Currently one in eight UK workers is in poverty. According to the Institute for Fiscal Studies, in the mid-1990s 37% of those in relative poverty (living below 60% of median net income) lived in a working household. In 2019 that reached 58%. With the government reporting record levels of employment, why are more people who are in work experiencing poverty?

1..A lack of wage progression for low-income earners

Low-paid jobs should act as a springboard to higher earnings, but only one in six low-paid workers permanently moved onto higher wages over the last decade. This is a particular problem in large companies with 5000 or more workers, who employ 28% of all low-paid people. If an employee does not have the opportunity to progress in an organisation, their wage rarely increases to match the financial responsibilities associated with life progression, such as having a family.

“Jobs that are low paid and insecure, offering only a dead-end and not a stepping stone to a better job, trap people in poverty.” Joseph Rowntree Foundation

2. The increased cost of living

On top of a lack of income progression, since 2005 the costs facing low-income households have risen by 41%. For all family types costs are rising, but a gap has opened up across income categories with costs rising faster for those on lower incomes, as shown by decile 1 and 2 on the graph below. These lower income-households pay a ‘poverty premium’, an additional cost for products and services based on higher credit costs and an inability to pay upfront charges, for example pre-payment electricity meters, pay as you go phones, and higher internet tariffs.

3. Renting as the new norm

The private rental sector has doubled in size in the last decade, meaning that more people are living in potentially costly or insecure rental accommodation, contributing further to the increase in outgoings. Six in ten adults who experience in-work poverty are living in private or social rented accommodation. For many of these people poverty can be directly to these housing costs, with the Housing Federation stating that over half of those in poverty in the private rented sector only become so when housing costs are taken into account.

“I got paid my wages weekly, and some weeks there wasn’t enough for food shopping” Amanda, Christians Against Poverty Service User

4. Single parents’ access to decent work

At 69.9% the employment rate for single parents is at an all-time high, but they are particularly vulnerable to in-work poverty and, despite these employment levels, the risk of child poverty for this family type is the highest it has been for 20 years. This is largely down to a lack of training, support and flexibility needed by single parents to access higher paid roles alongside parental responsibilities, as well as the cost of childcare. This results in a pay gap between lone parents and the main earner in a couple of £5.86, up from £3.59 in 2001/02. There is also a concerning gap between lone parents and the second earner in couples of £2.14 an hour, up from £0.31.

5. Higher incomes for pensioners

Not all of the reasons for these growing overall rates of in-work poverty are due to negative societal trends. There has been a decline in pensioner poverty, from 27% in the mid-90s to 18% today. According to the IFS higher pensions have caused the median income level to increase, pushing more workers in to relative poverty. This statistical quirk contributes to 5% of the increase.

Why is this important to businesses?

• In the world of CSR and responsible business, how are you ensuring that all customers can access products and services fairly, without a “poverty premium”? How can you reach beyond your existing customer base to support those in poverty, who can’t afford to benefit from your products and services?
• For those in leadership positions, what is your position on ensuring all colleagues are able to access wage progression and decent income, whether employed directly or indirectly by your business? Have you considered committing to paying a living wage?
• For those in HR, what are the practical policies and procedures you can enact to support colleagues experiencing or particularly vulnerable to in-work poverty (such as employee assistance plans, staff discounts, flexible working, childcare schemes and salary advances)?
• If you’re in customer insight and innovation, what do you need to learn about customers or potential customers who are on low incomes or struggling to get by to create products/services which better meet their needs?

Sources available. To receive the Social Issues Spotlight as a monthly email, please subscribe here.