home before marriage. After the Great Depression and World
War II, it became increasingly common for young people to experience a substantial
period of independent living before marriage. As a result, the incidence of co-
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residence with parents fell reaching a low point sometime during the 1970s (Glick
and Lin 1986; Young 1987; Goldscheider and Goldscheider 1989, 1994; De Jong
Gierveld et al. 1991; Hartley 1993; Weston et al. 2001; Becker et al. 2005b). In more
recent decades, there has been a global trend towards remaining at home longer
which some have speculated has been driven by increases in educational attainment,
weakening labour markets, and escalating housing costs (see for example, Giannelli
and Monfardini 2003; Martínez-Granado and Ruiz-Castillo 2002).
Although the historical trend in the age at which young people leave their
parents’ homes is remarkably consistent across countries, there is enormous cross-
country variation in the actual age at which residential independence is established.
Becker et al. (2005a) report for example that in 2002 co-residence rates for men in
their late twenties ranged from 20 to 22 percent in countries such as France, the
Netherlands, and the United Kingdom, to 70 to 73 percent in countries such as Italy,
Greece, and Finland (see also, Alessie et al. 2005; Manacorda and Moretti 2005;
Billari et al. 2001; Le Blanc and Wolff 2003). Canada and the United States lie
somewhere on the ‘early’ rather than the ‘late’ end of the age spectrum with more
than half of young people having left their parents homes by age 24 (Card and
Lemieux 1997).
Australia has not been immune to these broader demographic trends. The
nature and timing of residential independence for young Australians has also evolved
as economic, social, and cultural circumstances have changed. In Australia, as in
many other countries, leaving home in the middle of the twentieth century was
closely tied to marriage (Hartley 1993; McDonald 1995; Weston et al. 2001). During
the 1970s the numbers leaving home to marry fell and more young people left home
to be independent (McDonald 1993). A decade later this trend had reversed as the
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