Taylor Review: three ways the Government can tackle in-work poverty

12th Jul 2017

The quality of work is firmly in the political spotlight following the publication of the Taylor Review, and it’s about time too.

For years JRF has charted the growing prevalence of working poverty. The number of entirely workless households has declined and the employment rate has hit record levels, yet the number of people struggling to make ends meet despite working has increased. 

The Taylor Review came as Theresa May made a speech reiterating her commitment to build a stronger, fairer Britain one year on from becoming Prime Minister. With one in eight workers in poverty, these interventions could not be more important. She urged the political parties to come forward with their own ideas to tackle the big challenges facing the country.

It is often repeated that work provides the route out of poverty – indeed the Prime Minister said as much this morning in response to the Taylor Review. Undoubtedly the likelihood of experiencing poverty is far higher when people are out of work, but the time has come to get serious about tackling working poverty. Part of the solution lies in the nature of work at the bottom end of the labour market.  To this end the Taylor Review kicking-off a debate about what good work looks like in the UK today is welcome indeed. 

But there is an immediate problem that must be tackled. Recent JRF research shows the pressure low income working families are under, despite the large increase in the National Living Wage (NLW) and tax cuts. The shortfall between their income, and what the public says is needed for a minimum acceptable standard of living in the UK today, has grown – by as much as £900 compared to last year for a couple with children and one worker earning the NLW. The further families are from this benchmark the less likely they are to be able to manage when hit by unforeseen costs like the washing machine breaking, and the more likely they are to fall behind with bills and experience poverty.

Low income families rely on tax credits to top up their incomes and help with high costs such as housing and childcare. With most working age benefits and tax credits frozen while inflation runs at around 3%, living standards are going fall. In addition, the amount low income people can earn before their benefits start to be withdrawn has been cut within Universal Credit (UC). To make progress in the short term the Autumn Budget must lift the freeze on benefits and tax credits and enable people on UC to keep more of what they earn.

Longer term, the focus must be on how to create not just more jobs but better jobs and ensure people are able to get on once they are at work. Not only will this improve living standards, it will also help to bring down the benefit bill by reducing the need for welfare. Many of the measures in the Taylor Review will mark improvements, but a more far reaching response is needed. This must incorporate reforms to skills policy, housing and the industrial strategy to improve living standards for people at the bottom and to support them to get on.

To make progress, here are three key things we believe must happen, from our Strategy to Solve Poverty in the UK:

  • Supporting people to get on at work. Three in four low paid people fail to escape low pay over ten years and low paid employees are four times less likely to receive training from their employer compared to better paid colleagues. If delivered well, UC’s in-work progression could help but it must be complemented by high quality skills training that is targeted according to needs and income (rather than age and previous qualification). Training success needs to be measured by the outcomes achieved, such as securing work and increasing earnings (rather than outputs, such as qualifications gained).
  • Making inclusive growth more than a slogan. This means making sure the industrial strategy genuinely gives places the powers and capacity to build on their economic strengths, and making sure national spending on transport and science support the rebalancing of the economy. In addition, as the Taylor Review highlighted, it also means Government taking an active approach to inviting low pay sectors to work with them to drive up productivity and improve job quality.
  • Build genuinely affordable homes. Falling living standards are driven not only by inadequate income but by high costs. The lack of genuinely affordable housing has been the blind-spot in government policy for years. A ‘living rents’ model should be adopted, whereby rents are linked to local earnings to make them affordable for people on low wages. With the right investment such a framework could help deliver 80,000 new homes per year for affordable rent and shared ownership.