The ‘cold, hard, facts’ about in-work poverty
There are two major problems with this approach to economic policy.
Firstly, facts need interpretation. Secondly, there is almost always another fact that qualifies or offsets the first.
Take the IPPR’s statement that ‘more people in poverty now live in working households than in non-working ones’. This is then used to support their proposal to raise the National Living Wage by 20%.
The first thing to say is that the IPPR is correct. According to recent Nuffield Foundation Research: ‘60% of people of all ages living in poverty were living in working households’.
However, this derives partly from two favourable developments in recent years – that poverty in retirement has been hugely reduced, and that the proportion of people of working age in employment has increased. Thus, the chances of being poor and in a working household have almost inevitably increased, given that poverty is a relative measure (‘poor’ households being those with incomes below 60% of the median).
If we had more poor pensioners and more unemployed or economically inactive people, we would have a smaller proportion of working households amongst the poor.
More importantly, we need to see what a ‘working household’ means in practice. If one adult in a household works even a few hours a week, that is enough to qualify that household as ‘working’. Yet a household with two adults and two children, say, is unlikely ever to be out of poverty if only one adult is working part-time.
As the Nuffield researchers point out, ‘People living in one earner households face a very significantly elevated risk of in-work poverty, and account for almost six in ten people experiencing working poverty’.
Here, the IPPR’s recommended hike in the National Living Wage would do very little for these poor working households unless both partners worked, preferably full-time. Less than half of those experiencing in-work poverty have a low-paid member in their household. The problem isn’t low hourly pay as such, it’s that the adults aren’t working enough hours. This may be because of caring responsibilities, or health problems, or a variety of specific issues which are better catered for by some form of welfare payment or assistance with child care or elder care, rather than higher pay for hours which they can’t work.
Just to emphasise this, here is another important ‘fact’ – most low-paid workers are not poor. This is because they live in households with additional earners or other resources. Think of low-paid students living at home, or second earners with a well-paid partner.
In-work poverty, then, is an issue requiring closer study – not the seizing of apparently ‘killer’ facts to justify policies which are likely to harm output and employment.