Low incomes and high costs – a precarious balance

It's important to look beyond employment when considering poverty, says Chris Goulden. What about high living costs and low pay?

The Banos seem like a family balanced on the brink. The cost of living is creating such pressure on them, despite the best efforts of both parents to work their way towards affording that talismanic holiday or simply the extravagance of a £20 skirt.

The film highlights how important it is to look beyond simply employment when considering poverty. Both parents are already working full-time but they are struggling to get by because of the high cost of their commitments, the impact of falling behind with payments and the low incomes associated with some self-employment and clerical work. 

There are many faces of poverty in the UK and that is why we need an anti-poverty strategy to provide solutions that reflect this complexity, which don't assume that either work or income redistribution are silver bullets.

JRF's minimum income standards (MIS) research shows what the general public think we all need for the acceptable standard of living that the Banos are striving for. In MIS, parents with four teenage children would both need to earn around £24k per year to afford an adequate lifestyle, just a little under average earnings. The only financial help they would be entitled to is £60 a week child benefit. Out of their salaries, they would each be paying £60 a week back in income tax and £38 a week National Insurance, or nearly £200 a week in total.

In terms of minimum outgoings, food would be the biggest chunk of spending at an average of £190 per week, with travel costs coming in at over £100 per week. That is mainly due to running a car. There is also clothing (£70), water rates, Council Tax, insurance, gas, electricity and so on. The first thing that seems to get squeezed is social activities outside the home. Social retraction and getting cut off can compound the stress of living on a low income, especially when there are older children in the family.

MIS is also based on families being able to find suitable social housing. Having to keep up mortgage payments makes it even harder, especially when bank charges for missed payments start to spiral out of control. JRF research on debt and financial inclusion shows that punitive account charges are one of the main reasons that people on low incomes sometimes prefer the high APR alternatives of doorstep lenders and other sub-prime credit. Even though this choice costs much more, the security of knowing how much is owed each week – with the option for a break in payments when needed – can appear to better suit short-term needs.