In-work poverty trends

Poverty can affect people’s health when their financial resources are not enough to meet their basic living needs, such as adequate heating for their home, appropriate clothing or adequate nutrition. In their analysis of poverty in and out of work, Rod Hick and Alba Lanau note that people in poverty living in working families are in a better financial situation than people out of work in terms of income, material deprivation and stress.

The chart looks at the share of people living in UK households that are in poverty with at least one adult in work, in each year since 1996/97. It is divided into higher and lower family work intensity. In higher work intensity families, all adults are working and at least one adult is working full time. Lower work intensity families are those where one adult is self-employed, or only one adult works full time and the other adult does not work, or adults only work part time.

• Poverty has increased for families in work, both with high and low work intensity – families are increasingly in poverty where all adults work and with full-time work too. People living in higher work intensity households comprised 18.8% of people living in poverty in 2019/20, compared to 12.8% 10 years earlier and 8.5% in 1996/97.
• People living in lower work intensity households comprised 47.1% of people living in poverty in 2019/20, compared to 40.1% 10 years earlier and 35.4% in 1996/97. In total, 59.9% (three-fifths) of people in poverty are in a household where someone works.

There are a number of explanations for the growth of in-work poverty. Partly, it reflects the fact that a higher proportion of families have a family member in work, but the risk of being in poverty and in work has also increased. For higher work intensity families the figure has increased from 6.3% to 8.3% over the past decade and for lower work intensity families it has increased from 28.1% to 32.3%. This increased risk reflects the growth in housing costs for working families and the faster growth of pensioner incomes, which has raised the overall median (increasing the income required to be above the poverty threshold).

The growth of in-work poverty means some of the policy measures aimed at reducing poverty need to change. Increasing the amount of work for people who are in poverty and working is not necessarily an option, and even where this could be a solution there would have to be additional changes to childcare support and other structures. This would also mean shifting the focus from getting people into work to improving work progression, quality, security and pay. This will require action from both employers and government.

• Poverty is defined as an individual living in a household with a net household income below 60% of the median in that year. 
• Income is adjusted for household size to reflect economies of scale. For example, a household of four needs more income for the same standard of living as a household of one, but not four times as much. 
• Housing costs are deducted from income, to reflect that people with lower incomes in particular have fewer options for meeting the  cost of housing, relative to their income. 
• Lower work intensity families are those where an adult is self-employed, only one adult works full time and the other adult does not work, or those families where adults only work part time. Higher work intensity families are those where every adult works, with at least one adult working full time.

Source: Department for Work and Pensions, Households below average income: 1996/97 to 2019/20