2020 job market projected to push poverty even higher

Tackling poverty means tackling the weak job market

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

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.