Economists highlight poverty in working families

Research by the thinktank the Institute of Fiscal Studies found that while there has been a fall in the number of workless families, the number living in poverty in households in work has risen.

Cuts to tax credits and benefits would mean that low-income families would still be worse off, despite the Government’s planned rise in the minimum wage rise, its report said.

The annual report, Living Standards, Poverty and Inequality in the UK: 2015, is the 14th report in a series looking at the reasons for key trends in living standards, inequality and poverty.

The IFS examined child poverty figures released last month from the Households Below Average Income report - the Government’s official child poverty statistics.

This claimed that the percentage of children in households living under the poverty line in 2014 was at ‘its lowest level since the 1980s,’ at 17 per cent.

According to the IFS, the proportion of children living in workless families fell from 18 per cent to 16 per cent between 2009-10 and 2013-14.

However, during the same period poverty increased in working families from 19 per cent to 21 per cent.

Chris Belfield, a research economist at the IFS, and an author of the report, said, ‘The recent stability in absolute income poverty among children has masked important and offsetting trends. Since 2009–10, a fall in the number of workless families has acted to reduce poverty, but this has been offset by a substantial rise in in-work poverty. This largely reflects the wider nature of the labour market since the recession: robust employment and weak earnings.’

The IFS said that cuts to benefits would put increased pressure on poverty for working-age households, including for those with jobs.

Although minimum wage rises would help the lowest-paid, the overall effect would be smaller than benefit cuts and would push poverty up.

Julia Unwin, chief executive of the Joseph Rowntree Foundation, which funded the research, said, ‘A strong economy and rising employment have masked the growing problem of in-work poverty, as years of below-inflation wage rises have taken their toll on people’s incomes. The upcoming minimum wage rise will help, but many low-income working families will still find themselves worse off due to tax credit changes. ‘Boosting productivity and creating more jobs which offer progression at work is vital to make work a reliable route out of poverty.’

A Government spokesman said, ‘This report recognises that rising employment has led to increases in the proportion of children living with working parents. And we know that the proportion of people living on low incomes is at the lowest level since the mid-1980s.

‘Work remains the best route out of poverty and we want to ensure that when people go out to work they are paid a decent wage and get to keep more of what they earn. That is why we have introduced a new National Living Wage and are increasing tax thresholds so Britain can move from a low wage, high tax and high welfare economy to a higher wage, lower tax and lower welfare society.’

Earlier this month the Government announced that it would be changing the way it measures child poverty.

In place of the Child Poverty Act 2010, the Government will be legally bound to report on the proportion of children living in workless household, long-term workless households and the educational attainment of all pupils and the most disadvantaged pupils at age 16.