17 June 2014:
Could getting parents into jobs alone raise children out of poverty?
A new report published by the Social Mobility and Child Poverty Commission looks at whether parental employment changes could tackle absolute and relative child poverty and achieve Government targets for 2020 set by the 2010 Child Poverty Act.
Using household survey data and tax benefit models, the researchers simulated child poverty rates under a range of different scenarios. Based on the Office for Budget Responsibilitie’s most recent forecasts for earnings and employment growth, the targets are missed drastically. Relative child poverty in 2020 would be 21% – 3.5% higher than in 2011-12 and 11 percentage points above the target of 10%. Absolute poverty will be 24% – 19 points higher than the target of 5%.
The report analysed many scenarios to determine if changes in employment alone could achieve the Government targets. They found:
- Faster employment growth does reduce relative and absolute poverty
- Faster wage growth reduces absolute poverty but increases relative poverty (the median net incomes by which relative poverty is assessed increase)
However, it would take:
- An extreme increase in employment for parents; and
- Substantial increases in hours for working adults in households still under the poverty line
to achieve poverty targets through employment changes alone. These are very unrealistic, for example the hours needed to work are over and above the requirements for Universal Credits and there are obvious childcare issues.
However, if optimistic employment rates for parents can be realised, then fiscal impact on the Government (through collecting more tax and National Insurance) could be used to increase financial support for low income families.
How is poverty measured?
Most official definitions of poverty use relative income to measure who is classed as living in poverty by setting a net earnings threshold and classing those below it as ‘in relative poverty’. In the UK, the Government currently favours this measure, and identifies households where the net income is 60% or less of median income as living below the poverty line. However, this is an arbitrary measure that does not take into account public opinion about living standards and lifestyle choices. The Poverty and Social Exclusion research project uses the “consensual method” which looks at direct measures of deprivation, including social exclusion from society.
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