Most children in poverty are part of working families, IFS finds

16 Jul 15

Almost two-thirds of children living in poverty are in households where someone works, analysis by the Institute for Fiscal Studies has found.

The research, which was funded by the Joseph Rowntree Foundation, found that rising employment between 2009/10 and 2013/14 had led to an increase in the proportion of children living with working parents. However, this was offset by falls in real earnings reducing the incomes of working households. The net result was no change to the absolute rate of child poverty.

JRF chief executive Julia Unwin 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.”

Robert Joyce, a senior research economist at the IFS, added: “The government has recently emphasised worklessness as a cause of poverty. This makes sense, but tackling low living standards will be difficult without improvements for working families too.”

In last week’s summer Budget, Chancellor George Osborne announced that working-age benefits, specifically Tax Credits and Local Housing Allowance, would be frozen for the next four years. Support for children via Child Tax Credits and Universal Credit is also to be limited to the first two children.

Elsewhere, the research highlighted that “material deprivation” – a measure of what families say they cannot afford – was much higher among social renters, lone parents and disabled people than owner-occupiers, the self-employed and those with some savings.

Cuts to council tax support and the introduction of the so-called bedroom tax have caused “clear increases” in arrears on council tax and rent, the research found.

While inequality has fallen since 1990, much of this had happened since the recession, the research found. This partly reflects the ‘catch-up’ effect of pensioners: the median pensioner now has a higher income (after housing costs) than the non-median pensioner.

However, the top 1% has been taking an increasing share of household income, up from 5.7% in 1990, to 8.3% in 2013/14.

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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