Middle income families are the 'new poor'

Sad looking girl with her fighting parents behind her
Sad looking girl with her fighting parents behind her



Work isn't paying for huge numbers of middle income families. A new report has revealed that the lives of these families are similar in many ways to those on low incomes: half of them rent now rather than own their own home, and almost a third of their money now comes from benefits and tax credits.

The report, by the Institute of Fiscal Studies, has found that life has got better for people who are not working. Retired people in particular have seen their incomes lifted, so that they are now the least likely major demographic to be in income poverty.

Those out of work have benefited from the fact that benefits are rising faster than average wages - so that the average income of someone out of work has risen to 56% of the average income of someone who is working.

People of working age at the poorest end of the spectrum are actually more likely to be in work than in previous years. The proportion of children living in a household where no-one works has fallen from nearly one in four in 1994–95 to less than one in six. Their incomes have also been bolstered by increases in the benefits that still make up part of their income.

The 'new poor'

For those in the middle, however, things are not getting any better. The report uses the term 'middle-income' to describe households earning £25,700 with one child; £30,000 with two; or £34,300 with three. It says this group is the 'new poor'. They now get 30% of their income from benefits and tax credits, up from 22% 20 years ago. Half now rent - down from 31% 20 years ago, and their employment income is still lower than before the recession.

The researchers highlight that if the government wants to relieve child poverty, then it needs to recognise that two thirds of children in poverty live in a household where someone works. They cannot alleviate poverty through increasing employment rates: they will need to focus on lifting wages.

Robert Joyce, an author of the report and an Associate Director at IFS said: "Tackling low income is increasingly about tackling the problems faced by low-earning working households. In the short term this would be aided by a continued recovery in the number of hours worked by those on low wages or by more second earners entering work. Ultimately substantial progress will depend crucially on economic policies that push up productivity. Economic uncertainty following the Brexit vote will only serve to make these challenges all the tougher".

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