2020 job market projected to push poverty even higher

Tackling poverty means tackling the weak job market

Research we publish today looks at the impact of the projected job market in 2020 on poverty in the UK. Unfortunately, it’s more bad news. The implication is that we should target jobs and training assistance on the basis of household, not just individual, need and focus unerringly on the creation of more and better jobs.

The research uses a forecast of the type of job market we expect to have in 2020 and combines this with a model of household incomes that includes announced tax and benefit changes. The central forecast for 2020 is for many long-term trends to continue, including shifts towards a knowledge- and service-based economy and increases in high- and low-paid jobs. We already know that cuts to benefits and Tax Credits are likely to undermine the beneficial effects of Universal Credit. This will lead to (in combination with demographic and earnings change) rising poverty rates over the rest of the decade. Adding in an estimate of changes in the job market increases inequality further, although it does offset some of the rise in absolute child poverty.

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So, changes to taxes, benefits, demography and earnings (the blue bars) increase absolute child poverty in 2020 by just over 6 per cent but job market changes (the red bar) offset this a tad. Turning to the relative measure, tax and benefit changes raise poverty by around 5 per cent and the projected job market adds another 1 per cent by 2020. All groups except households headed by someone aged over 65 see rising absolute and relative poverty from tax and benefit changes, with lone parents hit particularly hard. Employment change makes things worse for everyone except for absolute poverty among families with children.

We weren’t naive enough to expect the central forecast to eradicate poverty, so the plan was then to try out some different scenarios that JRF, the research team and our advisory group thought might have a positive impact. These variations were all based on changing the distribution (but not increasing the number) of jobs, and we didn’t vary the tax and benefit system. The second chart shows the impact of some of these scenarios on relative child poverty rates (the long bar shows the predicted 2020 rate of 25.7 per cent).

None of the alternative scenarios (the short bars) have any meaningful impact on that central child poverty projection. Keeping the employment structure as it is now would decrease poverty by a tiny 1.2 per cent. This is the biggest difference. A general rise in qualification levels across the workforce and reduced pay for the highest qualified, for example, actually increases child poverty more than in the central forecast (by 1.0 per cent). Most other scenarios have virtually zero effect by 2020.

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There are two core reasons for this disappointing lack of impact. The first is that low paid and poorly qualified workers, along with women and part time workers, are spread across the whole household income distribution. This means targeting these workers is not an especially effective way of targeting poverty. The second is the huge ‘drag’ on poverty rates of the large number of workless households in the UK.

What do we do about these worrying findings? It is clear that interventions such as training and skills development need to be targeted on the basis of household need, not just individual need if we are to have a serious impact on poverty. It is also clear that we need more jobs. A lot more, because the 1.5 million new jobs included in these forecasts is going to be nowhere near enough when 6 million people in the UK are currently seeking more work.

A child in the Gorton estate in Manchester, where 27% of children live under the poverty line. Photograph: Getty Images

Chris Goulden is the poverty programme manager at the Joseph Rowntree Foundation.

Photo: Getty
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The future of the left: The path ahead is full of challenges

Be in no doubt: the left faces a struggle for survival.

There are plenty of grounds for pessimism about the left’s prospects and they are well rehearsed.  Across Europe, social democrats are out of power and when they do manage to enter government, it is under the skirts of dominant centre-right parties or at the helm of fragile coalitions. Ageing western societies have become more conservative, immigration has driven a cultural wedge into the cross-class coalitions that once undergirded centre-left voting blocs, and austerity has ushered in a politics of security, not reform. Only those who have borne the brunt of the financial crisis and its aftermath, like the unemployed youth and evicted homeowners of Southern Europe, have swung decisively to the left, joined by relatively protected but angry older middle class liberals of Northern Europe. Even in Latin America, where the left swept the board at the turn of the century, politics is shifting to the right. Bright spots, such as municipal experimentalism in Spanish cities, or energetic liberalism in Canada and Italy, illuminate the gloom. But mostly, darkness is visible.

Is this condition terminal? Inequality, stagnant living standards and the turbulence of global capitalism generate profound political discontent. They give oxygen to progressive protest movements as well as populist reactionaries, as the convulsions in US politics show. But only a facile determinism reads off political progress from economic crisis. There is nothing to guarantee that revulsion at political and economic elites will give birth to a new egalitarianism. The left needs a clearer headed view of the political terrain that it will face in the 2020s.

Demographic change is a given. Advanced democracies like Britain will get older and the weight of older voters in elections will increase, not diminish. The gap in turnout rates between young and old is unlikely to close, tilting politics even further towards the cultural concerns and economic interests of the over fifties. Leadership credentials and economic competence matter for these voters more than abstract appeals to equality. But a generation of young people will also enter middle age in the 2020s having endured the worst of the age of austerity, with lower wages, stymied home ownership aspirations and stunted career progression to show for it. So just as 20th century catch-all parties built cross-class electoral alliances, successful political movements in the coming decades will need to secure inter-generational voting blocs. Stitching these together will foreground the politics of family and focus policy attention on transfers of wealth and opportunity across multiple generations. 

Ageing will also ratchet up fiscal pressures on the state, as costs mount for the NHS, care of the elderly and pensions. But Britain’s tax base has been weakened by low productivity, corporate tax avoidance and expensive personal allowance giveaways. In the 2020s, this crunch will loom large over fiscal policy and force hard choices over priorities. Just as in the 1990s, we can expect public disquiet at the run-down of investment in public services to mount, but this time there won’t be the same spending headroom to respond to it. The political debate currently underway in Scotland about raising income tax is therefore a harbinger of the future for the rest of the UK.

Fiscal constraints will also force the left to take seriously the agenda of economic reform opened up under the ungainly title of “pre-distribution”. Without an account of how to generate and share prosperity more equitably within the market economy, social democracy is purposeless. But it will need a far more robust and plausible political strategy for achieving these ambitions than anything that has been on offer hitherto. Technological change will not usher in a new economy of its own accord, and without the solid base of an organised working class to ground its politics, the left needs to be open to a wide set of alliances with businesses, big and small. Combining economic radicalism with credibility and popular appeal, particularly to voters who still blame it for the financial crisis, is the hardest challenge the left faces, but there is no getting away from it.

On a note of optimism, the left is currently strong in cities, from which it can build out. Diversity is a strength in major urban centres, not a weakness, and powerful city leaders endow progressive politics with governing authority. Cities are the places where new social movements are most active and much of the energy of contemporary politics can be found, even if elections are fought on wider terrain. The task is to combine a propensity to decentralise and devolve with clear national political direction. The same holds with party reform: the mass political parties of the 20th century are dead, but networks can’t fight elections, so combining openness and democratic engagement, with discipline and national purpose, is vital. 

Nick Pearce is the director of the Institute for Public Policy Research.