Record rates of employment and small increases in pay have not halted the increase in the number of those in work living on incomes below what they need, particularly working families with children.
In recent years the phrase ‘hard-working families’ has figured prominently both in defining and defending ‘difficult’ policy decisions. The programme of welfare reform that began under the Coalition government on 2010-2015 was sold as necessary not only to reduce government spending, but also to restore fairness to a system that was claimed to be privileging the workless above the hard-working. Proposed changes in support for childcare can be seen as aimed at increasing the number of working parents. The introduction of the National Living Wage in April 2016 can also be seen as further evidence of a policy agenda focused on hard-working families.
And yet hard-working families have not escaped government cuts and reductions in support. Recent intended changes to tax credits – abandoned by George Osborne following pressure from within and outside of his party – would have resulted in significant losses for many in receipt of in-work tax credit support. Changes to the work allowance under Universal Credit will result in losses for working families receiving support from this April, losses that Iain Duncan Smith suggested could be recouped by people working a few more hours a week.
Behind the rhetoric and posturing, what has been going on? How have ‘hard-working’ families fared since 2008/09?
The latest in our annual series of reports looking at how many households are living on incomes below what is needed for an adequate standard of living – according to what the public think – shows that between 2008/09 and 2013/14, the proportion of people living below this threshold has increased by a third. Within this, families with children have actually seen the greatest increase in the risk of having low income, with over 40 per cent living on incomes below what they need in 2013/14. This means that in 2013/14 there were at least 1.2 million more children living in families with inadequate incomes than there were in 2008; at least 230,000 more were in families with less than half of the money needed for a minimum living standard.
This shows that making ends meet on a day-to-day basis has become more difficult for a growing number of families. What the new analysis also reveals is that work – and there is more of this with record levels of employment – is not necessarily providing a sure route to an income that could be considered sufficient for a minimum standard of living. For example, couples with children were more likely to work full-time in 2013/14 than in 2008/09, but cuts in in-work support, lower real wages and rising costs means that the risk of (hard) working families having inadequate incomes has increased. Where both are in full-time work, the risk of having insufficient income has more than doubled from 5 to 12 per cent over this period; in couple families where there is only one (hard-working) breadwinner, just over half of households have incomes below what they need in 2013/14. As Dolly so appositely sings ‘working 9 to 5 … barely getting by’.
Clearly this poses a challenge to claims that policy changes have been in support of ‘hard-working’ families; even full-time work is not providing enough income to enable families to reach what the public see as the socially acceptable minimum. Changes that have not been picked up yet in this annual analysis may help to slow the increase in the number of working households with inadequate incomes: the introduction of the National Living Wage for example. However, while efforts to tackle low pay can be welcomed, there remain key questions about the role of in-work support for hard-working families and the balance between employers and state in ensuring that families reach incomes that enable them to have a minimum socially acceptable standard of living. This is particularly important for low income families with children, whose ability to gain from better wages is highly constrained by the way pay rises are being clawed back by reductions in tax credits and Universal Credit.
The last verse of Working 9 to 5 neatly encapsulates the circumstances of many working families:
“In the same boat with a lot of your friends, waitin’ for the day your ship’ll come in, And the tide’s gonna turn and it’s all gonna roll you away”
Unfortunately, at least in the short term, it does not look like the tide is about to turn.