Using the latest available data on household incomes, the report Households below a Minimum Income Standard 2008/09 to 2012/13 monitors the widening gap in income inadequacy since the recession and its aftermath.
Calculated by the Centre for Research in Social Policy (CRSP) at Loughborough University, the Minimum Income Standard is the amount that the public think people need in order to reach a socially acceptable standard of living. The report finds that:
- 39% of people in households with children (8.1 million individuals) live below the Minimum Income Standard.
- Of these families, those headed by lone parents face particular pressure: 71% live on inadequate incomes (2.3 million individuals), up from 65% (2.2 million) over the period.
- Single breadwinner families have also seen a large increase in the risk of inadequate income. In 2008, 38% of families with children where someone works full time and their partner does not work were struggling to get by; this figure has risen to 51% (The number of people in these families has risen from 1.6 million to 1.9 million)
The research finds that the widening gap between the incomes of families with children and what they need was driven by a real-terms fall in wages and cuts to benefits and tax credits.
The analysis also confirms the rapid increase in the risk faced by childless working age households:
- 23% (3 million adults) are now unable to make ends meet, up from 16% (1.9 million) since 2008/09.
For childless working age households, especially younger adults, worsening job prospects played a crucial role in increasing the risk of low income in the immediate aftermath of the recession. The precarious nature of the labour market also left many unable to find stable employment, and reduced the earning potential of those that did. For single people under 35, the proportion not working rose from 16% to 25%.
As employment rates for younger adults recover, their prospect of having an adequate income may improve. Working families with children, on the other hand, will continue to feel the effects of stagnating wages and benefit cuts because they are reliant on benefits to top up their low pay.
To address this widening gap, JRF is calling for:
- reform of the markets for essential goods and services eg. energy, financial services and transport, to ensure they provide good value for money and those on low incomes don’t pay more than better off households for services (the so called ‘poverty premium’)
- national minimum wage rates to be set with regard to the changing cost of living and average earnings
- employers to pay the Living Wage where they can afford to
- changes to the design of Universal Credit so that low earners keep more of the money they earn before benefits are withdrawn.
Katie Schmuecker, Policy and Research Manager at JRF said:
“There has been a turnaround in who is suffering most as a result of the economic crisis and government measures to reduce the deficit. While last year’s monitoring report showed a sharp rise in young single people struggling to make ends meet, this year’s report shows a rapid widening of the gap between the incomes and costs of families with children. Falling earnings, cuts to in- and out-of-work benefits and sharp rises in the cost of essential items over several years have taken their toll upon the ability of families with children to secure a decent living standard. Without action by the government and employers to address this group as part of a wider anti-poverty strategy, this trend is likely to have serious consequences for the next generation.”
Donald Hirsch from the University of Loughborough, co-author of the report, said:
“Our tracking of what has happened to people on the lowest incomes shows just how much ground they need to make up in order to restore pre-recession living standards. Over one in three families with children now have incomes that are not high enough to afford a minimum basket of essentials according to our research into what the general public define as adequate. A pause in inflation, influenced by the drop in oil prices will make it easier to reverse recent trends, but it will take several years of rising real wages, while maintaining support through tax credits and Universal Credit, to reduce decisively the number of families with inadequate incomes.”