Which party can close the living standards gulf for low-earning families?

Recovery alone will not restore lost ground facing low-earning parents – the parties need to ensure the worst off feel the benefit of growth.

Recovery alone will not restore lost ground facing low-earning parents – the parties need to ensure the worst off feel the benefit of growth

£6,000: that’s how much more each parent in a dual earning couple needs to earn today compared to 2008 to afford an adequate standard of living.

That is one of the starkest findings from this year’s Minimum Income Standard, published today by JRF.  The research, carried out by Loughborough University, sets a benchmark for a minimum socially acceptable standard of living based on detailed conversations with members of the public. The research is now in its sixth year.

Despite the major social and economic upheavals that have occurred since 2008, the 2014 report reveals little change in the goods and services the public think are needed for an acceptable living standard. However, the cost of essential items has soared 28 per cent; particularly large increases in the cost of energy, food, childcare, public transport and social rents have fuelled the rise.

This has pushed up the amount families need to earn to sustain a decent living standard.

JRF graphj

Tax and benefit changes also affect the amount that needs to be earned. While the increase to the personal tax allowance has reduced the amount that single people without children need to earn to reach the Minimum Income Standard, for families with children the picture is very different. Low earning families with children are far more reliant on the state to top-up their income, for example through tax credits or child benefit.

As such, any reduction in state support has a greater impact on these families. A couple with one low earning worker and two young children has lost £4 for every £1 they’ve gained as a result of tax and benefit changes in recent years.

What is more, the situation has been worsened by the stagnant wage growth of recent years. Over the period that the cost of essentials increased by 28 per cent, wages increased by 9 per cent on average, and the minimum wage by 14 per cent.

A gulf has opened up between family incomes and needs, especially for those reliant on low incomes.

Given the extent of the ground that needs to be made up, simply sitting back and waiting for wages to go up as the economy recovers will be not be a sufficient response.

Rather, coordinated action is needed to tackle pay and the quality of work at the bottom end of the labour market; address the cost of essentials; and ensure the tax and benefit system supports low income families to keep as much of their earnings as possible and tops up their income where necessary.

Only that way can we be sure the benefits of recovery will trickle down and reach those in greatest need.

Katie Schmuecker is policy and research manager at the Joseph Rowntree Foundation – she tweets at @katieschmuecker

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5 Responses to “Which party can close the living standards gulf for low-earning families?”

  1. Kay

    I am uncomfortable with the solutions. Working tax credits, and the like, function as a subsidy to employers that pay the minimum wage (or a few pennies above it) or that use agencies rather than directly employ staff.

    The subsidy to employers, and the redistribution of money from tax payers to landlords in the form of Housing Benefit, are the sort of things that can be trimmed and cut by governments under the guise of austerity measures, so cannot be relied on as a long term solution. No, there is something horribly wrong about the pernicious business models that rely on low pay and job insecurity to grow their profits. Top Ups are just a fig leaf to cover them.

  2. Leon Wolfeson

    There is “coordinated action” from the Coalition….to further raise the poverty premium. Trickle down is a myth, there needs to be actions to ensure people are paid properly, and that there is a social security net underpinning the system.

    Ensuring people “keep as much cash as possible”, when often the poverty premium rises are larger than what the poor “save” are often counter-productive as well. Meanwhile, there’s no sign of wage rises – why should there be, with the harshly punitive benefits system holding down wages?

    Also, have you considered a Basic Income?

    (Let’s not even mention the ECHR ruling on how illegally low UK benefits are)

  3. Leon Wolfeson

    Indeed. We need to be talking rent caps, social housing, basic income, living wage..

    Not all of it will pass muster, but that’s what we need to be talking about.

  4. treborc1

    tell me about it I use to get IB at £147 IO won my claim for ESA and now get £96 and that because labour decided the longer you work the more you get so I only worked 32 years. So if anyone is going to have an accident try it a week before you retire.

  5. Leon Wolfeson

    I didn’t say anything about that…

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