A common, not unreasonable, assumption is that having a job means not being poor. But recent ippr research reveals that 57 per cent of all poor households with children have at least one parent at work: up from 47 per cent in 1997. One in seven working households in the UK lives below the poverty line – a further challenge to Labour’s already behind-schedule strategy for ending child poverty. But it opens up new political opportunities too.
Let’s examine trends over the past decade. Child poverty has fallen by 600,000 overall, but the number of poor children in working households has remained the same. This is partly because rising employment rates mean fewer children now live in a workless household, but only partly. Many families have simply exchanged poverty out of work for poverty in work.
Perhaps this is a predictable product of the government’s two-pronged strategy: supporting more parents into work while redistributing through tax credits and benefits. This mix has ‘made work pay’ (relative to out of work benefits) and boosted the poorest families’ incomes. More of both will be essential in the years ahead. The risk of poverty remains far higher among workless families. This is unarguably ‘real’ poverty: we’re talking about a couple with one child living on less than £260 every week.
So we need a third prong, to help families once someone moves into work. Eighty per cent of working poor families with children are couples, the vast majority of whom have just one earner. Increasing the Working Tax Credit for these families and improving the incentive for second earners to work at least part-time should be a priority. Combined with better childcare and extending the right to request flexible working to all, this would be a fairer and more effective way to support hard-pressed couples than a regressive Transferable Personal Allowance for single-earner married families, advocated by the Conservatives.
But beyond these immediate steps lies a far larger and more complex issue. More than one in five workers in Britain earn less than £6.67 an hour, the equivalent of £12,000 a year for a full-time working week. The link between wages and poverty is not straightforward. However, the sheer number of people meeting their responsibility to society but earning so little is a central – largely unspoken – factor underpinning our internationally high rates of poverty and inequality.
The minimum wage has pushed up wages from below without costing jobs. But broader action is needed to increase the number of decently paid jobs and promote progression at work. The government could commit to becoming a non-low pay employer, and build ‘fair wage’ clauses into public sector procurement contracts. The right mix of regulation and support could help boost productivity and wages in low-value businesses, while making the UK a leader in high-value green industries. We need a welfare and skills system that helps workers develop careers, not just get jobs. Could trade unions do more to organise in low pay sectors? And can consumer power be better harnessed to challenge high profit, low paying employers?
Ultimately, if the government is reluctant to increase taxes on high earners, then stronger action to improve pay at the bottom of the labour market – an underlying driver of inequality – is essential to closing the gap between rich and poor. Ending child poverty through remedial redistribution alone is neither politically nor economically viable. With the Tories now proposing ‘workfare’ and time-limited benefits, an agenda for fairness for families at work also offers the potential to carve out distinctive, popular and progressive political territory.