Gap between minimum wage and basic living costs increases for families

A new report from the Child Poverty Action Group estimates that parents are not earning enough to cover the basic costs of raising a child, with long-term benefits changes making things worse, particularly for single parents.

Child hold woman's hand at a table. She has her head in her hands and there is an open purse on the table with just a few pence spilling out of it.

 

The cost of raising a child has risen to £166,000 for a couple and £220,000 for a lone parent this year due to high inflation, but benefit cuts and ongoing price rises mean many parents can’t afford to give their kids a minimum acceptable living standard, according to new research.

The Cost of a Child 2023, produced for Child Poverty Action Group by Loughborough university’s  Centre for Research in Social Policy, finds that the combined effects of the pandemic, the cost-of-living crisis and social security cuts since 2016 have left even couple families with two children and both parents working full time at the ‘national living wage’ £51 short of what the public deem to be a decent living standard each week, compared to a shortfall of £37 last year after the £20 universal credit uplift during Covid was removed.

This is due to the four-year freeze on benefits from 2016 and a below inflation increase in 2022.  This year benefits did rise in line with inflation, but the shortfall of the previous years is still having an impact, says the CPAG.

It calculates that couple-parents with two children and one full-time and one part-time worker [both on the minimum wage] are £89 per week short of a decent living standard this year (£81 in 2022).

For lone parents working full time on the minimum wage the shortfall is £125 per week (compared to £117 in 2022). For lone parents working part time the gap has grown to £161 (from £153 in 2022).

Even lone parents working full time on the median wage, will be £67 a week short of a decent living standard this year; couple-parents earning the median wage do have an income that exceeds the threshold for an acceptable living standard, albeit only by £65 per week, says the CPAG.

The income gaps for non-working families are even larger.  Among non-working families both couple-parents and lone parents with two children have less than half the income they need for a decent living standard today (48% and 49% respectively- a shortfall of £332 and £265  per week).  That shortfall has grown from £197 per week in 2021 and £297 in 2022 for couples and £144 and £237 for lone parents, says the CPAG.    They are also hit by the benefit cap.The cap was raised for the first time this year to £423 per week for  families outside London,  but even with the increase a couple with two children would hit the cap if they were paying private sector rent of just £116 per week, says the CPAG.   In practice this means most non-working families renting privately cannot get their full rents covered by social security and must plug often significant shortfalls by making household cuts in other areas.

The CPAG calculates that non-working couple-parents renting privately with two children are £366 per week short of the income needed to reach an adequate living standard this year – up from a £230 shortfall in 2016.  Even in social housing, a couple family’s weekly income shortfall is £332 today, up from £222 in 2016, it says.

Parents on universal credit can claim 85% of their childcare costs up to a maximum cash value.  This year the cash value that can be claimed increased to £219 per week for one child and and £375 per week for two children.  While that is an improvement, says the CPAG, in many areas of the UK, the new amount falls far short of even 85% of the cost of a full-time nursery place for a child under two. In Inner London, parents would need to cover an additional £176 per week over and above the support provided by Universal Credit, it calculates.   Child Poverty Action Group is urging Government to increase childcare support to 100% of costs to improve parents’ chances of making work pay.

Meanwhile, new figures from the Department for Education show increasing problems over access to childcare, with the number of early years and childcare providers falling by 5% between 2022 and 2023 from 59,400 to 56,300 and the number of registered childminders in the year falling by 10% to 25,300 while school-based provider places rose by 7%. Parent fees continued to rise for all age groups, up to an average of £6.05 an hour from £5.68 in 2022 for children under two, to £6.07 an hour from £5.72 for two year olds and to £5.90 an hour from £5.60 for three year olds.

Chief executive of Child Poverty Action Group Alison Garnham said: “Families are being chased by a rolling storm of benefit cuts, the pandemic and the cost-of-living crisis. Their budgets can’t cope.  Four million children are already in poverty – more will join them unless politicians act.  All parties must commit to restoring the value of child benefit and to scrapping the two-child limit and benefit cap.  That would at least begin to close the gaping income gaps that are making it impossible for parents to provide a decent living standard for their children.”



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