Inadequate Universal Credit and barriers to work

The basic rate of support from our social security system has hit historic lows, which has been a significant driver of people going without essentials like food, a warm home or showers.

An inadequate safety net that allows incomes to fall so low can add to the challenges people face and make it harder for them to get back into work. This note draws on growing evidence that inadequate income can act as a barrier to employment, explains how this happens and highlights recent examples.

It concludes that an Essentials Guarantee — a widely supported reform of social security that would embed for the first time a protected, minimum level of support linked to the cost of essentials — would better enable households to meet their core needs, making it easier to recover from setbacks, including getting into and progressing in work where they are able to.

Losing your job, needing to care for a sick family member, breaking up with your partner — these are things that can happen to any of us. We can’t always deal with what life throws at us on our own, which is why we need a system in place that supports us all while we recover from setbacks.

Without an adequate safety net, a setback can be hard to overcome. But there is now overwhelming evidence and growing consensus amongst the public and across the political spectrum that the support offered by our working-age social security system has become worryingly low. The basic rate of Universal Credit — its standard allowance — is now at its lowest level in real terms in almost 40 years (CPI-adjusted and including equivalents in previous systems), with 66% of the public now thinking it is too low (Bannister et al., 2023).

Research from JRF and Trussell Trust (Bannister et al., 2023) shows that, in 2023/24, a single adult needs at least around £120 per week to cover essentials, like food, utilities, vital household items and travel (excluding rent and council tax). But Universal Credit’s standard allowance is currently only £85 per week for a single adult aged 25 or over — a shortfall of at least £35 per week. Similarly, the shortfall is around £66 per week for a couple where at least one is aged 25. The gaps are even greater for adults under the age of 25, who receive lower standard allowance rates: £53 per week short for a single adult and £94 per week short for a couple.

In addition, direct deductions from Universal Credit often pull people’s actual support well below these headline levels. Around half of households on Universal Credit face some form of deduction, for example losing up to 25% of their standard allowance each month to repay debts to central government.

The impacts of this threadbare safety net can be seen in consistent evidence of hardship, with around nine in ten low-income households on Universal Credit currently going without essentials, such as food, a warm home, adequate clothing or toiletries (Earwaker and Johnson-Hunter, 2023). Nearly three million emergency food parcels were distributed by food banks in the Trussell Trust network last year (Trussell Trust, 2023) — the highest ever levels of food bank need — with Trussell Trust research finding that inadequate social security is the main driver of this (Bull et al., 2023).

When every day becomes an all-consuming battle to afford essentials and deal with the effects of hardship, it’s no wonder that this can add to problems and make it harder to secure work.

Universal Credit’s basic rate (and its equivalents in previous systems) is now at around its lowest ever level as a proportion of average earnings — at 13% — and the UK has some of the lowest income replacement rates amongst OECD countries (Bannister et al., 2023). This means many people experiencing sudden setbacks will find themselves in the incredibly difficult situation of being unable to pay bills and getting into debt to pay existing commitments. This can spiral and have knock-on consequences, including on someone’s ability to get back into work.

A range of studies described below note that inadequate income support can move people further from the labour market. This could be because it creates problems for people, such as deprivation, social exclusion or homelessness (Mcknight and Vaganay, 2016). For example, a pilot employment support intervention in Oxford found that the higher a person’s weekly housing benefit shortfall, the less likely they were to attain employment through the pilot (Oxford City Council, 2015).

Recent research (Reader et al., 2023) on the impact of the two-child limit found: ‘Evidence also indicates that the effects of negative income shocks can render such policies counter-productive by pushing people further away from the labour market.’

People may struggle to meet costs associated with job searching

One explanation for this is that being unable to afford food or bills can make job hunting much harder. For example, not having enough to cover the bus ticket to an interview or a shift can make finding and keeping work near impossible, as this 60-year-old man living with his adult son told us in recent research (Pollard, 2022):

“They want you to do jobs, but they expect you to get there when you ain’t got no money. Then they offered me a job the other day, £10.50 an hour for two hours. It’d cost me £8 a day on the bus to get there and back. I ain’t got the money to get there and back.”

60-year-old man living with adult son

This echoes other evidence, such as from research by the Department for Work and Pensions (DWP) on the impact of the benefit cap (DWP, 2014). This illustrated how a lack of income can present upfront barriers to getting work in some industries, such as needing to pay for accreditation in construction, or registration and a criminal reference check to be a child minder, or insurance to be a taxi driver. One participant in the DWP study highlighted how inadequate income had made it harder to search for work due to the costs of travelling to interviews:

“I’ve had to give up driving so that’s affected job prospects and things like that. The cost of buses has gone up again so it’s even harder for me to drive... get to interviews because it takes money out of the pot for the house.”

Participant in DWP study

The recent two-child limit study found that the resulting reduced incomes meant families struggled to meet the financial costs of entering paid work, like childcare and transport, and made it harder to afford any further education or training to support future employment, or to take advantage of other earning opportunities (Reader et al., 2023). For example:

“Amanda, who at the first interview had recently obtained a degree in graphic design, had to sell the equipment she had bought to establish her own business, as she did not have enough income from her benefit payments to cover her family’s basic needs.”

Inability to afford costs associated with job searching is discussed in other studies, including transport to jobcentres or interviews, access to a computer and the internet, or buying clothes for job interviews (Ludwinek et al., 2017) (Centre for Social Justice, 2013) (Campaign for Better Transport, 2012) (Daley et al., 2020).

Hardship can restrict mental bandwidth, adding to other job hunting challenges

Recent research with people using food banks vividly describes how a lack of income itself leads to new problems emerging, compounding initial setbacks and making them harder to address. For example, people were having to dedicate a lot of time and energy to monitoring and managing their household budget because they had so little financial room for manoeuvre. Insufficient income also resulted in rent arrears or loans being called in, which then consumed yet more time dealing with lenders, landlords or other agencies (Pollard, 2022).

Not having enough to afford essentials can also put people under constant mental strain — with risk of eviction and fear about providing for children — again making job hunting harder, as this 53-year-old man expressed (Pollard, 2022):

My brain is on fire all the time, and that’s all just through the pressure of life, really I can’t look beyond today. I’m treading water. My head is just above the water at the moment. Just above. It is a struggle.

53-year-old man

Wider literature, including on ‘scarcity theory’ and ‘conservation of resources theory’, discusses the impact of poverty on mental bandwidth (Fell and Hewstone, 2015) (Schilbach et al., 2016) (Hobfoll, 1989). Recent studies use these theories to explain how financial hardship and stress associated with being unemployed consumes mental bandwidth, leaving less capacity for effective job searching (Gerards and Welters, 2020 and 2022) (Lim et al., 2016).

As a recent All-Party Parliamentary Group (APPG) on Poverty inquiry noted (APPG on Poverty, 2023): ‘Witnesses explained that the mental toll and stress that accompanies life on a low income, makes it harder for people to escape poverty. Living in scarcity does not put people in the right mindset to start looking for work.’

Negative effects on mental health can in turn impact employment outcomes

More broadly, there is strong evidence of the causal link between being on a low income and the likelihood of experiencing poor mental health (Cooper and Stewart, 2020) (Evans and Garthwaite, 2014). There is also evidence that poor mental health has a negative impact on employment outcomes (Frijters et al., 2014) (García-Gómez et al., 2010).

In the recent two-child limit study, the financial hardship experienced by families affected by the policy had negative impacts on their mental health and in turn their ability to look for work (Reader et al., 2023). A single mother of three children in the study said:

They’re telling me now to live with three (children) off that money; so it causes me worry. Like even before I get paid like I know what’s going out and I know what I’m gonna be left with and I know it’s gonna be a struggle again… it makes you lose everything, your motivation, your ambition, you know, your mental health; how can I even think about working when I’m constantly feeling ill, I feel sick and I feel like I haven’t been able to do anything that I wanted to?

Single mother of three children

Growing recognition that inadequate social security is creating barriers to work

The APPG on Poverty report concluded (APPG on Poverty, 2023): ‘The inadequate rates of benefits are counterproductive to the Government’s aim of getting more people into work.’

This mirrors conclusions being drawn elsewhere. Australia’s recently established Economic Inclusion Advisory Committee — set up to provide advice on economic inclusion, including the adequacy of benefits, before every Federal Budget — stated in their 2023 report: ‘It is our view that unemployment payments have fallen to such an inadequate level that they create a barrier to paid work. It is also our view that our income support system should prevent poverty and financial distress to ensure people looking for paid work are not placed at a greater disadvantage by virtue of not having enough money to meet the essentials of life.’

Similarly, Australia’s 2020 Senate inquiry into the adequacy of Newstart (an unemployment benefit which stopped in 2020, replaced by Jobseeker) found that: ‘The income support system itself is acting as a key barrier to employment because of the inadequate payment rates that force people into poverty.’

The Government should implement an Essentials Guarantee in Universal Credit

An Essentials Guarantee would embed in our social security system the widely supported principle that, at a minimum, Universal Credit should protect people from going without essentials. Developed in line with public attitude insights and focus groups, this policy would enshrine in legislation:

1. An independent process to regularly determine the Essentials Guarantee level, based on the cost of essentials (such as food, utilities, vital household items and travel) for the adults in a household (excluding rent and council tax). The independent process would draw on independent evidence, including from people with direct experience of living on a low income.
2. That Universal Credit’s standard allowance must at least meet this guaranteed level. (This should also apply to legacy benefits ahead of full Universal Credit rollout.)
3. That deductions from Universal Credit (such as debt repayments to government, or as a result of the benefit cap) can never pull support below this guaranteed level.

Ultimately the level of the Essentials Guarantee would be recommended via the independent process, but the research indicates that in 2023/24 it would need to be at least around £120 a week for a single adult to cover the cost of essentials. Universal Credit’s standard allowance is currently £35 a week below that, leaving a significant gap.

By better enabling households to meet their core needs, the Essentials Guarantee will make it easier for households to recover from a setback, including getting into and progressing in work where they are able to. It would also represent a significant and widely supported reform of social security, embedding for the first time a protected, minimum level of support linked to the cost of essentials.

Final public polling confirmed strong public support for the policy at the indicative guarantee level (Bannister et al., 2023). When presented with the policy, including what the current rates of support are and what they would increase to, 72% of the public supported it and only 8% opposed it. This support was also broad: Labour, Liberal Democrat and SNP voters all showed support around the 80% level, and 62% of Conservative voters supported it.

One explanation for this is that being unable to afford food or bills can make job hunting much harder. For example, not having enough to cover the bus ticket to an interview or a shift can make finding and keeping work near impossible, as this 60-year-old man living with his adult son told us in recent research (Pollard, 2022):

“They want you to do jobs, but they expect you to get there when you ain’t got no money. Then they offered me a job the other day, £10.50 an hour for two hours. It’d cost me £8 a day on the bus to get there and back. I ain’t got the money to get there and back.”

60-year-old man living with adult son

This echoes other evidence, such as from research by the Department for Work and Pensions (DWP) on the impact of the benefit cap (DWP, 2014). This illustrated how a lack of income can present upfront barriers to getting work in some industries, such as needing to pay for accreditation in construction, or registration and a criminal reference check to be a child minder, or insurance to be a taxi driver. One participant in the DWP study highlighted how inadequate income had made it harder to search for work due to the costs of travelling to interviews:

“I’ve had to give up driving so that’s affected job prospects and things like that. The cost of buses has gone up again so it’s even harder for me to drive... get to interviews because it takes money out of the pot for the house.”

Participant in DWP study

The recent two-child limit study found that the resulting reduced incomes meant families struggled to meet the financial costs of entering paid work, like childcare and transport, and made it harder to afford any further education or training to support future employment, or to take advantage of other earning opportunities (Reader et al., 2023). For example:

“Amanda, who at the first interview had recently obtained a degree in graphic design, had to sell the equipment she had bought to establish her own business, as she did not have enough income from her benefit payments to cover her family’s basic needs.”

Inability to afford costs associated with job searching is discussed in other studies, including transport to jobcentres or interviews, access to a computer and the internet, or buying clothes for job interviews (Ludwinek et al., 2017) (Centre for Social Justice, 2013) (Campaign for Better Transport, 2012) (Daley et al., 2020).

Recent research with people using food banks vividly describes how a lack of income itself leads to new problems emerging, compounding initial setbacks and making them harder to address. For example, people were having to dedicate a lot of time and energy to monitoring and managing their household budget because they had so little financial room for manoeuvre. Insufficient income also resulted in rent arrears or loans being called in, which then consumed yet more time dealing with lenders, landlords or other agencies (Pollard, 2022).

Not having enough to afford essentials can also put people under constant mental strain — with risk of eviction and fear about providing for children — again making job hunting harder, as this 53-year-old man expressed (Pollard, 2022):

My brain is on fire all the time, and that’s all just through the pressure of life, really I can’t look beyond today. I’m treading water. My head is just above the water at the moment. Just above. It is a struggle.

53-year-old man

Wider literature, including on ‘scarcity theory’ and ‘conservation of resources theory’, discusses the impact of poverty on mental bandwidth (Fell and Hewstone, 2015) (Schilbach et al., 2016) (Hobfoll, 1989). Recent studies use these theories to explain how financial hardship and stress associated with being unemployed consumes mental bandwidth, leaving less capacity for effective job searching (Gerards and Welters, 2020 and 2022) (Lim et al., 2016).

As a recent All-Party Parliamentary Group (APPG) on Poverty inquiry noted (APPG on Poverty, 2023): ‘Witnesses explained that the mental toll and stress that accompanies life on a low income, makes it harder for people to escape poverty. Living in scarcity does not put people in the right mindset to start looking for work.’

More broadly, there is strong evidence of the causal link between being on a low income and the likelihood of experiencing poor mental health (Cooper and Stewart, 2020) (Evans and Garthwaite, 2014). There is also evidence that poor mental health has a negative impact on employment outcomes (Frijters et al., 2014) (García-Gómez et al., 2010).

In the recent two-child limit study, the financial hardship experienced by families affected by the policy had negative impacts on their mental health and in turn their ability to look for work (Reader et al., 2023). A single mother of three children in the study said:

They’re telling me now to live with three (children) off that money; so it causes me worry. Like even before I get paid like I know what’s going out and I know what I’m gonna be left with and I know it’s gonna be a struggle again… it makes you lose everything, your motivation, your ambition, you know, your mental health; how can I even think about working when I’m constantly feeling ill, I feel sick and I feel like I haven’t been able to do anything that I wanted to?

Single mother of three children

Growing recognition that inadequate social security is creating barriers to work

The APPG on Poverty report concluded (APPG on Poverty, 2023): ‘The inadequate rates of benefits are counterproductive to the Government’s aim of getting more people into work.’

This mirrors conclusions being drawn elsewhere. Australia’s recently established Economic Inclusion Advisory Committee — set up to provide advice on economic inclusion, including the adequacy of benefits, before every Federal Budget — stated in their 2023 report: ‘It is our view that unemployment payments have fallen to such an inadequate level that they create a barrier to paid work. It is also our view that our income support system should prevent poverty and financial distress to ensure people looking for paid work are not placed at a greater disadvantage by virtue of not having enough money to meet the essentials of life.’

Similarly, Australia’s 2020 Senate inquiry into the adequacy of Newstart (an unemployment benefit which stopped in 2020, replaced by Jobseeker) found that: ‘The income support system itself is acting as a key barrier to employment because of the inadequate payment rates that force people into poverty.’

The Government should implement an Essentials Guarantee in Universal Credit

An Essentials Guarantee would embed in our social security system the widely supported principle that, at a minimum, Universal Credit should protect people from going without essentials. Developed in line with public attitude insights and focus groups, this policy would enshrine in legislation:

1. An independent process to regularly determine the Essentials Guarantee level, based on the cost of essentials (such as food, utilities, vital household items and travel) for the adults in a household (excluding rent and council tax). The independent process would draw on independent evidence, including from people with direct experience of living on a low income.
2. That Universal Credit’s standard allowance must at least meet this guaranteed level. (This should also apply to legacy benefits ahead of full Universal Credit rollout.)
3. That deductions from Universal Credit (such as debt repayments to government, or as a result of the benefit cap) can never pull support below this guaranteed level.

Ultimately the level of the Essentials Guarantee would be recommended via the independent process, but the research indicates that in 2023/24 it would need to be at least around £120 a week for a single adult to cover the cost of essentials. Universal Credit’s standard allowance is currently £35 a week below that, leaving a significant gap.

By better enabling households to meet their core needs, the Essentials Guarantee will make it easier for households to recover from a setback, including getting into and progressing in work where they are able to. It would also represent a significant and widely supported reform of social security, embedding for the first time a protected, minimum level of support linked to the cost of essentials.

Final public polling confirmed strong public support for the policy at the indicative guarantee level (Bannister et al., 2023). When presented with the policy, including what the current rates of support are and what they would increase to, 72% of the public supported it and only 8% opposed it. This support was also broad: Labour, Liberal Democrat and SNP voters all showed support around the 80% level, and 62% of Conservative voters supported it.

The APPG on Poverty report concluded (APPG on Poverty, 2023): ‘The inadequate rates of benefits are counterproductive to the Government’s aim of getting more people into work.’

This mirrors conclusions being drawn elsewhere. Australia’s recently established Economic Inclusion Advisory Committee — set up to provide advice on economic inclusion, including the adequacy of benefits, before every Federal Budget — stated in their 2023 report: ‘It is our view that unemployment payments have fallen to such an inadequate level that they create a barrier to paid work. It is also our view that our income support system should prevent poverty and financial distress to ensure people looking for paid work are not placed at a greater disadvantage by virtue of not having enough money to meet the essentials of life.’

Similarly, Australia’s 2020 Senate inquiry into the adequacy of Newstart (an unemployment benefit which stopped in 2020, replaced by Jobseeker) found that: ‘The income support system itself is acting as a key barrier to employment because of the inadequate payment rates that force people into poverty.’

The Government should implement an Essentials Guarantee in Universal Credit

An Essentials Guarantee would embed in our social security system the widely supported principle that, at a minimum, Universal Credit should protect people from going without essentials. Developed in line with public attitude insights and focus groups, this policy would enshrine in legislation:

1. An independent process to regularly determine the Essentials Guarantee level, based on the cost of essentials (such as food, utilities, vital household items and travel) for the adults in a household (excluding rent and council tax). The independent process would draw on independent evidence, including from people with direct experience of living on a low income.
2. That Universal Credit’s standard allowance must at least meet this guaranteed level. (This should also apply to legacy benefits ahead of full Universal Credit rollout.)
3. That deductions from Universal Credit (such as debt repayments to government, or as a result of the benefit cap) can never pull support below this guaranteed level.

Ultimately the level of the Essentials Guarantee would be recommended via the independent process, but the research indicates that in 2023/24 it would need to be at least around £120 a week for a single adult to cover the cost of essentials. Universal Credit’s standard allowance is currently £35 a week below that, leaving a significant gap.

By better enabling households to meet their core needs, the Essentials Guarantee will make it easier for households to recover from a setback, including getting into and progressing in work where they are able to. It would also represent a significant and widely supported reform of social security, embedding for the first time a protected, minimum level of support linked to the cost of essentials.

Final public polling confirmed strong public support for the policy at the indicative guarantee level (Bannister et al., 2023). When presented with the policy, including what the current rates of support are and what they would increase to, 72% of the public supported it and only 8% opposed it. This support was also broad: Labour, Liberal Democrat and SNP voters all showed support around the 80% level, and 62% of Conservative voters supported it.

An Essentials Guarantee would embed in our social security system the widely supported principle that, at a minimum, Universal Credit should protect people from going without essentials. Developed in line with public attitude insights and focus groups, this policy would enshrine in legislation:

1. An independent process to regularly determine the Essentials Guarantee level, based on the cost of essentials (such as food, utilities, vital household items and travel) for the adults in a household (excluding rent and council tax). The independent process would draw on independent evidence, including from people with direct experience of living on a low income.
2. That Universal Credit’s standard allowance must at least meet this guaranteed level. (This should also apply to legacy benefits ahead of full Universal Credit rollout.)
3. That deductions from Universal Credit (such as debt repayments to government, or as a result of the benefit cap) can never pull support below this guaranteed level.

Ultimately the level of the Essentials Guarantee would be recommended via the independent process, but the research indicates that in 2023/24 it would need to be at least around £120 a week for a single adult to cover the cost of essentials. Universal Credit’s standard allowance is currently £35 a week below that, leaving a significant gap.

By better enabling households to meet their core needs, the Essentials Guarantee will make it easier for households to recover from a setback, including getting into and progressing in work where they are able to. It would also represent a significant and widely supported reform of social security, embedding for the first time a protected, minimum level of support linked to the cost of essentials.

Final public polling confirmed strong public support for the policy at the indicative guarantee level (Bannister et al., 2023). When presented with the policy, including what the current rates of support are and what they would increase to, 72% of the public supported it and only 8% opposed it. This support was also broad: Labour, Liberal Democrat and SNP voters all showed support around the 80% level, and 62% of Conservative voters supported it.

All-Party Parliamentary Group (APPG) on Poverty (2023) Enough to be able to live, not just survive: a report by the APPG on Poverty following its inquiry into the (in)adequacy of social security

Joseph Rowntree Foundation and Trussell Trust (2023) An Essentials Guarantee: reforming Universal Credit to ensure we can all afford the essentials in hard times

Trussell Trust (2023) Hunger in the UK

Campaign for Better Transport (2012) Transport, accessibility and social exclusion

Centre for Social Justice (2013) Signed on, written off: an inquiry into welfare dependency in Britain

Child Indicators Research (2020) Does household income affect children’s outcomes? A systematic review of the evidence

Grattan Institute (2020) The recovery book: what Australian governments should do now

Department for Work and Pensions (2014) In-depth interviews with people affected by the benefit cap

Economic Inclusion Advisory Committee (2023) 2023–24 Report to the Australian Government

Joseph Rowntree Foundation (2023) Unable to escape persistent hardship: JRF’s cost of living tracker, summer 2023

American Economic Journal: Economic Policy (2014) Giving mom a break: the impact of higher EITC payments on maternal health

Joseph Rowntree Foundation (2015) Psychological perspectives on poverty

Health Economics (2014) The effect of mental health on employment: evidence from Australian panel data

Labour Economics (2010) Health effects on labour market exits and entries

Oxford Bulletin of Economics and Statistics (2020) Liquidity constraints, unemployed job search and labour market outcomes

Journal of Economic Psychology (2022) Job search in the presence of a stressor: does financial hardship change the effectiveness of job search?

American Psychologist (1989) Conservation of resources: a new attempt at conceptualizing stress

Journal of Vocational Behavior (2016) Unemployed and exhausted? Job-search fatigue and reemployment quality

Eurofound (2017) Reactivate: employment opportunities for economically inactive people

European Commission (2016) The strength of the link between income support and activation

Oxford City Council (2015) Welfare reform team evaluation of European Social Fund pilot project 2014–2015

Independent Food Aid Network (IFAN) and Joseph Rowntree Foundation (2022) Pushed to the edge: poverty, food banks and mental health

Centre for Analysis of Social Exclusion (CASE) (2023) Making work pay? The labour market effects of capping child benefits in larger families

American Economic Review (2016) The psychological lives of the poor

Parliament of Australia (2020) Adequacy of Newstart and related payments and alternative mechanisms to determine the level of income support payments in Australia

Trussell Trust (2023) End of year stats