News ID: 254541
Published: 1216 GMT June 19, 2019

Weak pay rises, dearer housing fuel jump in UK’s working poor, says IFS

Weak pay rises, dearer housing fuel jump in UK’s working poor, says IFS
ALEX EKINS/ALAMY

Britain has seen a big jump in the working poor since the 1990s, with almost three out of five people below the official poverty line living in a household where at least one person is working.

The Institute for Fiscal Studies (IFS) found that a drop in the number of workless households, better-off pensioners and higher rents had resulted in eight million in poverty from working households, the Guardian reported.

The thinktank said that between 1994 and 2017 the share of poverty accounted for by working households had jumped from 37 percent to 58 percent.

The in-work poor were living in relative poverty because they were living on less than 60 percent of median income. The IFS said the less well-off had been financially hit by more expensive housing and by weak earnings growth, but were still better off than they would have been had they been unemployed.

It added that success in cutting the number of households with nobody in paid employment had been a key factor in increasing in-work poverty.

In the mid-1990s, 18 percent of working-age households had no one in work but by 2017-18 that figure had dropped to 11 percent.

“Over the same period, the worklessness rate of lone-parent households fell from 66 percent to 36 percent. Because lone parents and other groups that have moved into work tend to have low earnings, earnings inequality and in-work poverty have increased, even though by moving into work, these households are themselves better off,” the IFS said.

Another development of the past quarter century — the rapid growth in pensioner income — had also been a factor in concentrating poverty in working households because the impact had been to push up both median income and the relative poverty line.

That meant more working-age families fell below the poverty line and helped explain why there was an increase from 13 percent to 18 percent in the proportion of people in working households living in relative poverty. Excluding pensioners from the calculations, the increase in in-work poverty would be closer to three-percentage points rather than five-percentage points.

Xiaowei Xu, a research economist at the IFS, and an author of the research, said, “The gradual rise in relative in-work poverty rates from 13 percent in the mid-1990s to 18 percent in 2017 are the result of complex trends.

“The rise in pensioner incomes driven by state and private pensions has pushed up the relative poverty line. Higher employment rates of people who are likely to have low earnings — such as lone parents — are a positive trend, even though this pushes up in-work poverty figures. However, higher inequality in earnings for working households, and considerably higher growth in housing costs for poor households have been key reasons for higher in-work poverty.”

The IFS said that it could find little evidence of an increase in severe poverty — the proportion with very low incomes and spending — during the period since the Conservative-Liberal Democrat coalition came to power in 2010.

 

 

 

   
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