In-work poverty

These two studies report an increasing number of people, including children, living in families classed as in poverty despite someone in the household having a job.  

Clare McNeil et al, writing for the Institute for Public Policy Research thinktank, state that the UK’s welfare state is “built on the notion that work is the main route out of poverty”. However, they conclude that this may no longer be the case.  

The authors examine data from 2019/20 predating coronavirus (they argue that the pandemic will have since intensified the pressures on low-income families). Their definition of poverty is households below 60% of median household income, adjusted for household size and after deducting housing costs.  

McNeil et al find the following proportions of households were below the poverty line:   

  • 17% of all working households;  
  • 10% of families with one full-time and one-part time earner—double the rate of 20 years ago;  
  • 4% of families with two full-time earners; and  
  • 42% of working families with three or more children.  

McNeil et al contrast the rise of in-work poverty since 2004 (under successive governments) with falls in unemployment over the same period. They also compare it with falls in poverty amongst other groups, such as pensioners, which they say demonstrate that government policy can be effective in reducing poverty.  

The authors argue that the main cause of increased in-work poverty is higher housing costs for those on low incomes. They highlight a rise in people living in private rented accommodation, combined with increasing rents; they report housing costs for private tenants have risen by 48% in real terms over the last 25 years. They also cite forecasts predicting that an increasing proportion of households will be living in the private rented sector, which they suggest means “further increases in working poverty rates are all but guaranteed unless action is taken”.  

Their recommendations include:  

  • steps to reduce the cost of housing, both by curbing house price inflation and allowing housing benefits to better reflect rents;  
  • improving the availability of flexible childcare; and  
  • labour market and welfare reforms to genuinely “make work pay”.  

Academics Juliet Stone and Donald Hirsch report that in 2019/20 there were 4.3 million children living in poverty (using the same definition as McNeil et al). This was an increase of 200,000 since 2018/19 and of 500,000 since 2014/15.   

Looking regionally, they state that London and Birmingham had the highest rates of child poverty, but that rates are growing fastest (which they refer to as an “alarming” increase) in North-East England. Again, they state that the picture is likely to have worsened during the pandemic.  

Looking at in-work poverty, Stone and Hirsch find that 75% of children in poverty in 2019/20 were in households with at least one working adult, an increase from 67% in 2014/15.   

Stone and Hirsch also consider housing costs to be a major contributor to child poverty, particularly in London. They recommend an increase to child benefit, retaining the £20 uplift to universal credit and extending the uplift to legacy benefits.  

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