Majority of poor children are in working families

Nearly two-thirds of British children in poverty live in working families, the Institute for Fiscal Studies has revealed in its annual poverty and inequality report.

The economic think tank said rising employment between 2009-10 led to increases in the proportion of children living with working parents. At the same time, falls in real earnings reduced the incomes of working families. These two contrasting trends led to absolute child poverty remaining unchanged overall in this period.  However, the proportion of children living in a working family rose from 54% in 2009-10 to 63% by 2013-14.

Key findings on trends in the report include:

• Between 2009-10 and 2013-14, the proportion of children in workless families fell from 18-% -16%

• Over the same period, increased rates of poverty within working families acted to increase absolute child poverty by more than two percentage points (ppts)

• Benefit cuts over this parliament will put upward pressure on absolute poverty for working-age households – including those in work

• The planned rises in the minimum wage will help many of those on the lowest hourly pay, but are smaller in overall magnitude than the benefit cuts and less tightly targeted on low income households

• Cuts to Council Tax Support and the introduction of the so-called ‘bedroom tax’ in 2013 both seem to have caused their own increases in arrears, on council tax and rent respectively. 

Comments

The recent stability in absolute income poverty among children has masked important and offsetting trends,” said Chris Belfield, a Research Economist at the IFS, and an author of the report. “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.”

Julia Unwin, Chief Executive of the Joseph Rowntree Foundation, 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.”

Simon Hopkins, Chief Executive of Turn2us recently raised concern over the cuts to the tax credit system. He said: “In work poverty could become a technical possibility by 2020 but for those who are out of work and on low incomes it is set to become a very practical reality.”

Source: Institute of Fiscal Studies press release

Date of publication: 17 July 2015