Six in 10 households below decent living standard have someone in work, despite record employment

New analysis by the independent Joseph Rowntree Foundation (JRF) published today shows how despite record employment, the economic security of many working families is not assured in the recovery.

Among those households struggling to make ends meet, six in 10 (2.6 million) have someone in work, the research for JRF finds.
 
Whilst things have stopped getting worse overall, there remain many more people living on low incomes than in 2008. For families, even with more work and slightly better pay, the risk of falling below the minimum has continued to rise.
 
Cuts in benefits have outweighed improved job prospects to contribute to an increase in the risk of having too little income to meet the Minimum Income Standard (MIS) - based on what the public say is needed for an acceptable standard of living.
 
Calculated by the Centre for Research in Social Policy (CRSP) at Loughborough University, Households below a Minimum Income Standard 2008/09 to 2013/14 shows how living standards have fared since the recession and its aftermath.
 
The report identifies 11.6 million people living below MIS in 2013/14, 28% of individuals covered by the research. This was up from 21 per cent in 2008/09, an increase of around a third over the period.
 
But there are encouraging signs:

  • The report shows that growing employment and a return to growth in the economy slowed the increases in the number of people falling short of a decent living standard. Last year, there was a less than one percentage point increase in the risk of having an income below MIS - a much smaller rise than previous years.
  •  The number of individuals in households without children below MIS fell slightly by around 400,000 last year, after seeing big increases between 2008/9 and 2012/13. The new National Living Wage in April will help households without children reach a decent living standard.
  •  For pensioners, the risk of being below MIS remains far lower than for other groups, at 8.5 per cent (823,000 individuals).

But it’s not all good news. People living in families with children have seen their risk of being below MIS increase by a third, with four in 10 now living below the standard - two million more than in 2008/09.
 
The analysis looks at the households below MIS by economic status. It shows the stronger economic outlook has not yet resulted in improved living standards:

  • Of the 2.6 million working households who are still below MIS, 600,000 have all adults working full time.
  • In single breadwinner families, there has been a growing risk of having a low income, increasing from 38 per cent in 2008/09 to 51 per cent in 2013/14 (of 868,000 single breadwinner households, 441,000 households lacked the income needed for an adequate standard of living in 2013/14).
  • 41 per cent of lone parents working full time still have incomes below MIS, up from 26 per cent in 2008/9 (of 319,000 lone parent households where the lone parent is working full time, 132,000 lacked the income needed for an adequate standard of living in 2013/14).
  • For couple families where both parents work full time, the risk has risen from five to 12 per cent (of 1.19 million couple households where both parents work full time, 143,000 lacked the income needed for an adequate standard of living in 2013/14, 88,000 more households than in 2008/09).

Full time workers below MIS

Overall risk of living below MIS

To ensure the better economic outlook and prosperity is shared by all households, JRF believes there are opportunities in next month’s Budget to help provide economic security for families:

  • Businesses should be encouraged to help employees into better paid jobs, by up-skilling low paid workers. The government can also encourage the creation of more and better jobs.
  • Markets should be reformed to ensure they work better for those on low incomes, allowing people to keep more of their income: this means more affordable housing, help with the rising cost of childcare and action on the high price of essentials.
  • Making sure work pays under Universal Credit – the Work Allowance should be increased, so families can keep more of their earnings before their benefits are withdrawn.

Katie Schmuecker, Policy and Research Manager at JRF, said:
 
“Work is the best route to economic security and a better standard of living and we welcome record levels of employment. But as well as more jobs, we need better jobs so all families can benefit from economic growth. Despite working full-time hours, more families are still falling short of what they need to make ends meet. We need the state and businesses to ensure people in work can achieve economy security.
 
“The upcoming National Living Wage is an important step towards building a society with higher wages and a lower need for welfare, but it won’t take all of the strain. Alongside topping up the earnings of low income families, more needs to be done to address skills shortages and encourage the creation of more productive jobs that can create prosperity for all.”
 
Matt Padley, author of the report and from Loughborough University, said:
 
“For the first time, our data is showing the extent to which the more favourable economic conditions are helping households on low income return to acceptable living standards. It is good news that things have stopped getting worse overall, although there remain many more people living on low incomes than in 2008. What is more troubling is that for families, even with more work and slightly better pay, the risk of falling below the minimum has continued to rise. Millions of low earners depend not just on wages but also on in-work benefits to make ends meet, and a decline in these benefits has made the most difference to the overall level of their incomes, relative to what they need.”