What can we learn from the Households Below Average Income figures?

26th Jun 2015

Aleks Collingwood reflects on what the statistics on Households Below Average Income show us - and what they don't reveal.

Yesterday was quite a surprise for some. DWP released the latest statistics on Households Below Average Income (which cover up to March 2014) - the first set of figures to reflect what has happened since the last Government’s welfare reforms started to hit, and many expected to see a rise in the number of people on low incomes.

What the statistics showed was that everything (apart from disability poverty) had more or less stayed the same as the previous year with no significant rise in poverty. In fact 9.8 million people were in relative income poverty (Before Housing Costs) in 2013/14 – the lowest since before 1994. What does this tell us? It tells us that on face value, the increase in the number of people getting jobs as the UK comes out of the recession seems to have helped families keep their household income level pegging.

What doesn’t it tell us? 

It doesn’t tell us what is actually going on within the labour market. So we don’t know how many of the jobs that people in poverty are getting are low paid, insecure or part-time. And it’s not clear what effect the stress of such employment conditions is having on people while they struggle to make ends meet. It doesn’t really tell us how the cost of living has risen considerably over the last six years either, as although absolute poverty is measured against RPI, it isn’t the best measure. In fact, inflation has been higher at the bottom end of the income distribution. JRF research shows that working households needed to earn substantially more in 2014 than in 2008 to achieve what the public thinks is an acceptable minimum standard of living. Overall, the cost of a basket of essential items rose by 28% over six years, while average wages increased by 9% and the minimum wage by 14%. It will take some time on current trends before this budget gap starts to close. The new Minimum Income Standard research will be published next Wednesday.

The one major significant difference that the statistics did show was the increase in disability poverty. The UK now has the highest number of people in households with a disabled member in poverty since 1998. 5.1 million. After housing costs. It is extremely worrying that disabled people and their families are being locked out of economic growth. The report makes the point that this must be interpreted with care due to changing measures of disability in the survey. However, evidence from JRF shows that not only are disabled people much less likely to be in employment than non-disabled people but that disabled adults who are employed are also much more likely to be low paid, even with the same level of qualifications as non-disabled adults. Part of this difference has to be related to discrimination in the labour market. The impact of welfare reforms on disabled people is therefore clearly going to be larger if they can’t use the route of employment to supplement their income - and this is a big worry.

What needs to happen now? 

We need to tackle the causes of high levels of poverty and disadvantage in the UK and work on the underlying factors including improving work conditions, wages, job security, the prospects of promotion, support for different groups to enter the labour market and, of course, many other things such as increasing the supply of affordable housing. Introducing a comprehensive anti-poverty strategy involving employers, businesses and communities, based on evidence and with a clear plan, targets and measures would help to deliver such a change.

See Julia Unwin's response to the figures here.