Working or not, it's the long-term situation that's hitting the poorest hardest, says Helen Barnard.
In all the heat and fury over the welfare changes, Iain Duncan Smith’s assertion that he could live on £53 a week has led to predictable demands that he prove it in a reality TV-style challenge. This ignores the fact that surviving on a small amount for a short, controllable period has a completely different impact to living on such a budget for a long time, as so many people are in our weak, insecure jobs market.
Jobseeker’s Allowance for someone under 25 is £56.25 per week. For someone over 25 it's £71 per week. Joseph Rowntree Foundation’s research into a Minimum Income Standard asks a broad cross section of the public about the minimum standard of living reasonable for someone in modern Britain. It focuses on minimum adequacy; not the breadline and not luxury.
Researchers have repeated the exercise to see how the recession and austerity have changed people's perception of what's adequate. While the public’s views have not fundamentally changed, views on what's necessary in some areas have altered – such as spending on birthday presents. The latest standard, based on research carried out in 2012, found that the public believed a single person needed to have a budget of £193 per week before rent. A couple with two children needed £455 per week, a lone parent with one child £275 and a pensioner couple needed £231 (Pension Credit is £145.40 per week).
Benefit levels are a fraction of what the public believes is needed for a decent life, particularly for single, working age people. The research also shows that earnings for many working people are unable to reach this standard. To meet these standards in 2012 a single person needed to earn at least £16,400 a year before tax; two parents needed to earn at least £18,400 each to support themselves and two children. Around a quarter of the UK population live below the Minimum Income Standard, our research calculates.
Since 2008, incomes have risen far slower than minimum budgets. Steep rises in living costs explain much (and for single people, all) of the required increase in budget. For families with children, earnings required to reach the minimum standard rose by 16 per cent more than inflation between 2008 and 2012. This was mainly due to cuts in tax credits, which outweighed any benefit from the newly-introduced higher tax allowances. Following the recent Budget, Donald Hirsch showed that the effects of subsequent tax and welfare cuts also roughly cancel each other out for families with children.
The picture may be worse than this. In addition to the squeeze from inflation and falling income, council tax rises mean the poorest households are paying on average £138 more, while research by the Resolution Foundation argues that the introduction of Universal Credit will mean that low and middle income families will see very little benefit from tax cuts.
It all means life on wages is hard enough – so what can it be like for those on even less?
Joseph Rowntree Foundation
