Last Updated on April 13, 2018 by Karl Thompson
The UK has seen significant falls in poverty over the last 20 years, HOWEVER, this progress is now at risk of reversing as poverty rates have been increasing in recent years. This blog posts summarizes the 20 year trend in UK Poverty according to the Joseph Rowntree Foundation’s 2017 Poverty Report. Specifically it looks at:
- The overall 20 year trend in UK poverty
- poverty among pensioners and children
- Three drivers of the reduction in poverty rates
- Three threats to the continued reduction in poverty rates
NB I’m using the same information from the report, but I’ve changed the order in which it’s reported and summarized it down further. Personally I think my version is much more immediately accessible to your ‘non-expert’: IMO the ‘JRF have a tendency to ‘over-report’ reams of nuanced data, and the overall picture just gets lost. The detail’s important if you’re a policy wonk, but probably going to get lost on the average, interested member of the general public.
Before reading this post you might like to check out my ‘what is poverty?‘ post which covers the basic definition of some of the terms used below.
The overall 20 year trend in UK poverty….the fall and rise of UK poverty rates
20 years ago, in 1996, nearly a quarter (24%) of the UK’s population lived in poverty. By 2004, this had fallen to one in five (20%) of the population. However, by 2016, the proportion had risen slightly to 22%.
*Relative poverty is when a family has an income of less than 60% of median income for their family type, after housing costs.
Children and pensioners living in poverty
As the chart above clearly shows, the biggest success stories in the long term reduction in poverty over the last 20 years are the numbers of pensioners who have been taken out of poverty and (to a lesser extent) the number of children.. As the chart above shows:
- In 1995, 28% of pensioners lived in poverty, falling to 13% in 2012, but rising to 16% by 2016.
- In 1995, a third of children lived in poverty, falling to 27% in 2012, but rising to 30% in 2016
- However, during that time the proportion of working age couples without children in poverty actually grew slightly, from 16% to 18%.
Factors correlated with falling poverty rates
The report notes three main factors which are mainly responsible for this long term overall decline in poverty:
- Rising employment, linked with higher wages due to the minimum wage, and better education.
- Increased support through benefits, especially the increase in the state pension age, but also out of work benefits for working age people with children
- Housing benefit and increased home ownership containing the impact of rising rents.
Factors explaining the long term decrease of UK Poverty in more depth
It seems that the main drivers behind the long-term decrease in poverty in the UK are the ‘positive’ economic factors such as improvements in the employment rate, pay and conditions, rather than increases to benefits.
Below I select what appear to be the five most import factors from the report which explain the long term decrease in poverty.
The increase in the state pension
The most significant reduction in poverty has been achieved with pensioners, and according to the JRF report, the main reason for this was a one off increase in the state pension at the beginning of the century:
NB – there is a lot of variation in pensioner income, which I may explore in a future post…
The employment rate has increase from around 71% in 1996 to around 75% in 2016…
NB – while you are statistically more likely to be in poverty if you’re not in-work, being employed it itself is not sufficient to avoid being in poverty. Both the introduction of the minimum wage, and changes to in work benefits for lone parents have been essential to making sure that a higher proportion of people in employment are also not officially in poverty. While work today is more likely to lift you out of poverty than in 1996, it remains the case that a large percentage of those in poverty are in-work (typically in part-time jobs).
Earnings are up for people with all levels of qualifications…
Obviously higher earnings are more likely to lift people out of poverty, HOWEVER, at the bottom end of the income earning scale, and especially for those with children and in part-time jobs, the increasing cost of living, especially rent (but also childcare and even food and utilities) has negated much of the above increase in wages, hence why government support in the form of child tax credits and housing benefit remains important.
The number of people with degrees has nearly trebled in this period: from around 12% of the UK population to over 30%
Those with degrees earn approximately twice the amount of those with no qualifications, so it would seem that New Labour’s focus on ‘education, education, education‘, and their push to get more people into higher education has had a positive impact in poverty reduction. However, with the introduction of tuition fees and with increasing competition for highly skilled jobs coming from abroad, it’s not clear that this trend (of more and more people getting degrees) is set to continue.
The introduction of the national minimum wage has resulted in a 46% relative pay increase for the poorest 10%, compared to a 40% median national increase
Both the introduction of the minimum wage and its subsequent increases seem to have been one of the most important factors in tackling in-work poverty. However, even with the minimum wage, a possible future barrier to further poverty reduction lies in the growth of precarious jobs leading to ‘underemployment’ – where people get too few hours to earn a decent living. For more on this, see my summary of the RSA’s report on ‘Future Work in the UK‘.
The increase in out of work benefits for people with children
Basically, there has a been a very slight long-term increase in out of work benefits for people with children, who are now slightly better off than 20 years ago, while poor people without children have seen no change, or are slightly worse off.
I guess this leads to an overall reduction in the poverty rate simply because there are more people per family household rather than just couple or single person household.
You can see from the above chart, that lone parents claiming JSA and child benefits were briefly lifted to 60% of median income (just on the poverty line) – sufficient to take them out of poverty, however, you can also see that benefits are again being cut back, so we can probably expect poverty rates to increase again in the future!
And one factor which doesn’t seem to explain the overall reduction in poverty… changes to in-work benefits…
With the exception of single parents who are better off over a twenty year period, every other household type seems to be worse off! Thus I can’t see how this variable would explain the long term decrease in UK poverty.
Potential barriers to further reductions in poverty
All three of the main drivers of poverty reduction mentioned above are now under question:
- The continued rise in employment is no longer reducing poverty.
- State support for low-income families is falling in real terms, and negates the gains made by increasing employment and wages.
- Rising rents, less help for low-income renters and falling home ownership leave more people struggling to meet the cost of housing.
The Joseph Rowntree Foundation: UK Poverty 2017