Higher living costs causing higher poverty among working households - IFS
By Caoimhe Toman
Date: Wednesday 19 Jun 2019
(Sharecast News) - The UK has experienced a dramatic rise in poverty among working households since the 1990s, with low pay and high living costs both to blame, said the latest report from the Institute for Fiscal Studies.
Indeed, median incomes were only 5.6% higher than 10 years earlier in 2007-08, before the Great Recession.
The chief reason for that had been employee earnings growth below the rate of inflation. Real median employee earnings fell by 0.3% in 2017-18.
Cuts in working-age benefits had further depressed the net incomes of poorer families, while incomes for middle- and high-income families had either stagnated or grown slightly.
As a result of the above, the number of people in poverty jumped to 8m with 60% living in households where someone works and absolute child poverty rising by 1% in the year.
The thinktank said that between 1994 and 2017 the share of poverty accounted for by working households had jumped from 37% to 58%.
"Over the same period, the worklessness rate of lone-parent households fell from 66% to 36%. 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.
Xiaowei Xu, a research economist at the IFS, and an author of the research paper, said: "The gradual rise in relative in-work poverty rates from 13% in the mid 1990s to 18% 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."
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