Poverty rates halve when people move into work – but work alone cannot eliminate poverty

Poverty rates fall from 35 per cent to 18 per cent when people move into work – but even sustained employment does not eliminate in-work poverty for too many households, highlighting the need for wider support, according to new research published today (Tuesday) by the Resolution Foundation in partnership with Clarion Housing Group.

With almost seven-in-ten working age adults living in poverty today either working themselves or living in a household where someone else does, up from fewer than five-in-ten two decades ago, the report, Working hard(ship), explores how employment effects the likelihood of different groups living below the poverty line.

And with social housing tenants in work more than twice as likely to live in poverty (34 per cent) than home owners and those in private rented accommodation (13 per cent), the report also explores whether housing tenure has an independent effect on poverty rates.

Working hard(ship) shows that while record employment levels have gone hand-in-hand with rising in-work poverty, moving into work continues to be a very effective way to for someone to exit poverty. Poverty rates fall from 35 per cent to 18 per when someone enters work, and from 68 per cent to 31 per cent for social renters.

However, the report warns that even sustained employment cannot entirely protect people from poverty, and that the benefits system has a critical role to play in supporting in-work households.

Working hard(ship) shows, for example, that a single parent with two children would have had to work 16 hours per week on the minimum wage to escape poverty if no benefit changes had happened since 2010. However, those benefit cuts mean that same single parent now needs to work 23 hours per week to escape poverty.

The challenge of escaping in-work poverty is particularly difficult for social housing tenants, says the report.

Social renters’ higher poverty risk when working stems from significant labour market disadvantages, rather than factors such as family size. Almost one-in-four social renters say they work part-time because they cannot find a full-time job, compared to just over one-in-ten workers in other tenures. And one-in-three social renters are in jobs paid at or very close to the minimum wage (compared to one-in-seven of those in other tenures).

The Foundation says that the growing problem of in-work poverty shouldn’t blind us to the importance of work as the main route out of poverty.

However, it adds that firms and policy makers also need to focus on further interventions to reduce poverty, including: better progression routes into higher paid work; more childcare support for parents keen to work more hours; more new affordable homes (including social housing); and, a benefits system that provides strong work incentives at the same time as offering adequate support for low-income working families.

Lindsay Judge, Principal Analyst at the Resolution Foundation, said:

“With almost seven-in-ten poor adults today either working themselves or living with someone else who works, the issue of in-work poverty is one of the biggest challenges facing 21^st century Britain.

“But the rise of in-work poverty has led some to mistakenly downplay the importance of work in tackling poverty. In fact, finding a job halves someone’s chances of living in poverty.

“However, work alone cannot eliminate poverty. Support to sustain employment and progress out of low pay are needed alongside a benefit system that provides adequate support for low-income working families.”

Clare Miller, Chief Executive of Clarion Housing Group, said: “Social housing provides a vital safety net and undoubtedly the heavily subsidised housing costs offered by housing associations helps save many from falling into poverty. However, it is important to better understand why for some of our residents, simply finding work isn’t the end of the story.

“At Clarion we know that being in work is important to our residents, not just for the obvious monetary benefit but also for the social value of being employed. We see every day the life-changing impact our jobs and training service delivers, as well as the work of our team of welfare benefits and money guidance advisors.

“But housing associations won’t fix poverty alone and this report sets out some compelling recommendations for government and employers that could help significantly improve the life chances of a considerable number of households.”