Working single parents will be the biggest financial losers under universal credit, according to new research published by Gingerbread.
The report, ‘Credit crunched: Single parents, universal credit and the struggle to make work pay’ by Professor Mike Brewer and Dr Paola De Agostini at the Institute for Social and Economic Research, has also found that non-working single parents’ income will be on average lower under universal credit than it is now.
It says that on average single parents earning the minimum wage and above it, as well as single parents who are not working, lose out in cash terms under universal credit, with those in work facing the biggest loss.
The report does find single parents looking for a part-time job will have greater financial incentives to do so, but says once they try to increase their hours past 20 a week they will find it hard to make work pay.
Gingerbread chief executive Fiona Weir said: “Government claims that universal credit will make work pay, but in fact working single parents will be the biggest losers under the new system.
“The simple fact is that universal credit won’t deliver on its promise to make work pay. Single parents on low wages will be under considerable pressure to extend their hours under universal credit, but our research shows that financially, extra hours often won’t stack up.
“Making every extra hour pay is of vital importance to single parents who are the primary carers for their children, and sole earners for their family. This report highlights a number of changes that could be made to improve work incentives for single parents under universal credit, and it’s vital that the government considers these carefully before it is implemented more widely.”
Universal credit’s claimant commitment will expect in-work adults to earn the equivalent of a full-time job at minimum wage, but it is as yet unclear what the expectations for single parents will be or if they will face sanctions if they fail to increase their hours. More than two-thirds (68%) of single parents enter the lowest three occupational groups, which tend to be the least secure, lowest skilled, lowest paid and with the least opportunities for progression, says Gingerbread.
Weir added: “It’s worrying to see that single parents will, on average, be worse off under universal credit than they are now. In the current difficult economic climate any new reform to the system must make lives better for families, not worse”.
Gingerbread recommends that the government changes two key aspects of the way universal credit is calculated, which it says would significantly increase the financial incentives to work longer hours:
– Increase the amount that claimants can earn before universal credit begins to be withdrawn
– Reduce the steep rate at which benefits are taken away from earnings, to make increases in hours or wage always worthwhile.
In addition, Gingerbread believes that the government must do more to address single parents’ barriers to work, include the cost and availability of childcare; lack of flexible jobs; and limited access to training and skills development.