Tag Archives: in work poverty

Is the record high employment rate masking the reality of in-work poverty?

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wage-packetBy Heather Cameron

The employment rate may have hit a record high of 74.6%, with unemployment continuing to run at an 11-year low, but in-work poverty has also reached unprecedented levels.

More than half (55%) of people in poverty are living in working households, including millions of children, according to the latest Monitoring poverty and social exclusion (MPSE) report.

And new research for the Joseph Rowntree Foundation (JRF) published last week says four million more people are living below an adequate standard of living and ‘just managing’ at best.

Statistics

The findings of MPSE paint a bleak picture for a substantial share of the UK population. It notes that the proportion of the UK population living in poverty has barely changed since 2002/03, remaining at around 21%. And at 55%, those in poverty in working households has reached its highest level since the data set began in 1994/95.

Of this 55%, four fifths of the adults in these families are themselves working – a total of 3.8 million workers were living in poverty in 2014/15, an increase of around a million since 2004/05.

Female employees make up the single largest group within this group at 1.5 million, followed by male employees at 1.4 million. However, the majority of workers in in-work poverty are male (53%) as there were 620,000 male self-employed workers in poverty in 2014/15, while there were 250,000 female self-employed workers.

The story is different for workless households, however, as the proportion of people in poverty in these households has decreased, with the number in workless or retired families having fallen by half a million. Despite the significant increase in the number of people aged 65 and over, the figures show there are 400,000 fewer pensioners in poverty. There have also been reductions in the number of children in workless households.

While this is clearly encouraging, as the MPSE report suggests, it is difficult to categorise this as progress since there has been little change in the relative poverty measure overall.

Moreover, the new research from JRF warns that millions of just managing families are on the tipping point of falling into poverty as 30% of the population are living below the minimum income standard (MIS). In addition, 11 million people were found to be living far short of MIS, up from 9.1 million, who have incomes below 75% of the standard.

So what is causing these worrying statistics?

Contributory factors

The labour market has undoubtedly had some influence on these figures, with low wages and insecurity. Although average incomes have begun to rise, they are still below their peak. Male weekly earnings are still lower than 2005 levels and female weekly earnings, although now equal to 2005 levels, are still below what they were in 2010.  And with inflation expected to return, it has been suggested that hourly pay is unlikely to reach its pre-recession peak before 2020.

However, this is only part of the issue. There are also a number of other contributory factors, including:

  • increasing cost of living;
  • housing market failures; and
  • cuts in welfare benefits.

The increase in numbers living below an adequate standard of living has been driven by rising living costs while incomes stagnate. The price of a minimum ‘basket of goods’ has risen 27-30% since 2008, and average earnings by only half of this. The JRF analysis suggests the cost of living could be 10% higher by 2020, a period when much state support has been frozen.

Housing is also an important factor. It is often too expensive and of poor quality, particularly in the private rented sector. The MPSE findings show that the number of private renters in poverty has doubled over the last decade, with rent accounting for at least a third of income for more than 70% of private renters in poverty.

Households accepted as homeless and those in temporary accommodation have also increased and landlord evictions are close to a ten-year high.

Added to this, is the four-year freeze on benefits, tax credits and Universal Credit (UC), along with a reduction in the overall benefit cap. The benefit cap mainly affects households with children and will increase the number of families affected, from 20,000 to 112,000.

All this puts those on the lowest incomes at risk.

Way forward

Clearly, strong growth in the number of people in employment does not mean an end to employment-related disadvantage.

To help end poverty, the JRF has called on the government to make a number of changes, including:

  • reversing cuts to the amount people can earn before their benefits are reduced;
  • ending the freeze on working age benefits;
  • extending support to low wage sectors to reduce the productivity gap; and
  • investing in a living rents scheme to provide more affordable housing.

As the MPSE report concludes, “solutions for in-work poverty require more than just more work.”

If you enjoyed reading this, you may also like our previous articles on poverty.

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Basic Income – a simple solution to a complex problem?

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By Heather Cameron

“If you want to incentivise work at every level of income then Basic Income is simply the best system.” (RSA, 2015)

Last month MPs in the UK Parliament were asked to consider the question of introducing a universal basic income to be payable unconditionally to all citizens without means-testing or work requirement.

The motion, which was tabled by Green Party MP Caroline Lucas, says the policy “has the potential to offer genuine social security to all while boosting entrepreneurialism”.

While no vote was taken on the policy, and it is unlikely to be made law any time soon, the motion raised the profile of the issue by enabling MPs to add their name in support.

And with ever increasing global interest in the idea, and basic income pilots set to spring into action all over Europe this year, perhaps it’s not as far away from becoming a reality in the UK as we may think.

Pilots

A number of cities and countries across Europe have committed to trialling a basic income.

Last year Finland announced a national basic income experiment, scheduled to start in 2017, which will be the EU’s first nation-wide project. It will see up to 100,000 Finnish citizens paid an unconditional income for a period of two years, after which the results will be analysed to see whether it should be rolled out nationally.

Trials have also begun in the Netherlands. The Dutch city of Utrecht will pay a small group of benefits claimants, whether they work or not, a basic income of £660 a month to provide a basic standard of living and help them avoid the ‘poverty trap’.

In Switzerland, a national referendum on a basic income is planned for this year, and support for the idea has also been reported in France and Canada.

While it is too early to tell whether these pilots will have the desired positive effect, the concept of a basic income is far from new and there have been signs of success from past experiments.

Positive outcomes

In the 1970s, a basic income social experiment, ‘Mincome’, was carried out in the Canadian town of Dauphin, which involved making payments to the entire population, relative to income to cover basic living costs. The programme succeeded in reducing poverty, improving health and alleviating other urban problems.

More recent basic income projects in developing countries have also helped alleviate poverty. In Namibia, a coalition of aid organisations trialled a basic income, funded through tax revenues, of 100 Namibian dollars to each citizen. The result: crime was reduced, children attended school and many villagers used the money to fund micro-enterprises. Meanwhile, in Uganda, a similar programme increased business assets by 57%, work hours by 17% and earnings by 38%.

Critics of such a system say that it would cost the state too much money, and would lead to welfare dependency and a reluctance to work, ultimately resulting in higher unemployment.

A recent survey undertaken in Switzerland would seem to refute this. It indicates that only a very small proportion of the population would stop working if they had a basic income and a majority believe that it would “relieve people from existential fears.”

Similarly, the Canadian experiment found no substantial difference in either female or male unemployment. There were changes in the labour market, as would be expected, with a reduction in working hours within families as a whole. Female spouses reduced their working hours to spend more time with children; and hours were reduced for adolescents within the family who entered the workforce later, suggesting that they were able to stay in education longer.

Way forward for the UK?

The Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) has recently concluded that there is a strong practical case for basic income in the UK to replace the current tax and benefits system – “it underpins security, replaces the complexity of the current system, and provides a platform for freedom and creativity.”

The RSA report sets out a potential basic income model for the UK. It would provide a universal payment to every citizen, (with restrictions for migrants and those serving custodial sentences). A ‘basic’ amount paid to everyone of working age would provide incentives to work, therefore mitigating against low pay traps of the current system. It would also, the RSA report claims, mitigate against some of the negative distributive effects of basic income schemes by redistributing from higher earners to families with children.

The report calculates household income, comparing the proposed model with the current system of likely Universal Credit/National Living Wage income for 2020/21. In all instances, ranging from single parent families with children under or over five to couples with children under or over five, there was a gain for household income under the basic income model.

With the current welfare system and all its complexity, the new Universal Credit apparently not doing what it’s supposed to and the continued increase in job automation, is this really just a simple solution to a complex problem?

Perhaps by the end of 2016, there will be more evidence for the UK to seriously consider.

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Why child poverty can’t be allowed to slip down the political agenda

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By Morwen Johnson

Current forecasts suggest that across the UK, 4.7m children will be living in poverty by 2020 (equivalent to nearly the population of Scotland). This is despite the fact that the Child Poverty Act 2010 legally binds the UK Government to a commitment to end child poverty by 2020. This commitment was reiterated in the Conservative’s pre-election manifesto.

Two recently published briefing papers from the Scottish Universities Insight Institute review the literature on poverty and children’s health and wellbeing, and poverty and children’s education. The findings add to an extensive evidence base confirming the long-term negative impact of child poverty on life chances and adult outcomes.

At the report launch event in May, there was extensive discussion about the continuing challenge of reducing child poverty, especially in the context of George Osborne’s pledge to make £12bn of cuts to the welfare budget by the financial year 2017-18.

Rise in in-work poverty

As the rhetoric in both politics and the popular press swings back to presenting the economy in a positive light, it’s easy to forget that economic growth must also result in quality jobs. Analysis by the Social Mobility and Child Poverty Commission shows that 5 million Britons are in jobs earning less than £7.50 an hour. And a quarter of these have been stuck in this situation for more than a decade.

Douglas Hamilton, one of the Commissioners of the Social Mobility and Child Poverty Commission who spoke at the Scottish Universities Insight Institute event, suggested that policy approaches which rely on welfare to work to meet child poverty targets are doomed, as this ignores the fact that getting parents into work can still leave children living in poverty. In fact the number of children in poverty living in workless households is at an all-time low.

Social justice and economic imperative

The Social Mobility and Child Poverty Commission said in its State of the Nation report last year that the challenge was “… to prevent Britain becoming a permanently divided society and ensure there is a social recovery alongside the economic recovery.” Donald Hirsch of the Centre for Research in Social Policy has estimated that child poverty costs £29bn each year in costs to the Exchequer and reduced GDP – an economic justification for continuing to address child poverty in a targeted way. However, if issues such as underemployment and a lack of affordable housing are allowed to become a norm in our society, it will inevitably impact on the likelihood of reducing child poverty.

Debates over how child poverty is defined and measured are likely to continue, but should not obscure the very real, everyday consequences for children of growing up in poverty. Research by Scotland’s Commissioner for Children and Young People found that children living in poverty struggled with having school uniforms, resources for school work, going on school trips and having basics such as housing and food. Unfortunately, stigma can also dissuade families from registering their children for free school meals.

1 in 6 children are still living in relative poverty in the UK. And that seems to be a reality which no one wants to put on the front page of the newspapers.

Read some of our other blogs looking at the issue of poverty:

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Addressing the causes of in-work poverty

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Image from Flickr user MoB68, licensed for reuse under Creative Commons License

Image from Flickr user MoB68, licensed for reuse under Creative Commons License

By Donna Gardiner

This week is Living Wage Week and the issue of workers struggling to make ends meet has been in the news again. Back on 23rd September 2014, I attended an event held by the Glasgow Centre for Population Health (GCPH) on the changing nature of work and in-work poverty in the UK, with a specific focus on Glasgow.

Over 100 delegates from across the public, private and voluntary sectors came together to learn about the latest research findings, take part in round table discussions and contribute to a panel debate on how to address the causes of in-work poverty. Speakers included experts on poverty from the Scottish Government, Glasgow City Council, Ipsos MORI, the Employment Research Institute at Napier University and the Glasgow Centre for Population Health.

The day began with a presentation by Jill Morton, from the Communities and Analytical Services division of the Scottish Government. Jill provided an overview of the Scottish Government’s policy commitments to tackle poverty, and highlighted recent statistics regarding the incidence of poverty in Scotland.

She reported that, in Scotland in 2012/13 (the most recent data available), 16% of people, and one in five children, were living in poverty.

Jill noted that whilst employment was the best route out of poverty, it was no longer a safeguard against poverty as over half of all working age adults in poverty in Scotland were from households in which at least one person was in employment. Six in ten children in poverty were also from working households. Jill concluded that for poverty to decline, lower income households must have access to quality and sustainable employment.

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Public Health Information Network for Scotland (PHINS) – 14th Seminar

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Image of outside of the Glasgow Royal Concert Hall.

Image by Neil Turner under Creative Commons License, via Flickr

By Steven McGinty

On the 10th October I attended an annual event organised by the Scottish Public Health Observatory (ScotPHO) in the Royal Concert Hall in Glasgow. The event focused on health inequalities and the factors driving them. It brought together individuals from a variety of areas, including academia, public health organisations, local and central government, and the voluntary sector to review current evidence, highlight upcoming research and debate key issues with fellow professionals. Continue reading →

Is it a happy birthday for National Minimum Wage?

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by Donna Gardiner

Today, (Tuesday, 1st April), is the 15th anniversary of the introduction of the National Minimum Wage in the UK.  The anniversary occurs during the second week of the Trade Union Congress’ (TUCs’) ‘Fair Pay Fortnight’, which aims to raise awareness of the problem associated with low pay, in-work poverty and the increasing cost of living in the UK. Continue reading →