: the state of play and the big challenges ahead Robert Joyce Agnes Norris Keiller
Poverty in the UK: past trends and future outlook Agnes Norris Keiller
Measuring poverty Focus on material living standards Measured as annual net household income Equivalised to account for household size Consider income before/after housing costs deducted (BHC/AHC) Relative poverty: Income less than 60% of contemporaneous median Absolute poverty: Income less than 60% of 2010/11 median (adjusted for inflation)
Measuring poverty Incomes required to not be in absolute AHC poverty Single Couple no children 2 children no children 2 children Household net income (AHC) Household gross earnings 7,250 12,250 12,500 17,490 14,700 1,900 20,700 9,400...e.g. if paid NLW would have to work 38 hrs p.w. 5 hrs p.w. head: 35 hrs p.w. head: 25 hrs p.w. spouse: 20 hrs p.w. Note: Assumes full take-up of means-tested benefits and tax credits. Children are assumed to be aged less than 14. All example households are assumed to be private renters in Greater Manchester with rent equal to the median rent of their household type among renters in the bottom half of the AHC income distribution. All amounts calculated under the April 2016 policy system and expressed in 2016/17 prices. Source: Author s calculations using the Family Resources Survey, various years, and the IFS micro-simulation model
Change in AHC poverty (ppt.) Poverty in the Britain over the last 50 years 0% 1965 1975 1975 1985 1985 1995 1995 2005 2005 2015-4% -8% -12% -16% -20% Note: Years refer to calendar years up to and including 1992 and to financial years from 1993 94 onwards. Figures are presented for GB up until 2001 02 and for the whole of the UK from 2002 03 onwards. The absolute poverty line is defined as 60% of median income in the middle year of each 10-year period. Source: Figure 4.2 of Cribb et al. (2017)
Change in AHC poverty (ppt.) 1. Falls in poverty greatest among pensioners 0% -5% -10% -15% -20% -25% -30% -35% 1965 1975 1975 1985 1985 1995 1995 2005 2005 2015 Overall Pensioners Note: Years refer to calendar years up to and including 1992 and to financial years from 1993 94 onwards. Figures are presented for GB up until 2001 02 and for the whole of the UK from 2002 03 onwards. The absolute poverty line is defined as 60% of median income in the middle year of each 10-year period. Source: Figure 4.2 of Cribb et al. (2017)
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Percentage in a workless household 2. Considerable falls in household worklessness 25% 22% 20% Children 15% 18% Non-pensioners 13% 10% 12% 5% Note: Years refer to financial years. Source: Authors calculations using the Family Resources Survey, various years.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Average weekly earnings (2017 prices) 3. Sustained period of poor earnings growth 525 500 475 450 425 400 375 350 Note: The series shows median gross weekly earnings of UK employees reported in April of each year. Source: Authors calculations using Annual Survey Hours and Earnings Table 1, various years, and ONS series D7BT.
Change 2009 10 to 2015 16 (ppt.) More living in low- and mid-earning households 3 2 Non-pensioners 1 0-1 -2-3 None 0 200 200 400 400 600 600 800 800+ Household weekly pre-tax earnings (2016 17 prices) Note: Graph shows percentage point change in non-pensioners living in households within each household earnings bracket. Source: Author s calculations using Family Resources Survey, various years.
The changing face of poverty 1994 21% 35% 45% Pensioners Non-pensioners in workless households Non-pensioners in working households Note: Years refer to financial years. Chart shows the composition of the population in relative AHC poverty. Source: Author s calculations using Family Resources Survey, 1994-95.
The changing face of poverty 1994 2015 21% 45% 35% 14% 29% 57% Pensioners Non-pensioners in workless households Non-pensioners in working households Note: Years refer to financial years. Chart shows the composition of the population in relative AHC poverty. Source: Author s calculations using Family Resources Survey, 1994-95 and 2015-16.
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Percentage of all children in poverty Majority of child poverty due to in-work poverty 80% 70% 60% Children in working households 50% 40% 30% Note: Years refer to financial years. Series shows the percentage of children in relative AHC poverty that live in a household containing at least one working member Source: Authors calculations using the Family Resources Survey, various years.
Average real weekly earnings (2015 = 100) The outlook for poverty: earnings 120 115 Outturn Forecast 110 105 Mar 16 Mar 17 100 Nov 17 2% 95 2015 2016 2017 2018 2019 2020 2021 Note: Years refer to the financial years. Source: Authors calculations using Annual Survey Hours and Earnings Table 1, various years, and OBR Economic and fiscal outlook: Economy supplementary tables, various years.
Average real weekly earnings/nlw (2015 = 100) The outlook for poverty: earnings 120 115 110 105 Outturn Forecast (Nov 17) NLW 17% 100 Average weekly earnings 2% 95 2015 2016 2017 2018 2019 2020 2021 Note: Years refer to the financial years. Source: Authors calculations using Annual Survey Hours and Earnings Table 1, various years, and OBR Economic and fiscal outlook: Economy supplementary tables, various years.
Gain/loss as % of net household income The outlook for poverty: policy changes Long run distributional impact of personal tax/benefit reforms since 2015 2% 0% Already implemented in full All -2% Planned or being rolled out -4% -6% -8% -10% Income decile Note: Assumes full take-up of means-tested benefits and tax-credits. Policies partially rolled are Universal Credit, the 2-child limits, the replacement of DLA with PIP and the abolition of the WRAG premium in ESA. Source: Authors calculations using the IFS micro-simulation model run on uprated data from the 2015 16 FRS and 2014 LCFS.
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Absolute poverty rate (AHC) The outlook for poverty 35% 30% 25% 20% 15% 10% 5% 0% Children All 3 ppt. 1 ppt. Note: Years refer to financial years. Source: Figure 2.4 of Hood and Waters (2017)
Summary Over the last 20 years: 1. Steep falls in pensioner poverty 2. Large reductions in worklessness 3. Poor earnings growth Almost 60% of those in poverty today are non-pensioners in working households, up from 35% in 1994 Changes in poverty closely tied to fortunes of low-paid workers Understanding this group is crucial for effective policy design
: the state of play and the big challenges ahead Robert Joyce Agnes Norris Keiller