Work is ‘no longer a route out of poverty’, says British think-tank
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In-work poverty has replaced unemployment at the heart of Britain’s “economic malaise”, according to a report published on Feb 10, warning of further political upheaval unless the trend is reversed.
PHOTO: REUTERS
LONDON – A typical lower-income British household would have to wait 137 years to see its living standards double, according to the Resolution Foundation – more than three times longer than in the past.
Publishing a new analysis of living standards, the think-tank said high rents and low pay mean work is “no longer a route out of poverty” for millions of British families.
In-work poverty has replaced unemployment at the heart of Britain’s “economic malaise”, the report said, warning of further political upheaval unless the trend is reversed.
The warning, published on Feb 10, comes as the incumbent Labour government is in turmoil.
Prime Minister Keir Starmer is under pressure to step down
Chief of staff Morgan McSweeney was forced out
Rivals for the Labour leadership are circling, with markets fearing a more left-wing government that might increase borrowing or dent growth through higher taxes.
Resolution’s report, Unsung Britain, warned that a slowdown in living standards among the 13 million working-age households in the poorest half of the country is fuelling a turn to populism.
Mr Nigel Farage’s insurgent Reform UK party has jumped to the top of opinion polls, leaving Labour lagging.
The concerns raised by the report also echo the “affordability” crisis gripping US politics.
“If politicians want to regain the trust of families, they need to get the economy growing again so that pay rises pick up, while also putting their specific needs at the heart of efforts to turn the country around,” said Resolution chief executive Ruth Curtice.
“If they fail to do so, the economic malaise facing unsung Britain risks fuelling further political disruption.”
The report showed incomes for poorer families are set to grow just 0.5 per cent a year across the 2020s.
At that rate it would take 137 years for lower-income families to double their living standards.
In the 40 years to the mid-2000s, the typical disposable incomes of working-age families in the poorest half of Britain doubled, growing 1.8 per cent a year in real terms.
The income slowdown for the lower-paid began in 2005 and has been “driven by pay rises drying up”.
The average gross annual earnings of someone in a lower-income family have increased by £7,700 (S$13,000) since the mid-1990s to £18,000 today – but nearly three-quarters took place before 2005, Resolution said.
As a result, in-work poverty has become a bigger issue than worklessness.
Most households living below the poverty line today have someone in work – 55 per cent, up from 38 per cent in the mid-1990s.
While Britain’s progressive tax system means poorer households pay a smaller share of their income in tax – at 12 per cent compared with 31 per cent for the most well-off – tenants with a private landlord spend on average 43 per cent of their household budget on rent. BLOOMBERG
