A working solution? The continued rise of in-work poverty

The latest edition of the DWP’s Households Below Average Income series released today shows that child poverty (i.e. those living in households with incomes less than two-thirds of the median) continued its downward trend in 2011-12. Having peaked at about 29% in 1992, the proportion of children living in poverty has since fallen steadily, reaching 17% in the latest figures. While on the face of it this appears to be a positive development, it is worth noting that a large part of this decline is associated with the squeeze on median incomes, which has affected the relative poverty benchmark, and the trend is expected to go into reverse over the rest of the decade.

The new data also point to an important shift in the composition of child poverty. Of the 2.3 million children living in poverty in 2011-12, around two-thirds (66%, or 1.5 million) were from families in which at least one adult worked. As the chart below shows, this proportion has increased rapidly since the start of the financial crisis in 2008, with this year’s rise (up 6 percentage points) being the most dramatic since these records began in the mid-1990s.

Source:Analysis of DWP, Households Below Average Income

However, it is worth noting that the upward trend pre-dates the recession. Where once fewer than half of those in poverty lived in working families, the proportion increased steadily from 2003-04 onwards. As our work has shown, this trend has been especially concentrated among families in which just one parent in a couple works, linked to poor wage performance among single-earner fathers.

The causes of this are likely to be many and varied, and it’s worth reflecting again that the number of families in poverty is falling in absolute terms, but the implication is clear: if we are serious about tackling poverty, it is no longer enough to focus on reducing the number of workless households (crucial though that is); we also need to focus on low pay as well as making it easier and more worthwhile for both members of a couple to work.

As well as thinking about the future of the minimum wage, this latest data also suggests the need to look at Universal Credit and improving childcare.