Comment Blog 5 March, 2019

Finding the fork in the road: Why work alone isn’t a route out of poverty

There is a belief, which has been long held across the political spectrum, that work is the best route out of poverty. The Government’s flagship welfare policy, Universal Credit, is built on the assumption that people can reduce their reliance on benefits by increasing their earnings through work. And, relatively speaking, this assumption holds true: people in workless households have a much higher rate of poverty than those with someone in work.

However, for those in work, it is increasingly true that work may not guarantee a decent standard of living: the rate of poverty among workers has been rising for the last five years, and now stands at 13 per cent. As the employment rate last week reached a record high and concerns about the number of people in work have eased, attentions need to turn to ensuring that work is a reliable route out of poverty.

The drivers of in-work poverty can be broadly divided into two camps: how much people earn through working, and how far this money can stretch. On the first of these challenges, policy responses have focused on “making work pay”, such as through raising the minimum wage. While this is having a notable effect on hourly wages for the lowest paid workers, it is failing to address the problem of in-work poverty. This is because hourly wages, which indicate low pay, and household incomes, which indicate in-work poverty, are not the same. Not everyone who is low-paid lives in poverty.  In fact, just under half of people experiencing in-work poverty have a low-paid member in their household.

That being said, addressing low pay is still an important piece of the puzzle, but what is important here is tackling the lack of pay progression: a quarter of low-paid workers remained permanently stuck in low pay and nearly half (48 per cent) fluctuated in and out of it over the last 10 years. Without tackling low pay progression, policies will continue to prop up low wages, while failing to address its root causes. Training has been identified as an effective means to escape this low pay trap, however, groups most likely to experience in-work poverty, such as those working part-time in low-skilled roles, are least likely to receive training. Part of the solution, then, could be looking at ways to increase training opportunities for those in non-standard working arrangements. This is not only about making training more affordable, but also more flexible. In this vain, the ambition of the Flexible Learning Fund, which aims to make lifelong learning easier to access, is a step in the right direction.

Raising wages will only go so far, however, and need to be complemented by policies that increase the purchasing power of those experiencing in-work poverty. Take, for example, the case a working single-parent family, for whom the chance of living in poverty is one in three36 per cent of single parents would work more hours if they could arrange reliable and affordable childcare, but, as it stands, lone parents with more than one pre-school child can effectively pay to go to work. Six in ten households who experience in-work poverty also live in private or social rented accommodation, showing the problem of in-work poverty is closely linked to addressing the issue of housing affordability.

In-work poverty is about more than work, and will require coordinated responses from across education, housing and welfare. Enabling specific groups to escape the low pay trap through targeted training policies is an important piece of the puzzle. Equally important will be addressing how far these wages can go, most notably in terms of housing and access to good quality, affordable childcare.