The short and long term problems for tackling poverty in Wales
Our latest report in the Monitoring Poverty and Social Exclusion series for Wales finds the country facing two big challenges to how it thinks and responds to poverty. The first of these is the longer term compositional changes to poverty – more young people, more people in work, fewer pensioners and workless families. The second is the tenor of UK government policy over the last five years, including the 2015 summer budget, covering welfare reform and minimum wage legislation.
Just under a quarter (23%) of the population of Wales are in poverty, defined here as having a household income below 60% of median after adjusting for family size and removing housing costs. The proportion has not changed much in recent years, having been very close to this level since the mid-2000s. However, there has been a shift in the age and work status of those who are in poverty within this total.
This is shown in the graph. Compared with ten years earlier, there are fewer children in poverty, entirely due to a fall in poverty in workless families. The number of children in low income, working families has risen. There are also fewer people aged over 65 in poverty, while the other age groups have all seen increases in poverty, again, mostly in working families.
This is largely in line with trends in the rest of the UK, but does pose new challenges. Some elements of dealing with in-work poverty are the same levers governments are used to for dealing with out of work poverty, such as encouraging people to work more hours and using of tax credits to incentivise that. Others are much less familiar, such as boosting progression in work to escape low pay, reducing the insecurity of some forms of work or encouraging employers to offer more in terms of flexibility or childcare.
The second and related problem is the challenge posed by policy from Westminster. The most obvious of these is the Summer budget 2015. Some of the changes in this will affect Wales especially; for example, families in Wales are more likely than families in England to be claiming tax credits. The cuts to tax credits will therefore fall harder on Wales than the UK on average.
More positively, the budget also contained a proposal to add a premium to the minimum wage for workers aged over-25, dubbed the “National Living Wage.” This also disproportionately affects Wales, where 25% of employee jobs are paid below £7.69 (two-thirds of the median wage) compared to 21% in the UK as a whole. We estimate in the report that 200,000 adults over-25 will benefit from the new minimum wage level in April 2016. However, if there turn out to be larger than expected job losses from the new higher wage, Wales is likely to be disproportionately affected by these as well.
There are other, less eye-catching changes, coming from Westminster that require a response from Wales. For instance, the Budget decreased the point at which lone parents with young children are expected to look for work, but extended free childcare for all 3 and 4 year olds in England at the same time. With childcare a devolved issue, there is a question about how Wales should now respond. The questions go beyond government to cover public, private and third sector organisations dedicated to reducing and mitigating poverty. What should the collective response be to the longer term changes in the nature of poverty in Wales? A reaction on this front and to the short term challenges and opportunities from the budget is urgently needed.