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20 April 2015

The DWP’s new solution to the problem of low pay? Blame working families

The latest developments to the Universal Credit will hit working parents hard, while doing little to tackle the real problem.

By Lindsay Judge

How many hours should low-paid parents be expected to work? Universal credit (UC) pilots launched today provide an insight into government thinking on this question.

Over the next year or so, 15,000 working families in receipt of UC will be randomly subject to different levels of ‘in-work conditionality’ requiring them to look for more or better paid jobs. Some will receive the light touch: a couple of phone calls every now and then encouraging them to increase their hours. Others will have to participate in a more intensive programme of ‘challenging’ interviews. All will be at risk of losing at least part of their benefit if they fail to comply.

Welcome to the brave new world of universal credit where the message is loud and clear: doing the right thing now means not just finding a job, but earning ‘enough’. But how much is that?  According to the Regulations, most claimants will need a salary of £227 a week, the equivalent of 35 hours multiplied by the national minimum wage, before the pressure to look for more or better paid work is switched off. 

While the number of hours those with caring responsibilities are expected to work may be tempered, there is an inherent discrimination present in this new regime. Put simply, families earning higher rates of pay have to work fewer hours than the lowest paid to be free of the strictures of in-work conditionality. This represents a sea-change to the current tax credits system, which uses the carrot of additional financial support to incentivise more hours, rather than the stick of conditionality to increase earnings.

But does this matter? Well it certainly does for low-paid parents struggling to balance work with caring for their children.  A couple both earning national minimum wage would need to work 51 hours a week between them under the new system before they are no longer subject to requirements to look for other employment. This stands in stark contrast to the 24 hours tax credit claimants  currently have to work to move out of conditionality altogether.

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Forthcoming research from the Child Poverty Action Group warns that coercing parents to work longer hours is at odds with what many regard as reasonable. While policies that help parents increase their working hours are to be welcomed, parental choice should be central given that the hours which suit one family may not work for another. Critically, the research shows that a cross-section of parents believe those on low pay should be able to make the same choices about work-family balance as those on higher salaries: spending time with one’s children should not become a luxury that only some can afford.

So why introduce a policy which looks set to be unpopular not just with working claimants but with a much broader part of the population? In part, in-work conditionality is necessary to correct for the points in UC where the work incentives are weakest: while the new system will ‘make work pay’ for those on a small number of hours, these gains rapidly diminish the more one earns. Without the pull of greater financial reward, UC needs the push of conditionality to get families to work longer hours.

But in-work conditionality represents something bigger than a simple technical fix. In-work poverty is increasing in the UK, and can be seen as the product of three variables: levels of pay, levels of in-work benefits, and the levels of hours worked. By placing the emphasis on hours the government individualises responsibility for poverty: parents have to solve the problem themselves by working more hours, no matter how incompatible this may be with their caring responsibilities. Policies such as in-work conditionality are convenient, then, in allowing the government to avoid far more difficult – and political – issues such as low pay and inadequate social security that lie at the root of child poverty.