How is public policy affecting people’s ability to make ends meet?

How is public policy affecting people’s ability

to make ends meet? Donald Hirsch

Centre for Research in Social Policy November 2017

The Minimum Income Standard (MIS) represents what families need for an acceptable standard of living, according to members of the public.

This analysis:

• compares the living standards of different household types to MIS in 2010 and 2022.

• breaks down the effect of different policies on household incomes in 2022.

Introduction

How is public policy affecting people’s ability to make ends meet?

Comparing living standards to the Minimum Income StandardBetween 2010 and 2022, many family types are moving further away from a decent living standard, even though minimum wages are going up for people in work.


Note on assumptions: all workers are earning the National Minimum Wage for over 25s; families all have a 7-year-old and a 4-year-old; families live in social housing and childless singles in low-cost private rented sector.

Shortfall in weekly income compared to the Minimum Income Standard in 2010 and 2022 (all in 2017 prices)

Policy changes are having a significant effect on living standardsThe following graphs show how policies to raise pay, lower taxes and reduce welfare affect working families in social housing, receiving Universal Credit and starting a family after April 2017.

The graphs project the effect of past and current policies on net weekly household incomes by the end of this Parliament (2022). All figures are shown in 2017 prices.


We look at the combined effects of six policies

Positive impact on living standards

Negative impact on living standards

Raising Income Tax allowances faster

than inflation, since 2010.

Raising the minimum wage for over-25s faster than average earnings,

since 2010.

Reducing the Universal Credit taper

from 65% to 63% in 2017.

Uprating most benefits more slowly

than inflation, since 2010.

Abolishing the first-child premium

in Universal Credit for children born after

April 2017. Reducing the Universal Credit Work

Allowances in 2016, then freezing them (compared

to increasing them with average earnings).

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--

-

-

+

+

+


Families with both parents working full-time earning the minimum wage have benefited more from better pay and lower tax than they have lost from benefit cuts…

Policy effects – in work

Dual earning couple, both earning NLW, 2 children Effect on weekly disposable income


+ + ++ + +

… but the overall gain is smaller for a couple where one parent works part-time and the other full-time…


Parents working full time + half time, both earning NLW, 2 children Effect on weekly disposable income

*NB tax allowance gain includes Married Tax Allowance, worth £1.85 a week to this family


+ + ++ +

… and there’s an overall loss for ‘single breadwinner’ couples, because of smaller tax and wage gains.


Couple with one full-time worker on NLW, 2 children Effect on weekly disposable income


*NB tax allowance gain includes Married Tax Allowance, worth £1.85 a week to this family

+ + +

Lone parents working full-time are also losing out, because wage and tax gains are offset by a larger cut to the Work Allowance than for couples…


Lone parent working full time, NLW, 2 children Effect on weekly disposable income


+ + +

… and for a lone parent working part-time, the policy effects have been overwhelmingly negative.


Lone parent working half time, NLW, 2 children Effect on weekly disposable income


+ +

Policy effects - work patterns matterFor working families, things will have improved for those with two working parents, with at least one working full-time. Only one in three working families below a Minimum Income Standard is in this situation.

In-work support is particularly important for families with part-time or irregular work, and for lone parents. Many of these families have caring responsibilities.

The following two slides show the effect on out-of-work households.


Out-of-work individuals and families have seen only losses…

Policy effects – out of work

Out-of-work benefit losses - totals for different cases Weekly

How is public policy affecting people’s ability to make ends meet? ** Includes loss of first child premium UC

* Includes effect of cash-limiting support for private rents to 2020

… and some bigger cuts will add to the losses of some out-of-work families.

Policy effects – out of work

Out-of-work benefit losses - totals for different cases Weekly


* Two-child limit applied to UC entitlement if third child born after 2017

Conclusions• Many low-income families are getting worse off relative to their

minimum needs. The main exceptions are dual earner parents without high childcare costs and childless people who work full time.

• Present policies give selective help alongside continuing cuts. The less work there is in the family, the more the cuts hurt and the less the help offsets them.

• In 2022, out-of-work families will have to live on approximately half of what they need.

• Ending the freeze so benefits keep pace with prices and allowing families to keep more of what they earn would help people make ends meet.


View the extended version of this presentation

also published: Households below a Minimum Income Standard 2008/09 to 2015/16

Report by: Matt Padley, Laura Valadez and Donald Hirsch. www.jrf.org.uk/blog/budget-must-improve-living-standards-struggling-families


http://www.lboro.ac.uk/media/wwwlboroacuk/content/crsp/downloads/reports/How%20is%20public%20policy%20affecting%20peoples%20ability%20to%20make%20ends%20meet.pdf

https://www.jrf.org.uk/report/households-below-minimum-income-standard-200809-201516

http://www.jrf.org.uk/blog/budget-must-improve-living-standards-struggling-families

http://www.jrf.org.uk




































































































































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How is public policy affecting people’s ability to make ends meet?