Trade, Development, and Immigration

How the poverty figures stack up

Yesterday, Catholic Archbishop George Stack made some remarks about poverty which, like so many remarks made by bishops on the subject, took statistics out of context in order to justify very damaging policy conclusions.

He argued that employment was not a route out of poverty, quoting the Joseph Rowntree Foundation (JRF) figure that more working households are in poverty than non-working households.

The situation described by the JRF arises firstly because the number of households in which nobody does any work whatsoever (which is the definition JRF use for their statistic on workless households) is vastly outnumbered by the number of households in which somebody does some work. On its own, a breakdown of the poverty population by work status tells us nothing. What matters is the relative risk of being in poverty for any given work status. The key question is ‘are the chances of moving out of poverty increased by finding work?’ The answer to that question is emphatically ‘yes’. To use an analogy, there will be far more non-Catholics in England and Wales who do not eat meat on Fridays than Catholics who do not eat meat on Fridays (because there are more than ten times more non-Catholics than Catholics). This does not mean that, if you convert to being a Catholic and accept the discipline of the Church, you then have more chance of eating meat on Fridays.

Secondly, the JRF statistic includes in the working households figure all those who do any work whatsoever (for example a few hours a week). Poverty, in working households, is hugely concentrated amongst families where the adult(s) do a small amount of work. A vibrant labour market, together with a tax and benefits system which provided opportunities and incentives for full-time work, would make a very big difference. This is quite contrary to the impression that the JRF statistic gives.

Indeed, the following statistics for households with children are especially pertinent. Amongst both couple and single parent families where the parent(s) is/are not in work, 54 per cent are in poverty as measured by material deprivation. Amongst couple families where one parent is in part-time work and the other not in work, 35 per cent are in poverty. Amongst couple families where one parent does not work at all and one works full time, 14 per cent are in poverty. In couple families where one parent works full-time and the other part-time just 2 per cent are in poverty. George Stack might regard the 14 per cent figure as high – though it is not nearly as high as the poverty rate amongst families with nobody in work. However, the 2 per cent figure, I think, tells us a lot about the value of work in reducing poverty.

There are also two tangential – but crucial – points in this debate. The first is that nearly 30 per cent of children grow up in families in which nobody works full time (the vast majority in single-parent families). This is problematic in terms of its effect on poverty, but also in terms of the impact it has on children more generally. Only long-term reform of the welfare and tax systems will change this. Such reform is generally attacked, not least by churches. Secondly, the overwhelming reason why families with adults in work are stretched is the high level of housing costs in the UK. It is not just a problem in the South East of England but in every region. This is entirely a function of the planning system. No other European country suffers from this problem – even countries that are as densely populated as the UK. Families struggle to afford food, not because food is expensive, but because housing is expensive. No amount of subsidy through housing benefit can lower costs if supply is fixed. It is a pity that church poverty lobbies never make that point.

Academic and Research Director, IEA

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

1 thought on “How the poverty figures stack up”

  1. Posted 22/05/2014 at 15:38 | Permalink

    Some very good points: you are right that you are definitely far less likely to be in poverty in work than out of work.

    You might be interested in this Social Mobility and Child Poverty Commission blog post by Professor Paul Gregg setting out (at a very basic level) some of the key facts on working poverty to put a bit more flesh on the bones of your argument that getting more people into work is a reliable way of reducing poverty

    This analysis suggests that:
    * Working poverty has been broadly static over time: it has increased in relative importance as workless poverty has decreased
    * Three quarters of children in working poverty live with at least one parent who works full time

    Most interestingly, the blog highlights analysis looking at what proportion of children in working poverty live with parents who are meeting Universal Credit work conditionality rules (broadly, all couples with one full-time worker, second earners and lone parents in full-time work if their youngest child is aged over 13 and in part-time work if their youngest child is aged over 5).

    This suggests that – ignoring disability and related caring responsibilities – 58-63% of children in poverty live in households where parents are “working enough” according to new tighter benefit conditionality rules. Once the fact that a quarter of children in households with some “work potential” is factored in, this proportion could be as high as 70-73%.

    Of course, views on this finding will depend on whether you consider Universal Credit conditionality rules to be stringent enough or e.g. whether the state should expect all parents to work full-time regardless of how old their children are and also what you consider “poverty” to mean…

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