A new report by the Institute for Public Policy Research has found that rates of in-work poverty hit a new high of 17 % of working households – more than one in six – before the pandemic took hold in early 2020. This is a significant shift from even a decade ago. Families with one full-time and one-part time earner are increasingly being pulled into poverty. For people in this group, the chances of being pulled into poverty have doubled over the past two decades – from one in 20 to one in 10.
Single parents, single-earner families and large families are worst affected by rising in-work poverty. 42% of in-work families with three or more children are in poverty, a record high – up more than two-thirds over the past decade.
Unemployment is projected by the OBR to rise to 6.5 per cent by the end of the year, with many people in unemployment at risk of swapping ‘out of work’ poverty for ‘in-work’ poverty once they do find work.
What needs to be done? The report points to three key areas where action could be taken to reduce levels of in-work poverty.
Housing- For those on low incomes with unaffordable private rents, local housing allowance (LHA) should be raised to the 50th percentile to help meet these income gaps along with an overhaul of the private rented sector so that it provides greater stability, security and is more affordable for tenants. IPPR has recommended measures for England including ending section 21 (no-fault eviction) and introducing a mandatory open-ended tenancy, capping rent increases and supporting tenant unions.
Childcare-Childcare support claimed through universal credit should be provided upfront rather than paid in arrears and the complexity of claiming this support should be reduced. For working families who are eligible for universal credit, further reducing costs (eg by raising the existing ‘cap’ on childcare fee claims or by increasing childcare costs covered to 100 per cent) would help make childcare costs more manageable for those on low incomes. The report calls for a minimum of £616 million additional investment annually in England for the childcare sector to cover the annual funding shortfall across all care delivered by nurseries and pre-schools in delivering the free entitlements to help avoid further closures and higher fees for parents.
Making work pay –An employment bill could do much to improve job quality and security. The report suggests measures should include - greater availability of quality flexible and part-time work and the establishment of a ‘good jobs standard’ for England and a 20 per cent higher minimum wage to apply to zero hours contracts and other uncontracted hours.