Labour market Government must give working poor a fair chance 13 January 2009 NEWS RELEASE For immediate release: 13 January 2009 Government must give the working poor a fair chance, says Resolution Foundation The Resolution Foundation today welcomed the Government’s White Paper on social mobility but called for an acceleration of action to ensure that new opportunities and fair chances for the future are extended to those in low paid jobs. The working poor face a difficult few years. In order to deal with the recession and the associated job losses which are likely to fall disproportionately among the low paid, it is vital that the Government ensures opportunities to train, retrain and progress are widely available. The trebling of the number of Professional and Career Development Loans to be made available in the next two years is therefore to be welcomed. Despite some of the White Paper proposals incorporating the needs of low earners, however, others focus on only the most disadvantaged members of society. For example, while the Government has stated its long-term ambition to make a free early leaning and childcare place available to all two year olds, the pilot announced in the White Paper will provide places for only 15 per cent of the most disadvantaged two year olds. Children of the working poor are therefore unlikely to be included. Sue Regan, Chief Executive of the Foundation said: “While the economic downturn will restrict the finances available to the Government, it has made it even more essential that investment in social mobility remains at the top of the Government’s agenda. In addition to providing opportunities for today’s working poor to train and retrain, the Government must ensure that its children-focussed policies are extended as broadly as possibly, to include the children of those in low paid jobs. Failure to include low earners’ children risks restricting the opportunities of a generation and limiting UK plc’s future access to talent. Providing a fair chance for all members of society is not just good for social justice, it’s good for the economy.” Low earners are in a highly exposed position and are particularly vulnerable to the effects of the UK recession: Low earners are more likely (than higher earners) to work in small organisations or be self-employed. As such, they are more vulnerable to business failure and subsequent unemployment Low earners are less likely (than higher earners) to have received on- or off-the-job training. They are therefore more likely to find it difficult to regain employment if they are made redundant Low earners who are buying property with a mortgage are more likely (than higher earners) to have stretched themselves financially. As such, they are more likely to face difficulties with repayments and to be suffering from negative equity Low earners spend a higher proportion (than higher earners) of their income on essential items such as food and housing. They are therefore less able to cut back on their spending when faced with a reduction in income. They are also less well placed to benefit from the recent VAT reduction, because they spend a higher proportion of their income on goods that are not subject to the standard rate of VAT The Resolution Foundation is publishing an audit of the plight of low earners next month. /Ends For further information please contact Cara Brown on 020 7731 9143 / 07957 536758 cara.brown@resolutionfoundation.org All the Foundation’s research, reports, briefings, seminar notes are available on our website www.resolutionfoundation.org Notes to editor: The Foundation defines ‘low earners’ as those with below-median income (from all sources) who are (more or less) independent of state support. As a proxy, a household is considered low earning if gross annual income is between £11,200 and £25,800. Around 7.4 million households in the UK fall into this category, equivalent to around 15.1 million adults, or just under one-third of the adult population. Households with above-median incomes are considered high earners, while those with below £11,200 income are considered benefit-dependent. The Foundation’s first project in 2005 was on low earners and their financial health. Discovering an ‘advice gap’ for 12 million low earners of working age and a further 3 million low earners in retirement, the Foundation developed proposals for a national generic financial advice service. This proposed service was aimed at low earners in the ‘advice gap’ – people who are not currently attractive to commercial providers of advice, nor receiving support from existing voluntary sector provision. This work fed into the Thoresen Review which recommended in March this year that a Money Guidance service be set up. This is now at Pathfinder stage backed by £12 million from the Treasury and the FSA. Relevant Resolution Foundation reports can be downloaded from the Foundation’s website: www.resolutionfoundation.org- A national dividend: The economic impact of financial advice and The advice gain: The impact of generic financial advice on the financial services industry.
