Research published today by the New Policy Institute finds that almost half of Working Tax Credit (WTC) is paid to low paid workers across just three sectors – retail, health and social work, and accommodation and food services (hospitality) – which contain less than a third of the total workforce.
The research, based on official survey data covering 2010 to 2012, is the first attempt to quantify the amount of WTC – the benefit paid to workers with a low family income – that can be attributed to different sectors of the economy. It finds that the three sectors with the largest attribution of WTC were:
- Retail: £1.3 billion per year across the two years, being 20 per cent of the attributed total for a sector but containing only 14 per cent of the workforce.
- Human health and social work: £1.2 billion per year, 18 per cent of the attributed total.
- Accommodation and food services (hospitality): £0.6 billion per year, 9 per cent of the attributed total. With only 5 per cent of the workforce, this is the sector with the highest proportion of its employees benefitting from WTC.
Taken together, the three sectors, which contain under a third of the workforce, account for almost half of the total attributed WTC spend (47%).
The research also found that 80 per cent of WTC expenditure is attributable to workers who work in the private sector, while the public sector accounts for 20 per cent of WTC spend. Around half of WTC spending in the public sector is attributable to low paid staff in local government.
Commenting on the findings NPI Director, Dr Peter Kenway said:
‘In his speech to the Conservative party conference, the Chancellor announced a two year freeze on working-age benefits. Working Tax Credit is one of them. This research shows that those who’ll be hit by this are likely to be employees directly serving the public, especially in shops, health and social care, restaurants and indeed schools. The private sector and the local public sector account for the great bulk of WTC, reflecting the pattern of low earnings across the economy’.
Notes to editors:
- Working tax credit (WTC) is a benefit paid to workers with a low ‘family’ income. In this context, ‘family’ is to be understood as either a single worker or a worker and their partner. WTC can be paid to families with or without dependent children.
- WTC is paid to the family directly by HMRC, not by the employer. To be entitled to WTC, a family must work a minimum number of hours and have a low income. Family income and hours, not those of the individual worker, determine WTC.
- Several factors affect the qualifying hours and the maximum amount of WTC that can be paid. In 2012-13, WTC recipient families without dependent children received an average of £48.40 per week; those with dependent children received an average of £66.30.
- Since WTC is assessed on family income, if two adults in a family work in different sectors, their WTC needs to be attributed between them. This research makes the simplest assumption attributing half of the WTC to each. Where there is only one working adult in a couple, half the WTC is left unattributed.