Majority of people living in poverty are in work, report finds

Single-parent households see biggest increase in working poverty during the last decade, as experts urge firms to pay fairly and implement financial wellbeing policies

The majority of people living in poverty in the UK last year were in working households, a think tank has claimed, as experts urge employers to pay the real living wage and implement financial wellbeing policies.

A study by the Institute for Public Policy Research (IPPR) found that the likelihood of those in working households being in poverty had steadily increased over the last 25 years, growing from 13 per cent in 1996-97 to 17 per cent in 2019-20.

When taking into account the large size of the ‘in work’ group, the IPPR concluded that the majority of those living in poverty belonged to a household where at least one person was working.

While the report said the adage that ‘work pays’ was still true, it found the average person in a working household was currently 32 per cent more likely to be in poverty now than in 1996.

The report also found households were affected by the rise in working poverty differently. Single working parent households saw the most dramatic increase, with the proportion in working poverty rising from 20 per cent in 2010 to 40 per cent last year.

The research added that, before this time period, employment rates among single parents were rising at the same time that poverty rates were falling, meaning it was not inevitable that growing employment rates must lead to higher rates of in-work poverty.

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The rise in working poverty among single-earning couple households also rose dramatically, increasing from 19 per cent in 2003-04 to 31 per cent last year, meaning this group now experiences poverty rates almost as high as those of households where no one works full time.

Charles Cotton, senior reward and performance adviser at the CIPD, said there were many contributing factors to in-work poverty, but described low wages as a “key component”. He called on companies to play their part in preventing working poverty by paying employees a living wage.

"Not only is there a strong moral case for paying staff a liveable wage, there is also a compelling business case, with research showing that money and debt problems may impact people’s performance at work, which can ultimately hurt a company's bottom line,” Cotton said. "We urge all employers that can do so to pay at least the real living wage.”

Cotton also acknowledged that, especially in the aftermath of the pandemic, not all businesses could afford to increase employee wages, but called on all organisations to ensure there were sufficient financial wellbeing initiatives in place for workers. 

"Employers that can't afford to increase their wages – and even those who can – should ensure they have a financial wellbeing policy in place so that people can access guidance and support when they need,” Cotton said. “The policy should include creating a culture where people feel they can be open about their money problems without being judged.”

In-work poverty has continued to increase despite a real growth in wages among the working poor over the past decade, driven in part by an increase in the minimum wage, the report said. It attributed this to the exponential rise in housing costs, both in home ownership and especially in renting, alongside “less generous” social security and social welfare payments.

However, it also mentioned that, in a post-pandemic world, more flexible working policies were required for employees to avoid living in poverty, concluding that, as things stood, flexible working policies failed to keep pace with people’s home needs.

The levels of in-work poverty across the UK varied, but in London there has been a striking increase. The city had average levels of in-work poverty as recently as the late 1990s, but currently one in five (22 per cent) working households in London are living in poverty. This compares to 15 per cent in the south and east of England, and 13 per cent in Scotland.