On October 7, 2015, the British Resolution Foundation analysis – Summer Budget changes will push up to 200,000 working households into poverty<\/a> – took into account the changes to the minimum wage system and rejected the Government’s claim that cutting the Tax Credits would not increase poverty.<\/p>\n They found that by 2020, a single parent in a low pay position (earning \u00a39.35 per hour for 20 hours per week) will be \u00a31000 worse off per annum while a couple working a combined total of 53.5 hours per week on the same hourly rate will be \u00a3850 worse off per annum.<\/p>\n They found that “the number of poor working households will rise by up to an additional 200,000 over the course of the parliament as a result of policies announced in the Summer Budget”.<\/p>\n 100,000 of these increased poor will be directly the “result of cuts to tax credits and other benefits announced in the Summer Budget”.<\/p>\n It found that “Many of those looking forward to a pay rise this April will soon learn that those gains will be dwarfed by reductions to tax credits.”<\/p>\n The modelling by the Resolution Foundation found that the minimum wage would have to rise to around \u00a312 per hour (\u00a322,700 a year) to offset the loss of tax credits.<\/p>\n In Britain, the so-called ‘living wage’ is currently \u00a37.85 an hour or \u00a39.15 in London. The legal minimum wage is only \u00a36.50 per hour.<\/p>\n The ‘living wage’ is how much a family has to receive to enjoy an acceptable standard of living.<\/p>\n The Government’s justification is clothed in the sophistry of moving Britain from a “low wage, high tax, high welfare society to a high wage, low tax, low welfare” but, in reality, this is just an ideological move to attack the defenceless as a way of attempting to reduce the fiscal deficit.<\/p>\n On October 5, 2015, the British Resolution Foundation published its – Low Pay Britain 2015 Report<\/a> – which is the fifth in an annual series and shows the “the prevalence of low pay in Britain”.<\/p>\n The five annual publications have established a pattern where:<\/p>\n \nEven before the financial crisis hit, too many employees in Britain were low paid by the standards of the day and relative to other countries. The downturn has done little to alter that, and pay has fallen behind the cost of living\n<\/p><\/blockquote>\n The 2015 Low Pay Report found that:<\/p>\n 1. “21 per cent … were low paid in Great Britain”. This proportion has shown “little change … over the last 20 years”.<\/p>\n 2. “2 per cent of employees” were affected by “‘Extreme’ low pay”.<\/p>\n 3. “22 per cent … were paid less than the voluntary Living Wage” and that proportion has risen since 2013.<\/p>\n 4. “5 per cent … were on the minimum wage. This proportion has been increasing steadily since the early 2000s”.<\/p>\n The question then is what is the relation to low pay and the poverty line? The proposition is that if low pay is insufficient to ward of poverty so that employment is not a sufficient path to a poverty free inclusive life then the problem is the wage floor established by the minimum wage is too low.<\/p>\n In its – Monitoring poverty and social exclusion report 2014<\/a> – released on November 20, 2014 in liason with the New Policy Institute, a person is considered to be in ‘relative poverty’ if their “income is below 60 per cent of the median”<\/p>\n To overcome the problem that a declining median income level over the last decade presents this sort of classification, the Report uses a “fixed level of income as the threshold”.<\/p>\n The difference between the two measures amounts to “a difference of two percentage points when estimating the number of people in poverty”.<\/p>\n We learn that:<\/p>\n \nHousehold incomes fell in real terms for the third year in a row. Median income in 2012\/13 was 9 per cent below where it was in 2007\/08 and 4 per cent lower than a decade ago. Incomes of the bottom tenth have fallen further and for longer and are now 8 per cent below their level in 2002\/03.\n<\/p><\/blockquote>\n The following graph (reproduced from Indicator: 1A in the Report) shows that the low income trend turned well before the GFC although the GFC has exacerbated the disadvantage.<\/p>\n Over the same period, (2003-2013), “the consumer prices index rose by 30 per cent” and for “all family types, the cost of attaining a minimum standard of living has risen more quickly than average consumer prices”.<\/p>\n The Report found that the “poorest households spent over a quarter of their income on housing” compared to the richest 20 per cent who spent less than 10 per cent of their income on housing.<\/p>\n The poor are also heavily indebted with “One in five adults in poverty are behind with at least one bill, compared with one in twenty of adults not in poverty”. More households in the UK now have negative equity.<\/p>\n In the period since 2011\/12, the proportion of people in material deprivation has risen in Britain.<\/p>\n How does this all impact on poverty measures?<\/p>\n The 60 per cent of median income’ rule shows that 21 per cent of people in Britain (13.3 million) were in living below the poverty line. Using the 2010\/11 fixed threshold measure, reveals that 23 per cent (14.6 million) were below the poverty line.<\/p>\n But the falling median income over the last decade blurs the extent to which poverty has risen in Britain. Using a pre-GFC income fixed income threshold measure (2007-08) and indexing it to inflation shows that there were 16.6 million people living below the poverty line.<\/p>\n More people below the age of 30 are in poverty whereas pensioners (above 65 years) have enjoyed lower poverty rates. There was an interesting UK Guardian article over the weekend (October 24, 2015) – Pensioners prosper, the young suffer. Britain’s social contract is breaking<\/a> – discussing the age profile of poverty.<\/p>\n What about the working poor?<\/p>\n 1. “half of all poverty is found in working families”.<\/p>\n 2. “Around two-fifths of working-age adults in poverty are themselves in work”.<\/p>\n 3. Poverty in working families is rising in the UK as is the number of families on low pay.<\/p>\n While the British government claims that the expanding employment in the UK is a sign of its policy success, the reality is quite different when we consider the quality of the work being created.<\/p>\n 1. Underemployment remains at high levels.<\/p>\n 2. “two thirds of those in work now but unemployed a year ago are in low-paid work” which means they are classified as being working for less than the ‘living wage’.<\/p>\n 3. Only 20 per cent of low-paid workers have been able to gain better pay over the last decade. In other words, low pay is a trap.<\/p>\n 4. “Changes to the way the welfare system operates have worsened the experience of poverty for many of those affected”.<\/p>\n![\"UK_Trends_in_Income_2000_2013\"](\"https:\/\/billmitchell.org\/blog\/wp-content\/uploads\/2015\/10\/UK_Trends_in_Income_2000_2013.jpg\")
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