Both parents in low-income families will have to work full time if they are to climb out of poverty, according to a report by the Joseph Rowntree Foundation.
It says single parents and families with more than two children are likely to see their living standards stagnate or fall even if they work full-time, as are low-income families with one main breadwinner. It adds that those who are out of work face a sharply growing gap between their income and the amount they need for a basic living standard.
However, families with two parents in full-time work, workers without children and pensioners will typically become better off over the next five years due to changes to pay and benefits announced in the Summer Budget.
The report, Will the 2015 Summer Budget improve living standards in 2020?, written by Donald Hirsch from Loughborough University, says the introduction of the National Living Wage (NLW), which will raise the minimum wage to £9 per hour for workers aged over 25 by 2020, will drive an increase in living standards for low-paid workers without children, who it says will typically have incomes close to or above what they need by 2020. Some of those who currently qualify only for small levels of support will be lifted out of the benefits system entirely by a combination of higher wages and reduced entitlements, it predicts. However, it adds that “most low-income families with children will see their living standards continue to stagnate or decline as reductions to in-work benefits, also announced in the Summer Budget, outstrip wage rises”.
The report states that while most households with two parents working full time on the NLW will be better off than they are on the National Minimum Wage (NMW) now, only 6% of low-income families with children have this working pattern. Most have one full-time and one part-time earner and the report predicts their financial situation will not improve.
The report calculates that a single parent with one child who works full time on NLW will be £80 short of what they need every week, compared to £7 short in 2010 and £39 short today. Dual-earner families with one parent who works full-time and one part-time on NLW will be £82 short of what they need every week, compared to £57 short in 2010 and £90 short today. An out of work couple with two children will be £221 short of what they need, compared to £163 short in 2010 and £197 short today.
Julia Unwin, Chief Executive of the Joseph Rowntree Foundation, said: “The Summer Budget has transformed the relationship between pay, benefits and work incentives. The National Living Wage is a game-changer for some on low incomes as the new, higher rate will make work pay for more people.
“But the wage rise comes hand-in-hand with changes to in- and out-of-work benefits. Families will only be able to make ends meet if they have two parents in full-time work, but those who are able to find extra work will face a difficult juggling act as they try and make longer hours fit around family life. Lone parents, even those working full time, and people who are searching for work face a decade of sharply declining living standards.”
Donald Hirsch, Director of the Centre for Research in Social Policy, Loughborough University, and author of the report, said: “By 2020, some working families, including many lone parents and families with three or more children, will be around a third short of the Minimum Income Standard even if they work full-time on the National Living Wage. That is, they will be as badly off in work in 2020 as they were out of work in 2010 – while those not working in 2020 will become even worse off, falling around 50 per cent short of what they need.”
The report says that in order to move out of poverty and have a better standard of living, parents on low incomes will both have to work full time. To help them to do this, the JRF report calls for more high quality, flexible, affordable childcare; action to boost productivity, creating better paid, secure and flexible jobs which offer good career progression for people on low incomes; employers to pay the higher, voluntary Living Wage where affordable; and a greater supply of genuinely affordable homes.