United Kingdom
Low income by work status
Key points
- Unless all adults in the family are working (and at least one of them full time), the risks of being in low income are substantial. For example, the risks of low income among working-age adults are: 70% for unemployed families; 60% for economically inactive families; and 25% for those with some paid work.
- These risks have increased somewhat since the mid-1990s for all family types. For example, the proportion of working-age adults who are in families where all the adults are working but who are still in low income has risen from 2½% in the mid-1990s to 4½% now.
- Among working-age adults in low income, the number in working families has risen whilst the number in workless ones has fallen. As a result, half now live in families where someone is in paid work. This is a rather different balance from a decade ago, when the majority were in workless families.
- Nearly all the rise in working families in low income has been in families without dependent children.Note that around a third of this rise has been due to an increase in the total number of working families without dependent children, with the other two-thirds being due to an increased risk of low income for such families. More specifically, the total number of working-age adults in working families without dependent children in Great Britain averaged 15.1 million between 1994/95 and 1996/97 and 17.2 million between 2003/04 and 2005/06, an increase of 14%. The risk of these adults being in low income averaged 7% between 1994/95 and 1996/97 and 9% between 2003/04 and 2005/06, an increase of 26%. So, 14/(14+26)=35% of the increase has been due to an increase in the underlying population and the other 65% has been due to an increase in the risk of low income for the population. As a result, almost half of all working-age adults who are in working families but still in low income do not have dependent children. This clearly has implications for the future efficacy of the tax credits system in alleviating low income among working families, as this system is mostly targetted on working families with children.
- By contrast, most of the fall in workless families in low income has been in families with dependent children.Note that nearly of this fall has, in turn, been due to an decrease in the total number of workless families with dependent children rather than to a reduced risk of low income for such families. More specifically, the total number of working-age adults in workless families with dependent children in Great Britain averaged 2.1 million between 1994/95 and 1996/97 and 1.6 million between 2003/04 and 2005/06. The risk of these adults being in low income remained broadly unchanged, at around 80%.
Graph 1: Over time (proportions)
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Graph 2: Over time (numbers)
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Graph 3: By family type
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Graph 3: Shares
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Why this indicator was originally chosen
For working-age households, the risk of being low income depends crucially on the extent to which the adults in the household are working.
Definitions and data sources
The first graph shows the risk of a working-age adult being in a low income household, with the data shown separately for the following family work statuses: all working (single or couple, with one in full-time work and the other - if applicable - in full-time or part-time work); part working (couples where one is working and the other is not plus singles or couples where no one is working full-time but one or more are working part-time); workless - unemployed (head or spouse unemployed) and workless - economically inactive (includes long-term sick/disabled and lone parents). The self-employed and pensioner families are excluded from the analysis. The left hand bars show the average for the three years 1994/95 to 1996/97 and the right hand bars show the average for the years 2003/04 to 2005/06.
The second graph shows, over time, the number of working-age adults who are in low income households, with the data shown separately for families where someone is in paid work and for workless families. The third graph provides a further breakdown, with the data shown separately for families with and without dependent children.
The fourth graph shows a breakdown of the low income working-age adults by the work status of their family. The inner ring shows the average for the three years 1994/95 to 1996/97 and the outer ring shows the average for the three years 2003/04 to 2005/06. The self-employed are included in the 'part working' category as their risks of low income are similar, and much higher than the 'all working category.
The data source for all the graphs is Households Below Average Income, based on the Family Resources Survey (FRS). The data relates to Great Britain. Income is disposable household income after deducting housing costs and the low income threshold is the same as that used elsewhere, namely 60% of contemporary median household income. All data is equivalised (adjusted) to account for differences in household size and composition. Note that in 2007 DWP made some technical changes to how it adjusted household income for household composition (including retrospective changes) and, as a result, the data is slightly different than previously published figures. The averaging over three-year bands has been done to improve the statistical reliability of the results.
The term 'family' is used to cover an adult and their spouse (if applicable) whereas the term 'household' is used to cover everyone living in a dwelling. So, a young adult living with their parents would count as one 'household' but two 'families'. In analysing the rates of low income by work status, the work status is analysed by family whereas the income is analysed by household. This is the main reason why the low income rates for workless families is much less than 100 per cent. Note that an alternative – and more technically correct - term for 'family' is 'benefit unit'. For a more detailed discussion of this issue, see the page on households, families and benefit units. Note that families where at least one of the adults is of pensionable age are excluded from the analysis.
Overall adequacy of the indicator: high. The FRS is a well-established annual government survey, designed to be representative of the population as a whole.
External links
- See the 2005 Joseph Rowntree Report entitled Routes out of poverty.
- See the HM Revenue & Customs sites on tax credits
Relevant 2007 Public Service Agreements
Overall aim: Halve the number of children in poverty by 2010-11, on the way to eradicating child poverty by 2020.
Lead department
HM Treasury.
Official national targets
Reduce by a half the number of children living in relative low-income by 2010/11.
Other indicators of progress
Number of children in absolute low-income households.
Number of children in relative low-income households and in material deprivation.
Overall aim: Maximise employment opportunity for all.
Lead department
Department for Work and Pensions.
Official national targets
None.
Other indicators of progress
Overall employment rate taking account of the economic cycle.
Narrow the gap between the employment rates of the following disadvantaged groups and the overall rate: disabled people; lone parents; ethnic minorities; people aged 50 and over; those with no qualifications; and those living in the most deprived Local Authority wards.
Number of people on working age out-of-work benefits.
Amount of time people spend on out-of-work benefits.
Previous 2004 targets
Halve the number of children in relative low-income households between 1998/99 and 2010/11, on the way to eradicating child poverty by 2020, including:
- reducing the proportion of children in workless households by 5% between spring 2005 and spring 2008; and
- increasing the proportion of parents with care on Income Support and income-based Jobseeker's Allowance who receive maintenance for their children by 65% by March 2008.
As part of the wider objective of full employment in every region, over the three years to Spring 2008, and taking account of the economic cycle, demonstrate progress on increasing the employment rate.
As part of the wider objective of full employment in every region, over the three years to Spring 2008, and taking account of the economic cycle:
- increase the employment rates of disadvantaged groups (lone parents, ethnic minorities, people aged 50 and over, those with the lowest qualifications, and those living in local authority wards with the poorest initial labour market position); and
- significantly reduce the difference between the employment rates of the disadvantaged groups and the overall rate.
As a contribution to reducing the proportion of children living in households where no-one is working by 2008:
- increase the stock of Ofsted-registered childcare by 10%;
- increase the take-up of formal childcare by lower income working families by 50%; and
- introduce by April 2005, a successful light-touch childcare approval scheme.
Relevant government policies
The numbers
Graph 1
| Year | All working | Part working | Workless - unemployed | Workless - economically inactive | Self-employed |
|---|---|---|---|---|---|
| 1994/95 | 2% | 20% | 68% | 53% | 24% |
| 1995/96 | 3% | 20% | 69% | 52% | 23% |
| 1996/97 | 3% | 24% | 74% | 58% | 20% |
| 1997/98 | 4% | 24% | 73% | 54% | 22% |
| 1998/99 | 4% | 25% | 74% | 54% | 21% |
| 1999/00 | 4% | 25% | 73% | 57% | 22% |
| 2000/01 | 4% | 25% | 74% | 56% | 22% |
| 2001/02 | 4% | 23% | 71% | 58% | 20% |
| 2002/03 | 4% | 25% | 71% | 59% | 18% |
| 2003/04 | 4% | 23% | 74% | 58% | 20% |
| 2004/05 | 4% | 23% | 69% | 54% | 19% |
| 2005/06 | 5% | 26% | 71% | 57% | 24% |
| Average 1994/95 to 1996/97 | 3% | 22% | 70% | 54% | 22% |
| Average 2002/03 to 2004/05 | 4% | 24% | 71% | 57% | 21% |
Graphs 2 and 3
| Year | In working families | In workless families | ||||
|---|---|---|---|---|---|---|
| With dependent children | Without dependent children | Total | With dependent children | Without dependent children | Total | |
| 1994/95 | 1.5M | 1.0M | 2.6M | 1.7M | 2.2M | 3.9M |
| 1995/96 | 1.5M | 1.0M | 2.5M | 1.7M | 2.1M | 3.9M |
| 1996/97 | 1.6M | 1.2M | 2.8M | 1.6M | 2.2M | 3.8M |
| 1997/98 | 1.7M | 1.2M | 2.9M | 1.5M | 1.9M | 3.4M |
| 1998/99 | 1.8M | 1.2M | 3.0M | 1.4M | 1.9M | 3.3M |
| 1999/00 | 1.7M | 1.2M | 2.9M | 1.4M | 2.0M | 3.4M |
| 2000/01 | 1.7M | 1.4M | 3.1M | 1.3M | 1.9M | 3.2M |
| 2001/02 | 1.6M | 1.3M | 2.9M | 1.3M | 2.0M | 3.3M |
| 2002/03 | 1.6M | 1.4M | 3.0M | 1.3M | 2.0M | 3.3M |
| 2003/04 | 1.5M | 1.4M | 3.0M | 1.3M | 2.0M | 3.3M |
| 2004/05 | 1.6M | 1.5M | 3.1M | 1.2M | 1.9M | 3.1M |
| 2005/06 | 1.9M | 1.7M | 3.6M | 1.2M | 2.1M | 3.3M |
Graph 4
| Group | Proportions | |
|---|---|---|
| Average of 1994/95 to 1996/97 | Average of 2003/04 to 2005/06 | |
| All working | 6% | 12% |
| Part working (including the self-employed) | 34% | 38% |
| Workless - unemployed | 26% | 12% |
| Workless - economically inactive | 33% | 38% |