Children in poverty in working households

Chris Smith

Image of sad child staring out of window

This In Focus article looks at official statistics on children in low income working households. It then considers government policy on child poverty both before and during the coronavirus pandemic, and summarises comments on policy from the Social Mobility Commission and others.

This issue is the subject of a forthcoming oral question in the House of Lords. On 15 July 2020, Lord McNicol of West Kilbride (Labour) is due to ask the Government “what steps they are taking to reduce the number of children living in poverty in working households”.

Measuring numbers on low incomes

There is no single measure of the number of children living in poverty in working households, but instead a range of data that addresses the question using different measurement approaches.

The Department for Work and Pensions (DWP) publication Households Below Average Income (HBAI) provides information on the number of households on low disposable incomes. ‘Low income’ in HBAI is defined in two different ways:

Relative low income sets a threshold of 60% of UK average (median) income. This threshold moves each year as average income changes.
Absolute low income sets a threshold of 60% of median income in 2010/11, increased by inflation.

Disposable income in HBAI is also measured in two different ways: before allowing for housing costs (BHC); and after allowing for housing costs (AHC). There are a total of four measures: relative and absolute low income, each measured BHC and AHC.

The table below shows, of all children in households with at least one adult in work, how many are on low incomes on these four different measures in 2018/19:

Number and percentage of children in working households who are in low income families, 2018/19

Source: Department for Work and Pensions, ‘Households below average income 1994/95 to 2018/19: data tables’, 26 March 2020, tables 4_14ts and 4_20ts.

The trends over time in the percentage of children in working households who are on low incomes differ between the four measures, as the graph below demonstrates.

Percentage of children in working households who are in low income families, 1996/97 to 2018/19

Graph showing rates of 1) relative low income, BHC; 2) relative low income, AHC; 3) absolute low income, BHC; and 4) absolute low income, AHC from 1996/97 to 2018/19.

Source: Department for Work and Pensions, ‘Households below average income 1994/95 to 2018/19: data tables’, 26 March 2020, tables 4_14ts and 4_20ts.

Alternative poverty measures

Other measures of poverty exist. For example, as well as the proportion of working households that are in poverty, HBAI also shows the proportion of poor households that are in work. For instance, the Social Mobility Commission, the statutory body that advises on issues of social mobility, highlighted figures suggesting that 72% of children in poverty were in families with at least one adult in work, a figure which has increased “steadily” from 44% in 1996/97. These figures are on a relative low income and AHC basis.

The DWP also publishes estimates of “material deprivation”, which combines measures of income with access to commonly owned goods and services. The DWP reported that 6% of all children in households with at least one adult in work were suffering from “low income and material deprivation and low income”, and 2% were suffering from “severe low income and material deprivation” (HBAI table 4_5db).

The independent Social Metrics Commission was formed to develop a “new approach to poverty measurement that both better reflects the nature and experiences of poverty that different families in the UK have”. The Government has said that it will publish “experimental statistics”, based on the commission’s work, in 2020.

Government policy

Prior to the coronavirus pandemic, the Government stated that “work is the best route out of poverty, and a child living in a household where all adults work is about five times less likely to be in poverty than children in households where nobody works”. Alongside this, it highlighted the increase in full time employment prior to the pandemic.

In June 2020, the Social Mobility Commission stated that the increases in the number of children in relative poverty was one of its “major concerns”. The commission said that there was “mounting evidence” that benefit reforms were putting children into poverty, highlighting universal credit in particular. It concluded that “the intention of universal credit was to lift more families out of poverty, but the DWP appears to have done little work to ensure it is not making child poverty worse”.

Similarly, the Institute for Fiscal Studies attributed recent increases in absolute child poverty to less generous benefits and tax credits, for example as a result of the working-age benefit freeze and the two-child limit. For working families, it said that between 2016/17 and 2017/18, average benefit incomes fell by between 3% and 9% for those earning between £51 and £299 a week.

The Joseph Rowntree Foundation estimated that the introduction of universal credit would reduce the number of people in poverty in working families by 300,000, but would increase the number of people in out of work families in poverty by 200,000.

Could the coronavirus pandemic increase child poverty?

Loughborough University’s Centre for Research in Social Policy suggested that child poverty would increase as a result of coronavirus (Covid-19). It called for the temporary increases in benefits introduced during the crisis to be made permanent. The Institute for Public Policy Research estimated that the pandemic will lead to a rise in the number of children in poverty of 200,000, predominantly amongst families that have suffered job losses.

The Child Poverty Action Group (CPAG) proposed a number of other policies in response to coronavirus, including an emergency £10 increase in child benefit.

The National Children’s Bureau said that the rise of in-work child poverty is of most concern during the crisis. It echoed the CPAG’s call for an increase in child benefit, as well as the suspension of the two-child limit and the benefit cap. The CPAG said that such measures could reduce child poverty by hundreds of thousands.

The Children’s Society called for an increase in funding for local authorities to enable emergency support for families to ensure no-one is left with nowhere to turn at a time of crisis.

The Government’s Children’s Commissioner for England, Anne Longfield, supported many of these policy prescriptions. She cited long-lasting effects from child poverty, such as poorer physical and mental health and lower education attainment, as reasons to act.

Government coronavirus response

On 15 June 2020, the Parliamentary Under Secretary of State for Work and Pensions, Baroness Stedman-Scott, outlined the Government’s actions in relation to child poverty during coronavirus. These included:

increases to welfare benefits;
a £16 million grant for food charities, together with a charities grant fund to assist food charities; and
£63 million to enable local authorities to help the most vulnerable families.

The Government also extended the free school meals scheme, and subsequently announced that it would also cover eligible children over the summer holiday.

A House of Commons Library briefing provides further details on these policies, along with others intended to support household finances during the pandemic.

Exchanges at Prime Minister’s questions

UK child poverty statistics were the subject of exchanges between the Prime Minister, Boris Johnson, and the Leader of the Opposition, Keir Starmer, on 17 June 2020 and 24 June 2020. The statements made by both leaders have been factchecked by the Children’s Commissioner for England.