Rising in-work poverty ‘needs to be addressed’

REPORT: Study shows high housing costs and tax credit cuts are creating more working poor

Cuts to tax credits should be reversed and high housing costs need to be tackled, according to researchers who say 60% of UK people in poverty live in a household where someone is in work.

Experts from Cardiff University who carried out the research say the figure is the highest recorded.

They found the risk of poverty for adults living in working households rose by more than a quarter, from 12.4% to 15.7%, during the 10-year period from 2004-05 to 2014-15.

Social policy lecturer Dr Rod Hick, who led the study, which was funded by the Nuffield Foundation, said he found that the number of workers in a household was more important than low pay in determining in-work poverty.

He said: “There has been a lot of discussion recently about how increasing the minimum wage can help to reduce poverty.

“However, what our report finds is that less than half of adults experiencing in-work poverty have a low-paid worker in their household and most low-paid workers live in non-poor households.

“Low pay is one of the reasons why in-work poverty occurs, but it’s not the only reason and, indeed, it is a secondary factor behind the amount of work conducted by household members.”

The report analysed data from the Households Below Average Income report for 2014-15, which is the most recent available with micro-data and compared it to the reports for 2004-05, 2007-08 and 2010-11, along with looking at Understanding Society, a survey of about 40,000 UK households.

The research examined the effectiveness of tax credits in reducing in-work poverty over the past decade.

Dr Hick said: “Our research shows that tax credits have proven quite highly effective in reducing in-work poverty, for families who received them.

“However, tax credits are received by less than half of working poor households, through a combination of design and low take-up.

“In particular, working poor families without children have very low rates of tax credit receipt.”

The study also found that housing costs were an important factor and that those living in private rented accommodation were more at risk of in-work poverty than those in owner-occupied homes.

It found there had been a 10 percentage-point shift from mortgage-holders to private tenants over 10 years from 2004-05.

Dr Hick added: “If policy does not do more to tackle rising housing costs directly, then it seems likely that these will eat up gains made elsewhere – for example, in terms of the planned increases in the minimum wage.”

To help tackle the problem of in-work poverty, the report makes a series of recommendations including building more homes to help tackle high housing costs and reversing cuts to tax credits.