Income and Poverty

A depressing set of poverty statistics

  • Published: Jun 13, 2013
  • Author: Tom MacInnes
  • Category: Income and Poverty

Today the DWP published the most recent set of income and poverty statistics for the UK. They make quite depressing reading. Median incomes fell by 3% between 2010/11 and 2011/12, following a 4% fall the previous year. This two-year fall is unprecedented over the last 50 years. On one of the DWP's published measures, poverty rose. On the other, it remained static. Let's unpack this a little. 

The DWP publishes two measures of poverty - a "relative" measure, where the poverty line is set at 60% of median income in that year, and an "absolute" measure, where the line is set at 60% of some previous year's median. They tell us two different things. The relative measure tells us how well the incomes of the poorest are holding up compared to the rest of the population. When the median falls, relative poverty may fall too, as the poverty line is effectively lowered. That is what happened last year. 

The absolute measure tells us how the incomes of the poorest have changed over time. Essentially, it tells us how many people, given their incomes today  and with adjustments only for inflation, would have been considered to be in relative poverty at some fixed point in the past. (That fixed point is actually 2010/11, in line with the targets in the Child Poverty Act, but it could in theory be any year).

The graph below shows the poverty rates for children, working age and pensioners. By clicking either Absolute or Relative Poverty, you can look at that trend. The figures are shown after housing costs have been deducted. 

Click here to view graph on a mobile 

On the absolute measure, poverty fell substantially for all groups until around 2005, and much more slowly thereafter. On the relative measure, the fall to 2005 is less pronounced, On the relative measure, the falls in child and pensioner poverty were less pronounced up to 2005. Among working age adults, there was no fall at all. 

The last two years are worth a closer look. On the relative measure, there were small falls for all groups in 2010/11 and no changes for any groups in 2011/12. On the absolute measure, there was little change in the last set of statistics and a small rise this time round.  So in 2010/11, the poorest were somewhat protected from the worst of the falls in income. In 2011/12, this was not the case. 

Having looked at the overall trends, we can now break down the data a little by certain characteristics. We look at the relative measure, again after housing costs. The first graph looks at family work status. A “full working” family is one where all the adults in the household are working, and at least one is working full time. A “part working” family has at least one adult in work, but either one adult is not working or the only work is part time. Self-employed, workless and retired families are hopefully self-explanatory. 

The bars show the proportion of the whole population in each type of family who were in poverty in 1997. The pies underneath show the proportion of all people in poverty who were in each family type. So, in 1997, 4% of people in full working households were in poverty, and they made up 7% of everyone who was in poverty that year. By clicking on different years, you can look at how the patterns have changed over time. 

Click here to view graph on a mobile

There’s a few things to look at but one of the more striking findings is the change in the composition of poverty from out of work families to working families. This is a long term trend. For some years now, excluding pensioners, over half of those in poverty were in working families. But this year, for the first time, over half of all people in poverty - including pensioners - were in working families. 

Of the three types of working family, those most at risk are those in part working families; those where either one adults is not working or no adult is working full time. Some 28% of all those in poverty are in these families. We know that since the start of the recession/ downturn in 2008, the number of people working part time but wanting full time work rose considerably. This is likely to be increasing the number of "part working" families, and hence their share of overall poverty. 

These figures only take us to April of last year. Looking ahead, there are a lot of unknowns, but let's focus on two. Firstly, the raft of welfare cuts that came in this April must surely increase poverty among those affected. It may, though, be more of an issue of depth of poverty for people who are already poor rather than increasing numbers of people in poverty. The changes by tenure will be important, the "bedroom tax" affecting those in social rented accommodation and the benefit cap affecting those in private rental as well. 

Secondly, the squeeze on wages is still ongoing , and unemployment is neither going up nor down, so this high share of poverty found in working families is set to stay. A living wage would obviously help, but for many families, the issue is one of hours worked as well as the hourly rate of pay. If and when the economy recovers, will those working part time move into full time work, or is the future of the labour market lots of people working not many hours? 

Unfortunately, these visualisations cannot be viewed in older versions of Internet Explorer (IE 8 and earlier). You can download a newer version here .  Google ChromeFirefox and Safari also work fine. 


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