Low-income parents will both have to work full time for a decent standard of living by 2020
Parents on low incomes will both have to work full time over the next five years in order to provide themselves with a minimum standard of living, a new report reveals.
Will the 2015 Summer Budget improve living standards in 2020? has been produced by Loughborough University’s Centre for Research in Social Policy (CRSP) on behalf of the Joseph Rowntree Foundation (JRF). It is the first in-depth, independent analysis to take a look at how the measures announced in the Budget will affect people’s ability to afford a decent standard of living.
Donald Hirsch, Director of CRSP and author of the report, has used the Minimum Income Standard (MIS) to track how the living standards of low-income households will change by 2020. The report is based on what the public say is necessary for a minimum socially acceptable standard of living.
It shows that families with two parents in full-time work, workers without children and pensioners will typically become better off over the next five years due to changes to pay and benefits announced in the Summer Budget.
But lone parents and families with more than two children are likely to see their living standards stagnate or fall even if they work full-time, as are low-income families with one main breadwinner. And those who are out of work face a sharply growing gap between their income and the amount they need for a basic living standard.
The introduction of the National Living Wage (NLW), which will raise the minimum wage to £9 per hour for workers aged over 25 by 2020, will drive an increase in living standards for low-paid workers without children, who by 2020 will typically have incomes close to or above what they need.
Some of those who currently qualify only for small levels of support will be lifted out of the benefits system entirely by a combination of higher wages and reduced entitlements.
But most low-income families with children will see their living standards continue to stagnate or decline as reductions to in-work benefits, also announced in the Summer Budget, outstrip wage rises.
While most households with two parents working full time on the NLW will be better off than they are on the National Minimum Wage (NMW) now, only 6% of low-income families with children have this working pattern. Families with one full-time and one part-time earner – a more common model of family life – will fall as far short of MIS in 2020 as they do now.
The report identifies the following winners and losers:
- A single person aged over 25 who works full time will have 97% of what they need in 2020, leaving them just £6 short of what they need every week, compared to £39 (79% of MIS) in 2010 and £54 (70% of MIS) today
- Double-earner families who both work full time and have two children will have 93% of what they need in 2020, leaving them £34 short of what they need, compared to £45 (89%) in 2010 and £75 (84%) today
- Pensioners will have 106% of what they need in 2020, leaving them with £15 more than they need every week, compared to £4 more (102%) in 2010 and £9 less (96%) today.
- A lone parent with one child who works full time on NLW will have 71% of what they need in 2020. This will mean they are £80 short of what they need every week, compared to £7 short (97%) in 2010 and £39 short (86%) today
- Dual-earner families with one parent who works full-time and one part-time will have 82% of what they need in 2020. This will mean they are £82 short of what they need every week, compared to £57 short (87%) in 2010 and £90 short (81%) today
- A single person who claims out-of work benefits will get 35% of what they need in 2020. This will mean they are £118 short per week, compared to £107 short in 2010 (41%) and £110 short (40%) today
- An out of work couple with two children will have 52% of what they need in 2020. This will mean they are £221 short of what they need compared to £163 short (62%) in 2010 and £197 short (57% today).
Donald Hirsch said: “When you step back and look at the overall impact of benefit changes in the present decade, it becomes clear that the social safety net is changing profoundly. For example, in 2010, families with small children were helped to get almost to the MIS if they worked, but fell a third short if they did not.
“By 2020, some working families, including many lone parents and families with three or more children, will be around a third short of the standard even if they work full-time on the NLW. That is, they will be as badly off in work in 2020 as they were out of work in 2010 – while those not working in 2020 will become even worse off, falling around 50% short of what they need.”
Julia Unwin, Chief Executive of the JRF, said: “The Summer Budget has transformed the relationship between pay, benefits and work incentives. The NLW is a game-changer for some on low incomes as the new, higher rate will make work pay for more people.
“But the wage rise comes hand-in-hand with changes to in and out-of-work benefits. Families will only be able to make ends meet if they have two parents in full-time work, but those who are able to find extra work will face a difficult juggling act as they try and make longer hours fit around family life. Lone parents, even those working full time, and people who are searching for work face a decade of sharply declining living standards.”