Between 1994 and 2017 there was an increase from 13% to 18% in the proportion of people in working households living in relative poverty that’s an increase of 40%
By 2017 8 million people in the UK living in working households were in relative poverty.
These are among the key findings of new research funded by the Joseph Rowntree Foundation and published today by the Institute for Fiscal Studies as part of its annual report on Living Standards, Poverty and Inequality in the UK.
A key driver of the rise has been higher housing costs for low earning households, driven mainly by higher private and social rents. In addition, earnings growth has been significantly slower for lower earners relative to higher earners.
But it also reflects the fact than many more people are in work. They are better off than they would have been had the stayed out of work, but they remain in poverty. In addition, pensioner incomes have risen faster than working-age incomes– pushing up the relative poverty line.
Over the same period the proportion of those in poverty who live in working households has increased dramatically.
In the mid-1990s 37% of those in poverty lived in a working household. That has reached 58%. Most of the reason that the majority of the poor are now in working households is that there are many fewer workless households and many fewer poor pensioners.
Xiaowei Xu, a Research Economist at IFS, and an author of the research, said,
“The gradual rise in relative in-work poverty rates from 13% in the mid 1990s to 18% in 2017 are the result of complex trends.
The rise in pensioner incomes driven by state and private pensions has pushed up the relative poverty line. Higher employment rates of people who are likely to have low earnings – such as lone parents – are a positive trend, even though this pushes up in-work poverty figures. However, higher inequality in earnings for working households, and considerably higher growth in housing costs for poor households have been key reasons for higher in-work poverty.”
Tom Waters, Research Economist at IFS, and another author of the research said,
“‘Severe’ poverty is a clear policy concern but it is hard to measure. We find little evidence that there are significant rises in it.
Severe income and expenditure poverty rates are little changed, and rates of material deprivation – which measures whether households feel unable to afford basic items such as keeping the home warm – have clearly declined, with falls seen across the income distribution.
While these results suggest that very low living standards have not become more common, they do not tell us what has happened to the frequency of ‘destitution’, such as rough sleeping.”