Cycles of poverty and unemployment
One thing politicians can agree on is that "work is the best route out of poverty"… but, as employment grows more insecure, it is becoming ever clearer that getting a job does not provide a solution on its own. In the last few years, the number of people 'cycling' between unemployment benefit and a short-term job has risen by a massive 60 per cent. This raises the worry that when it comes to employment as a way of lifting people out of poverty, many are merely bumping along the runway and never taking off.
Our research programme published today explores some of the issues as experienced by employees and employers, as well as learning about the causes of cycles of poverty from a national panel survey going back to the early 1990s.
A plain message from the work is that employment does not provide a sustainable route out of poverty unless job security, low pay and lack of career progression are also addressed.
Underlying growth in the extent of in-work poverty has destabilised strategies to reduce poverty and inequality. As the case studies carried out for the programme show, some employers are responding to fluctuations in demand for the services their businesses provide by resorting to temporary and agency-based workforces.
What is interesting is that it seems the ethos of the company is a key factor driving those kinds of human resource decisions. Similar employers in the same sectors were managing to cope perfectly well with a more permanent workforce alongside alternative strategies for coping with fluctuations in demand. Serious improvements to employment conditions could therefore be relatively easy to make.
The UK Government has recently laid before Parliament the EU Directive on Agency Workers after much delay and debate. This should help a lot of the people who were interviewed for our programme but many other improvements are needed as the economy stutters back into life.
'Living wage' campaigns have much to offer and our extensive research has shown how they can be soundly-based on what the public and experts agree is enough to live on in modern Britain. Public sector employers are more commonly adopting a living wage policy, especially in local government, but they also need to look at their purchasing and contracting decisions so as not to exacerbate the use of low-paid, insecure jobs by contractors. Services for people in or looking for employment need to take on board the programme's lessons about the dynamic nature of income, because if they do not, we risk getting stuck in a vicious cycle ourselves in terms of alleviating poverty.
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Comments
Thanks once again to the JRF for some insightful and serious reports on the issue of recurrent and in-work poverty. Many of your findings echo our own analysis here at the Resolution Foundation. Our work is concerned with the issues that the UK’s 14 million ‘low earners’ face – those people living in households above the poverty line but below median income. Our report last year, Closer to Crisis?, showed how the recession has served to highlight and in some cases exacerbate the vulnerability of these households, who have little in the way of safety nets – over half have less than a month’s savings in the bank – and few prospects for progression in what might be perjoratively termed ‘dead-end’ jobs.
We are just embarking on some work to explore this issue of progression further, particularly for the 0.75 million low earners in ‘non-standard hours contracts’ and the half a million low earners who are holding down more than one job. We believe – and the JRF’s research supports this – that these are the low earners particularly vulnerable to the low-pay/no-pay cycle.
Alongside the focus on quality work and progression that is vital to ‘making work pay’, we also believe that more needs to be done to tailor the benefits and tax credits systems to the realities of low income household’s finances. Next month we are publishing an in-depth qualitative study of the financial health of low earners. A key insight from this work is that current forms of in-work support are ill-equipped to cope with the considerable fluctuations in income that these households experience. For example tax credit awards based on annual income figures are poorly tailored to low income budgeting strategies based upon days and weeks rather than months and years.
That said there is no question that the measures of recent years – the national minimum wage, tax credits and the rest – have played a crucial role in improving the situations of low earners, as our Low Earners’ Audit shows. The question now is whether government can maintain this support in a period of fiscal consolidation. And it remains to be seen whether employers can be engaged more effectively in this debate too, and be encouraged to move away from business models built upon a low wage/low skill equilibrium. Government will not be able to solve the issues highlighted by these JRF reports on its own.