In-work poverty is now a bigger challenge than out-of-work poverty, new research finds today. 58% of children living in relative poverty have at least one parent in work.
In-work poverty is now a bigger challenge than out-of-work poverty, new research by the Joseph Rowntree Foundation finds today.
Its latest annual report analysing poverty and social exclusion shows that 58% of children living in relative poverty have at least one parent in work. This reflects a long-term trend: in-work poverty has been steadily rising for several decades to affect over 2 million children today, while out-of-work poverty has been falling steadily since the early 1990s so it affects fewer than 1.5 million children today.
Part of this trend appears to be driven by people swapping out-of-work poverty for in-work poverty. In particular, the lone parent employment rate has risen by more than 10 percentage points over the last 15 years. But much of this increase has been in low paid work that does not often offer much chance of progression.
All of this points to the fact that, while work remains the best route out of poverty, it is not enough on its own. A strategy to cut (relative) poverty in general, and child poverty in particular, needs to focus on increasing in-work earnings as well as finding work.
Over the last decade, tax credits have “taken the strain”. The JRF report finds that tax credits are today keeping one million families out of poverty. In this context, the Coalition Government’s plans to cut tax credits (including reducing the Childcare Tax Credit to 70% of eligible costs from 80% today, cuts and caps to Housing Benefit (given HB is also an in-work benefit) are likely to lead to increases in relative poverty. At the same time, this group faces a double hit from declining real incomes, as the Resolution Foundation has shown.
But equally clear is that increasing tax credits more quickly than earnings is not possible each and every year and doesn’t provide a full policy response – there are limits to how far increasing wage subsidies can ‘hold back the tide’. So, while further increases in tax credits would be part of a strategy for cutting in-work poverty, they are not the whole of the answer.
Equally important are the integration of the skills and employment systems – still too disparate today – to help people ‘get on’ at work as well as ‘get in’ to work. Not to be forgotten too is the role of employers, both in creating opportunities and in paying a living wage. On the latter, the public sector can take a lead, both directly and through their supply chains. None of this is easy, particularly in the current economic climate, and employers need to see the business case for acting – this needs to be part of an economic growth strategy, rather than solely based on corporate social responsibility – supported by Government.
35 Responses to “Work no longer enough to prevent poverty”
Mr. Sensible
This is why the Coalition should not be going cutting some of these in work benefits.
vikz Richards
Work no longer enough to prevent poverty | Left Foot Forward http://ow.ly/3leXe
vikz
Work no longer enough to prevent poverty | Left Foot Forward http://ow.ly/3leXU
Chris
@Onus Probandy
I think your argument and calculations are simplistic. You’re assuming that A and B both grow at the same percentage rate, x, but income growth last year for the average worker was stagnant but grew by 55% for corporate fat cats. If the country experiences 10% growth doesn’t correlate into 10% growth in pay for everyone.
“Relative poverty is an appalling measure of poverty. If my neighbour wins the lottery, I am not instantly poorer, nor does my family start to starve.”
Ermmm, yes you are instantly poorer relative to your neighbour. That is why your neighbour moves out and buys a mansion while you stay in the poky terrace. You’re misunderstanding what the purpose and meaning of relative poverty, basically it is a pseudonym for income inequality.
Onus Probandy
@Chris
I think the calculations are simplistic too. I don’t think they are wrong though. Which is why I am surprised to constantly hear about relative poverty.
I was not arguing that “corporate fat cats” didn’t get bigger increases than the “average worker”; I was arguing that relative measures of poverty are not valid by using an example where both the poor and the rich experience the same growth but the “relative poverty” always shows that the rich person got more benefit from that — they did not.
With your example, the absolute measure of poverty that I proposed would have shown exactly what you want it to, since A’s growth is zero:
OLD_INEQUALITY = B / A
NEW_INEQUALITY = (B * (1+0.55)) / A
= OLD_INEQUALITY * 1.55
i.e. 55% increase in inequality.
“Ermmm, yes you are instantly poorer relative to your neighbour.”
What does that matter? That is exactly my argument. Judging my own poverty by anything other than an absolute measure is ridiculous. What if my neighbour wins the lottery but I don’t know about it? What if my neighbour wins the lottery and just banks the lot and never spends any of it? Am I still relatively poorer then?
My ability to provide for my family is a function of my own circumstances, not my neighbour’s. When he wins the lottery I will have no more or less than I had before he won it.