Earning your own poverty

More working people in the UK are living in poverty than when the global financial meltdown reached its apex nearly eight years ago.

 
Despite an unemployment rate that continues to drop – it is now just over 5 per cent – work, even full-time work, is no antidote to poverty. And a new report by the charity the Joseph Rowntree Foundation (JRF) shows just how widespread in-work poverty has become.

In-work poverty
At the height of the financial crisis, one in five households earned below what the charity has calculated is the minimum income a household needs to live adequately. Now, this figure has increased by a full third – in 2013/2014, the proportion of households struggling to make ends meet had skyrocketed to nearly 1 in 3.

 
JRF has also stressed that now, a majority – 60 per cent, or 2.6m households – who fall below the minimum standard of living have at least one person in work. And of these working households, at least 600,000 households have all adults working full-time.

 
Working families with children are most likely to fall into low income, the report from the Joseph Rowntree Foundation notes. Single parents working full-time had incomes that fell below JRF’s minimum income standard at a rate of 41 per cent, while half of all couples with children who had only one full-time breadwinner fell below the minimum.

 
JRF measures its Minimum Income Standard based on what the public believes is the minimum earnings that a household needs to achieve an adequate standard of living.

 
Currently, the minimum income threshold is set at ÂŁ16,850 a year for a single person, ÂŁ25,600 for a single parent with one child and ÂŁ36,060 for a single breadwinner with two children.

 
“Despite working full-time hours, more families are still falling short of what they need to make ends meet. We need the state and businesses to ensure people in work can achieve economy security,” said JRF policy and research manager Katie Schmuecker.

 
“The upcoming National Living Wage is an important step towards building a society with higher wages and a lower need for welfare, but it won’t take all of the strain,” she added. “Alongside topping up the earnings of low income families, more needs to be done to address skills shortages and encourage the creation of more productive jobs that can create prosperity for all.”

 
Matt Padley of Loughborough University who authored the JRF report said cutting benefits has hit low-income families hard.

 
“Millions of low earners depend not just on wages but also on in-work benefits to make ends meet, and a decline in these benefits has made the most difference to the overall level of their incomes, relative to what they need,” he said.

Stagnating wages
And while falling unemployment usually translates into upward pressure on wages, earnings have uncharacteristically stagnated. A Chartered Institute of Personnel and Development (CIPD) survey of employers shows that this trend will continue into 2016.

 
The survey of 1,000 employers found that bosses intend to raise salaries by an average of only 1.2 per cent this year – less than half the 3 per cent increase that the Bank of England had predicted, and the lowest rate in two years.

 
In the survey, the number one reason employers gave for giving a less than 2 per cent pay increase to their employees this year was “the organisation’s inability to pay more”. Employers also pointed to the increasing costs of employment, as the mandatory minimum wage is set to go up in April while the government has also implemented an apprenticeship levy.

 
The additional cost of pensions auto-enrolment was also cited as a factor in limiting pay rises this year. What’s more, 1 in 3 employers noted in the survey that they did not feel compelled to hike wages because the inflation rate had remained so low.

Political choice
But Unite assistant general secretary Steve Turner pointed to an unbalanced economy created by government policies, as well as low public infrastructure spending and greedy, profit-flush companies as the main reasons that wages have stayed low while in-work poverty has soared.

 
“The JRF report is the latest to show that in austerity Britain, people work hard to earn their poverty,” Turner said. “In-work poverty has grown dramatically under the Coalition and Conservative governments because of their failed economic policies.

 
“The question now is – what are we going to do about the unsettling reality that getting a job, even a full-time job, does not guarantee even a basic level of economic security?

 
“First, we must challenge employers when they say they cannot afford wage increases,” he argued. “How can this be the case when top-level executive pay has gone through the roof in the last few years alone?

We’ve entered a period of wage stagnation not seen in a century – an unprecedented seven year real wage fall – yet bosses have not shared in any of the economic pain. On the contrary, their fortunes only got better.

 
“What’s more, independent research commissioned by Unite has proven that the minimum wage can go up substantially without harming jobs or the economy.

 
“Not only has this government actively nurtured the creation of low paying, insecure jobs, it has sought to attack and roll back the financial support for families who, through no fault of their own, cannot work their way out of poverty no matter how many hours they work or how hard they try,” Turner added.

 
“The government knows what needs to be done – leading economists around the globe are united on this question. We need public investment in our infrastructure – such as housing and public transport – to grow the economy and create decent work for all and a government that has an active industrial strategy for manufacturing and other high-skill industries. We can create well-paid, secure jobs – it is a political choice not to.”