Every penny counts

1The decade before the banking collapse of 2008 saw a downward trend in the numbers of families in which nobody worked. A combination of factors had created a favourable environment for people moving into work, either for the first time or after a period of absence from the job market. These included: economic growth in some sectors; the introduction of Working Tax Credit as a direct benefit to those in low paid work; appropriate educational and accreditation opportunities at local colleges and training centres; new types of jobs in public services such as classroom assistants, health support workers etc.; and the introduction of Child Tax Credit that heavily subsidised child-care, as well as free, part-time nursery provision for three-to four-year-olds.1 Since the crisis of 2008 however, against the backdrop of government budget cuts, these have either been pared down to a fraction of what they had provided as forms of support for low-income families or have been eliminated altogether.

2Between the financial years 2009–2010 and 2012–2013 average pre-tax household earnings in the UK fell by 9.4 percent with prices outstripping wage increases.2 Over these years a ‘wage squeeze’ worsened income levels with average rates of pay falling by between one and two percent each year.3 The worst affected were those in insecure employment, moving in and out of work at regular intervals. These workers were most likely to see annual, real-terms cuts in their pay packets.

3Whereas low interest rates provided some buffering to many home-owners, no such protection was available to those living in the privately rented sector. Indeed, tenanted households on average saw the proportion of their income going on their housing costs rise by two percent between 2007–2008 and 2012–2013. Since 2013, there have also been marked increases in the numbers of people living in poverty in both the social housing and the privately rented sectors: of 400,000 and 350,000 respectively.4 Of course for those home-owners who were no longer able to afford their mortgages following a reduction in household income for any reason, the result was often repossession. Over this period, the proportion of people living in a mortgaged home declined by five percent.5

4The problem of absolute poverty (defined as 60 percent of the 2010/11 median income) is also still with us today with 12.9 million (20.3 percent of the population) living in these circumstances in 2014–2015 (considering disposable income after housing costs). 27.5 percent of all children (3.7 million) live in conditions of absolute poverty.6 By 2015, 9.6 million people, fifteen percent of the population, were living in what has been termed ‘deep poverty’.7

5More specifically with respect to wages, at the end of the Coalition Government period, the UK had one of the worst records of all industrialised countries for low paid employment, coming second only to the US. A fifth of workers were paid less than the Living Wage; this figure having risen from 3.4 million in 2009 to 4.8 million by 2014. By April 2015, 21 percent of employees (5.7 million) were low paid. Six percent (1.5 million) were on the National Minimum Wage; this proportion having increased year-on-year since 2000.8 In its 2016 report, the Resolution Foundation estimated that based on current trends the proportion of workers on low pay will increase to fifteen percent by 2020.9

6On top of pay being held down across all sectors, as we have seen the real value of the National Minimum Wage has fallen by five percent since 2010. Moreover, low paid employment is not distributed proportionately across society. Women and young people, for example are far more likely to be in low paid work than men and older workers (except for the very oldest). Women make up 61 percent of all low paid employees; and 25 percent of female employees are low paid compared to sixteen percent of male employees.10 Rising rates of younger workers are low paid; 80 percent of workers in the 21–25 years age group for instance, are low paid.11 Low pay is also linked to educational attainment: 35 percent of those with basic attainment levels are low paid compared to just three percent of those with tertiary qualifications. Moreover, nearly three-quarters of people in low paid jobs in the UK in 2002 were still in low paid work in 2012.12 Rather than being a ‘first step’ on a route to more secure and better paid employment, these types of employment represent a low pay poverty trap from which those workers affected find it very difficult to escape.

7The worst sectors for breaches of minimum wage legislation and low pay generally are: hospitality; retail; restaurant and bar work; hairdressing; child-care; social-care; hotel cleaning; and various types of home-working. In these sectors, even were the National Minimum Wage to be set at a higher level, perhaps at the level of the Living Wage, there would remain the problem of enforcement. Over a quarter of a million workers are not paid the legal minimum after two decades of legislation. Despite this the number of government inspections that were completed has fallen by a half in recent years.13

8However, reduced levels of income and the insecurity affecting those in low paid jobs are not simply the product of low wages―rather they are caused by a combination of factors. Such jobs are more likely to be based upon zero-hour contracts for example, which have tripled in number since 2010, affecting nearly 1.4 million workers.14 Cuts to tax credits and other benefits have also reduced family incomes. There is also the problem of families in the lowest income quintile depending upon wages that are too low to have benefited from the increase in personal tax allowance. The combined effects then of several factors such as low pay, reductions in benefits and credits etc. need to be our focus if we are to understand the growing poverty in the UK under the Coalition and Conservative governments since 2010―and poverty trends in developed countries more generally. Considering welfare reforms, the introduction of the Social Sector Size Criteria (also known as the ‘under occupation charge’ and the ‘bedroom tax’) the maximum benefit cap and reductions in Council Tax relief in 2013, reduced overall household incomes for the families affected.

9In March 2013, the Coalition Government’s Welfare Reform Act came into legislative force. As we have seen, the effects of the welfare reductions introduced by the new Act impacted upon poverty measures almost immediately. Over the next two years the proportion of working age adults living in poverty increased to 22 percent. By April 2015, fourteen percent of pensioners were living in poverty following the first downward annual trends in six years. Over the same period the proportion of children residing in poor households rose to 29 percent; an increase of two percent.15

10The introduction of the National Living Wage at £7.20 from April 2016 was predicted to benefit 1.9 million workers immediately and six million by 2020; meaning a two percent fall in the proportion of employees on low pay over these years. However, scrutiny of what these figures represented revealed a less optimistic scenario. The Resolution Foundation predicted that over time the National Living Wage was likely to result in a ‘bunching’ of the pay distribution with large numbers of workers pushed close to, but not over the low pay threshold. This would mean increasing proportions of workers stuck at a level at, or only slightly above, their minimum legal entitlement and for significant periods of time.

The NLW is also likely to lead to a significant bunching of the pay distribution. The share of employees paid only their age-specific legal minimum was around 1 in 50 in the years following the introduction of the minimum wage in 1999. In 2014, around 1 in 20 were on the wage floor. With the introduction and growth of the NLW, by 2020 more than 1 in 7 are expected to be paid at or only just above the legal minimum. 16

11This analysis also found that in 2015 nearly one-quarter of employees (23 per cent, or 6.3 million individuals) were receiving pay below the Living Wage, representing a new high for this measure.17 Moreover, assessments of the impact of the raised National Living Wage do not include the economic experience of self-employed workers who tend to be lower paid than those with full-time employed status; indeed, more than half (51 percent of self-employed workers) were low-paid in 2013–2014. With 4.5 million workers in this category in the UK, this represents a significant gap for our understanding of what is happening for many on low incomes.18

12Comprehensively considering the impact of the introduction of the National Living Wage, it will not result in a new era of upward social mobility for the worst off in society. Rather it will result in the ‘locking-in’ of the low pay threshold for many millions of workers, as employers set their remuneration rates at the lowest levels required. Of course, the National Living Wage does mean that pay levels will improve for the lowest paid workers, and especially those in ‘extreme low pay’. However, any assessment of its overall impact on the lives of working families will be overly optimistic unless other income elements are factored in.

13In reality, the increase in minimum wage levels will nowhere near make up for the £12 billion worth of cuts to welfare benefits announced for instance by the government in 2015. The greater share of the advantage arising from the National Living Wage will go to households that are already towards the top-end by income of those affected, while welfare reductions will disproportionately affect those households with the lowest total incomes. The result of government wages policy and changes to benefits combined will be that many or even most households will be worse off than before.

14What we have seen since 2010, has not been a state-driven attempt to help ‘the most vulnerable’ out of poverty. Rather it has been a concerted move to lock the poorest in society into a new ‘low wage dependency’. In this economic model, the ‘ways up’ from low pay by skills acquisition, career development and so on, are blocked as a large proportion of workers remain stuck at or close to the low pay threshold. Equally, the ‘ways out’ are also blocked as benefits for working and nonworking members of low-income households are removed. The result is a situation in which the room for manœuvre for workers is constrained to the extreme, and in which employers have no reason to improve the conditions, security or pay levels above the minimum required for their employees. Far from social mobility then, it is a scenario of structural, labour-market immobility for these workers and their families.

Family voices

Feeling ‘the squeeze’

15Even before the 2008 financial crisis, wages were failing to keep pace with price rises. Today, millions of people in the country cannot reach an acceptable minimum standard of living because their wages are too low. Even when wages are subsidised by tax credits, many families still fall short on this measure. In Liverpool alone, 32,600 families in work qualified for Working Tax Credit at the time of the study. Low pay is a fundamental problem; but it isn’t the only issue. There are also poor employment practices and working conditions that make work and family life difficult to balance.

16Brenda explained how the combination of these and many other pressures affected her. She was having to manage a student debt of £30,000 and had just gone back to work after having her third child. She was working in the hotel and leisure sector. On a weekly basis, her expenditure exceeded her combined income from wages, Child Tax Credit, Child Benefit and Housing Benefit by £98.91, and as a result she was also struggling to pay back a debt of £2,280. Her relationship with her long-time partner had become difficult since having the baby, and she was worried about how she was going to cope with shift work. She was relying on help from her mother.

I’m like, I don’t have enough time; and if I do have the time, it’s either to sleep, to be able to just sit and do nothing or clean up […] but even though things have changed, I’m still only just getting by now. It’s kind of like I’m putting all this time in, but I’m not with the kids―and for what? I’m getting by; but you’ll see in the diary, my wages went up by only 12p an hour. So I went from £6.19 to £6.31; its minimum wage.
Brenda

17Gill and her partner Pete had two young children, one of whom had health problems. When they were interviewed, Gill was also pregnant. Pete had previously worked for the same large international company for many years before being made redundant. He was unemployed for about eighteen months during which time he was receiving Job Seeker’s Allowance and applying for fifty to sixty jobs a week to make sure his benefit wasn’t stopped. He then got a job in a well-known fast food outlet.

He was working for […]. He was going out and working all hours there and he wasn’t seeing us. And that was a trial; a six week trial. At the end of six weeks they just said ‘No, you’ve not got the job’.
Gill

18Following this experience, Pete obtained work in the service sector. He was being paid £6.3119 an hour on a zero-hour contract. This required him to phone-in every day except Sunday, to see if he was needed. In practice he found he was working every day.

He goes in at 8am every morning, and he’s there all day. Last week he did 47 hours. The week before that was 50 hours. I think the zero-hour contracts are for holiday cover, aren’t they? So they don’t have to pay you holiday pay or sick pay.
Gill

19In an average week, the family was spending £95.40 more than their combined income from earnings, Child Tax Credit and Child Benefit. They could only manage this by drawing upon Pete’s redundancy money and the funds Gill’s father left after he had died the previous year.

20Jenny was a lone parent with one young child. Since she’d left school when she was sixteen, she had always worked and saw that as being very important. Nonetheless, she was struggling financially.

Rent, gas and ‘leccy bills are just outrageous; water bills, everything. You can’t go a week without having a bill. There is always a bill there; and it needs to be paid, no matter what. By the time you get to the end of the month, and you think ‘Oh, there is a week free’. Then something else happens; and there never is, there never is.
Jenny

21Jenny had been employed in her catering job for about nine months. She was working two shifts: one of ten hours; and the other of six hours. She was being paid £6.19 an hour.20 If it had been a slow day she would have to wait for her pay, hoping she would get it at the end of the next shift. She would sometimes have to wait until her employer had the money. Jenny wasn’t given payslips and although the work itself wasn’t difficult, her work situation was stressful.

My boss, the bosses that work there, they are just unreal; and she is constantly threatening me with my job, accusing me of everything. But there is nothing I can do; and everyone is like ‘Just walk out; go on the dole’. But I can’t do that. I know that my job keeps me and [her son]. So I couldn’t just walk out of work. I have to stay there and take it. It is stressful; especially with the work situation. You feel like you are working for nothing. You are working and working; and you are coming home, and you have still got nothing. It does really get you down.
Jenny

22Both Phil and his partner Dot were being paid the National Minimum Wage. Dot had two jobs, working as a care worker and as a cleaner, while Phil worked full-time in the hotel and leisure sector. They were living in social housing near to the city centre and had one child. Even with their combined income, including tax credits, they were finding it hard to make ends meet. Phil compared their situation to what he remembered of how things had been a few years previously.

Oh no, much worse. I’d say over the last two years we’ve noticed. The likes of tax credits […] we used to get like £100-odd off them in 2010, and it’s only £50-odd now. The wages haven’t gone up; they’re only rising with the minimum wage. And we were on minimum wage then. So basically, the money hasn’t ‘gone up’, it’s only gone up with the minimum wage; but the tax credits and things like that are going down. And it’s not what we had in 2010. We could afford to say ‘Yeah, we can pay that bill’. But now we’ve got to ‘rob Peter to pay Paul’. We struggle, basically, we really struggle; juggling bills. So what generally happens now is a lot of companies are always pressuring us to pay more and more, like electricity and gas. But our financial situation doesn’t allow us to do that. So we just pay what we can pay.
Phil

23Gaynor was a lone parent with one child. She had three jobs, including working in a well-known supermarket. She was struggling to pay off rent arrears on her privately rented property, as well as a pay-day loan. On average, she was left with just £8.39 a week, once her weekly expenditure was taken away from her combined earnings, tax credits and benefits.

Yeah, the living wage is £7.50, but we’re only on £6.50 minimum wage and this is what’s happened. I’m getting penalised because I have to do extra hours to get the money in, because I’ve got more going out than I’ve got coming in. And I’m getting hit in other places because I’ve done a few extra hours. My rent and my Council Tax benefits, that all went down when my wages went up. Now I’m even thinking ‘Is it even worthwhile working?’ I’ve worked nearly all my life apart from for five years where I brought my daughter up. I’ve worked since I was sixteen and sometimes I feel like, well, ‘what is the point?’
Gaynor

The wage freeze

24Carol and Ric had two children. Carol had been forced to give up her job due to chronic ill-health and the family was now relying solely on Ric’s pay as a residential care worker. He was being paid just above £7 an hour and had not had a pay increase for many years. Despite the long hours he worked, the family was in permanent debt, owing nearly £4,000. Although Ric’s hourly rate had stayed the same, changes in how it was calculated meant that he was now earning less.

Money-wise, as well, there’s been no raise at all since, I can’t remember when. In fact they cut hours. I wouldn’t say they fiddle the hours, but Ric works from 12–10pm. It used to be ‘twelve-to-twelve’ and he was paid for twelve hours; then he’d finish his shift and then he’d get the ‘sleep-in’ rate; but they’ve changed that. They’ve taken the two hours off, and now he only gets paid from ‘twelve-to-ten’; and the two extra hours go onto the ‘sleep-in’, and there’s no increase there. So for every shift he’s two hours pay down. And even things like staff expenses in work, they’re £3 a day and, if the lad [their son] wants to go to town, that’s it gone, isn’t it? It’s more than gone. There are no expenses for anything like the food and drink, and he’s out from 12 noon till 8am the next morning. He’ll take his packed lunch with him that he’ll have when he comes in at 10 at night and that’s it. And they’re basic things. There are numerous other things, like the staff bedroom and conditions and that sort of thing really. But you’re tied in, what can you do about them at the end of the day? And you’re back to that same old thing, you’re lucky to have a job; ‘like it or lump it’really. You’ve got no choice about it.
Carol

25Ruth had four children and her partner Mark had been looking for work for a long period. She was working in a clerical job and was being paid £7.80 an hour, or just about the Living Wage. Financially, things were very difficult and the family was struggling with debts of nearly £6,000. Ruth also had not had a pay rise in recent years.

When I started working, the wages were quite good. But I haven’t had a wage increase in five years. It’s been tough. Don’t get me wrong, we got a bonus at Christmas; £200. So that was good. It makes you feel a bit more appreciated. But I would like a bit more pay. I would love a bit more pay. Obviously, when you see someone else getting a three percent rise or a 1.5 percent rise, you’re a bit jealous of them like; because we are just left on the same wage.
Ruth

26Liz was a lone parent with one child, living in a privately rented property. She was working as a receptionist, but found that her finances were a constant struggle. On a weekly basis, her outgoings exceeded her combined earnings, Working Tax Credit and benefits by £27.08. As a result, she often relied on help from family members. Again, Liz had not had a pay rise that kept up with rising costs for many years.

Nothing, until last year. I think we got something like [an extra] 20p an hour; so I didn’t see nothing for it. Five years ago, when we used to have different bosses, we used to get a raise each year; even if it was like 20p or something. We’d get it every year, but now we don’t. That’s all we’ve had in the five years, 20p.
Liz

27Janet was also relying on financial help from her family to cope. She was a lone parent and had two children. She was working full-time as a teaching assistant. Her outgoings were by far exceeding her combined income from wages, tax credits and Child Benefit. Over an average week, she had £134.04 more going out than she had coming in. She had debts of over £3,000.

I can’t remember the last time my wages went up. They’ve stayed the same for years now. It’s got worse really. I love my job; but everything’s gone up apart from my salary. It’s not just me; all the other girls and staff in the school are doing three times more than what they use to do. We were only talking about it the other day; how much it’s changed. I come home with just over £1,000 a month after tax and everything, and I do overtime. Like today, I’ve been in since 7:10am. I’m paid for today; it’s breakfast club, so we get paid overtime. But by the time you get taxed, it’s nothing. And it’s only going to get taken out of my Working Family Tax Credit; so you do it out of the goodness of your heart don’t you?
Janet

28Cuts in public sector funding had made things hard for the voluntary sector organisation Luke worked at. As a result, he’d had no increase in his pay for six years. He was also getting no additional payment for being on ‘stand-by’, and having to deal with emergencies. His partner had recently had their second child and was on maternity leave from her job in a supermarket. They had a mortgage which accounted for nearly a third of their outgoings. They were only just about managing financially, with an average weekly surplus of £25.61.

In the last one or two years, the budget cutting for the Local Authority and the Government means we haven’t got any opportunity to get more funding like there used to be. So we have to think about alternatives. We can generate income but at the moment everyone’s salary has been frozen; no increases at all. We provide a critical service to the elderly, so sometimes we’ve got to deal with emergencies. So, we’ve got some unexpected working hours during the weekends and evenings. It’s classed as ‘emergencies’; but it’s quite often… and we don’t get paid; but we can claim back the time.
Luke

Working for free

29It is remarkable that people already in low paid employment should work with an expectation, or even a requirement, that they do extra unpaid work. However, this was a common experience amongst the families.

30Liz was working part-time, which enabled her to take her child to and from school. Whilst this suited her, she found that she was also expected to work unpaid hours by coming in earlier and finishing later than she was contractually obliged to.

So, it’s only ever like half-an-hour at most; although I suppose during the week that’s 2.5 hours, isn’t it? I’ve never thought of that really. But no, I don’t get paid for it. It’s expected. No flexi-time. I suppose if I wanted to I could note it down and probably push for it to get my time back; but I never have. You just go along with it.
Liz

31Gavin and Phoebe had four children. Gavin was working full-time in manufacturing. Phoebe had previously had a good job but she’d had to give it up for health reasons. The family had debts of nearly £4,000 and each week their expenditure exceeded their income by £104.31. Their financial difficulties weren’t helped by the fact that part of Gavin’s employment was unpaid.

He’s salaried, so he’s got to work at least ten percent of his hours more a week. He doesn’t get paid extra for that, it’s just part of his contract.
Phoebe

32Where breaks cannot be taken for any reason, this also means that in effect an unpaid element exists within the working day. This was true of Brenda’s workplace experience. Because of the nature of her work she often found that breaks couldn’t be taken when they were due. She then got an unsympathetic response from her manager when she raised the issue.

I didn’t have a break today; but if you were to mention anything it would be ‘Well that’s your fault’ because you chose not to have your break.
Brenda

33As a shop worker on the minimum wage, Karolina was also expected to work unpaid beyond her finishing time.

I’m paid minimum wage, plus sometimes I’ve got to stay. Say I finish work at five thirty on Saturdays; I’m never really out of the place at five-thirty, because we need to cash up the tills. Whoever is cashing up the till can’t do it on their own because they need a witness to sign off the money that’s there. So I’m spending hours, not getting paid; and I don’t think it’s right. But then when you come in late to work, you get asked ‘Why are you late?’
Karolina

34Once a job had been found, travel to and from work presented its own difficulties. Cath and Nick were spending nearly £2,500 a year putting petrol in their car which Nick needed to get to work. They had three children, one of whom had serious health issues. They were living in social housing. As well as having to travel a long distance outside of Liverpool, Nick was also expected to be available on a ‘stand-by’basis.

For the people on stand-by, they don’t get paid for that time on stand-by. They have to be available at any time; and that’s if you want to get paid. And also his time; he’s got to leave a lot earlier. So even if he doesn’t start till half-six, he’s got to leave at half-past four, two hours before so he doesn’t get stuck in the rush hour traffic.
Cath

Escaping low-pay?

35Joy was a lone-parent with one child. She was living in privately rented property and had been employed as part-time as a receptionist for twelve years. She was paying back debts of over £2,000. Joy saw no real prospect of improving her situation.

There’s nothing within my workplace that would affect my pay rate. They can just pay minimum wage, unless there’s a manager’s role; but we only have like one manager. There’s nothing really to increase the pay. I’ve just picked up a day in work to increase my monthly pay.
Joy

36Apart from increases linked to the National Minimum Wage, Liz didn’t think her financial situation or her job prospects would improve.

I’ve been in the same job for ten years this year. I don’t get nothing major; just like when the minimum wage goes up. I don’t even know what it is to be honest; but whenever we get a rise, it’s not really noticeable, especially because I’m parttime. We get graded on what we do but to be honest with you, they try and keep you at the basic rate if they can anyway. So it doesn’t matter what you do. I’m that used to it now, that I’m just like I never think I’ll get increases and anything I do get is a bonus. I’ve never put in for a promotion and because of the hours that I work there probably aren’t any opportunities.
Liz

37Brenda was in debt after having gone to university as a mature student to improve her employment prospects. She now felt she would have to do further training to escape being on the minimum wage.

I’m not sure […] what my plan was for the future. It was to kind of look for a salaried, paid job, rather than shift [work] at minimum wage. I’m in £30,000 of debt from uni; so I don’t want to be getting minimum wage all my life. I was looking to maybe do a bit more training. Yeah, kind of just look elsewhere for something that pays a salary.
Brenda

38However, Brenda was already having to find a £1,000 a year to keep her training up to date, and couldn’t afford to do further training on top of this.

Another one for me is the position that I’m in. For me to improve my training, we have to do continuing development courses every year; it’s self-funded isn’t it? So, that’s another thing for me to keep going. It’s like £1,000 a course; it’s like £1,400 for that course; and then it’s a six-week course.
Brenda

39Karolina and her partner Micha were from Poland and had been in Britain for eight years. Karolina was working part-time in a shop. Micha was doing full-time manual work, taking as much overtime as possible to manage financially. Both were on the minimum wage. They had one young child and were expecting their second. Micha had used the last of their savings at the time to pay for training. He was hoping that this would enable him to get a better position at his work; but it hadn’t worked out as planned. Karolina didn’t feel he had any prospects with his employer.

Micha just said that [he needed] that ‘card’ to be able to [improve his job]. He had to pay for it, because when he was jobless he got it himself. Because he asked the people in the job-centre if they would arrange that for him and every time they said, ‘Oh, we need to find out’or ‘We haven’t got that course at the moment’. So he spent the last of our money on that. He paid about £300 for it; and he got that done because he was hoping to get a [better paid] job. But then he couldn’t get the job.
Karolina

40Colette was working full-time as a teaching assistant, on a temporary contract. She had two children and was living in privately rented property. On a weekly basis, her financial outgoings exceeded her combined wages, Child Tax Credit and Child Benefit by £8.46. She had debts of over £1,300. Colette saw training as a way of improving her prospects. However, that meant doing training on top of work, and at the same time as looking after her family. She was finding the situation overwhelming.

At the moment I am trained at NVQ Level 2. I’ve got an opportunity to become a Level 3. But I struggle with that because it is done out of work hours. Also I’ve got the child-care to worry about; plus the exhaustion. I am absolutely shattered when I come home at the moment. I don’t think I could go to university and study; and as you can see, trying to get some peace and quiet! I could only do it when [the children] have gone to bed.
Colette

41Being self-employed Emma could only see one way of earning more money.

I’m self-employed. The only way I could improve what I’m doing would be to take more hours on. But I’d have to take a huge amount of hours on, because I think the [threshold] for the Working Tax Credit―I don’t know if it’s 30 hours. But then it’s picking [her son] up; and it’s like holidays over the summer. If I work 30 hours, it’s getting somebody to mind him for 30 hours; and I couldn’t afford to pay for him to go to school clubs or that type of thing. The other thing would be to maybe bring work home with me, like ironing, which I could do at home, in the evenings; and then obviously [her son] is with me anyway. So that could be a bit of a boost.
Emma

Self-employment; the way out?

42Self-employment, a ‘way out’ of poverty much trumpeted by successive governments in Britain since the 1980s, offered no solutions to the family members who had tried it.

43Steve was categorised as ‘self-employed’ even though he had been working full-time for the same company for a number of years. He and Sian had three children. Sian described Steve’s work situation. Steve was earning the Living Wage, but that still left the family spending on average £10.72 more each week than they had from their combined wages, tax credits and benefits. They had debts of over £1,200 and frequently needed help financially from family members.

He’s classed as self-employed; he’s been with the firm for seven years. He’s on just under £8. They [the workforce] asked for a pay rise last year and they [the employer] said, ‘No’; but he gets his petrol paid. There’s a works van they all get in to go to work. But his wages, they’re not enough for what he does.
Sian

44Emma had four children. One was working and another was in full-time education. She was working as a self-employed cleaner, earning £6.20 an hour. On a weekly basis her outgoings were exceeding her combined wages, Child Tax Credit and Child Benefit by £59.60 a week. She was paying back debts of £1,584. Emma explained that she would much rather have been working for an employer, than have the insecurity of not knowing whether she would have work from one week to the next.

I just find it a struggle to go out to work and then at the end of the week there’s nothing left. It’s just disheartening; it gets me down. I worry about my credit cards, but saying that though, I still use them. I’ve got to; there’s no other way I can work round it. I think a lot of people are in a very similar situation. I‘d like not to be self-employed and work for a company [so that I] didn’t have to do all the book-work and knew from one week to the next that my job was safe; knew what money was coming in. Being self-employed I can’t be off, because I don’t get paid. If anyone cancels a job at the last minute, I don’t get paid. It’s not reliable. I would much prefer to be working for someone; 40 hours a week with a wage and enough money to do stuff.
Emma

Help from the state?

45Changes to tax credits were having a major impact on Ruth’s income and were a part of the reason why the family was now over £5,500 in debt.

When the government came in last time, the new government, the Coalition, I lost a hundred and twenty [pounds] a week in Working Tax Credits. So I only get Child Tax Credits now and my wage. Previously I had had Working Tax Credits, so it was like a massive amount of money to lose. So it’s completely different now to then.
Ruth

46This situation had been compounded by the loss of Housing Benefit after her daughter had left school.

I just don’t think things are made very easy for people for the transition. They stop everything; and I just think, ‘If you know that transition is going to happen, why can’t it be made that little bit more simple for people? Especially when they [the landlord] are sending letters out saying the next step is eviction!
Ruth

47Eileen had seen her tax credits go down by £60 a month. Her finances had also been affected by one of her children turning eighteen.

I’ve got a lot less money coming in now because [her son] has turned eighteen. I used to get help towards his rent. I used to get Child Benefit and I used to get a few quid for Family Tax Credit. That’s all stopped; even though he’s doing nothing. That all stopped; all of a sudden. There’s a lot less money coming in. So we’re feeling it.

48Eileen

49A change in the rules for Working Tax Credit had affected Don and Terri.

You could work whatever, like twenty hours a week, and you’d get Working Tax Credits. They stopped my Working Tax Credit without telling me because my partner didn’t work enough hours.
Terri

50Amy was told she had been overpaid tax credits and couldn’t understand why.

From last August, I’ve lost tax credits for my son because he was at school leaving age. My tax credits had stopped for him, and my family allowance had stopped for him as well. The Child Benefit had stopped for him. But I’ve had a letter from ‘the tax credits’ recently saying that there’s been an overpayment, although all the changes of circumstances were notified to them. So my tax credits have now reduced as well; and they’re taking back money for an overpayment. I will query it when I phone them, because I really don’t understand where the overpayments come from. It was a couple of thousand pounds.
Amy

51A forced reduction in her working hours by her employer meant a double loss of income for Gaynor.

Mine are like down to thirteen hours a week anyway; that’s what my contract is. I lose my working tax [credit] below sixteen hours and then I’ll be down to £66 a week. Well hopefully, more work will come up because thirteen hours a week just isn’t good enough. It took me eighteen months to get the job that I’ve got now. I don’t want to wait another eighteen months for another job. I’ve had this job for a year and she still hasn’t offered me extra hours.
Gaynor

52At the same time as Brenda’s wages rose by 10p an hour, she lost her Council Tax Benefit21 which meant that her Council Tax went up from £20 to £80 a month (including arrears payments) so that she was no better-off. She had been offered more hours, but the effect on her Working Tax Credit would have meant that her overall income wouldn’t actually rise.

I’d even do more hours, but it doesn’t financially benefit me if I did. I’d lose so much in tax credits; so it’s not worth it.
Brenda

53Some of the families had experienced considerable difficulties arising from confusion over the payment of Council Tax and Housing Benefit. For some, this has resulted in payments being stopped or reduced, causing a great deal of anxiety and stress.

54Brenda had assumed that she didn’t need to tell the Local Authority how the increase in the minimum wage had affected her pay. This had led her into serious difficulties over the payment of Council Tax.

It’s minimum wage and that just happened automatically over the period of a year. Then all of a sudden I got a letter to say ‘Have your wages changed? ’I was like, ‘I didn’t think I needed to let anyone know’. It was just a small increase. I said, ‘I’ve only been in proper employment for a few years now’. So I got a letter from work to say the wages had increased, and then all of a sudden I got a letter from the Council saying ‘You’ve been overpaid by’, I think it was ‘£1,400, and we want it back’. It turns out that the overpayment is for the rent, and they want £11.50 a week; and then my Council Tax is £30 a week. So I’m paying out £41.50 a week. That’s over £160 a month; for what? For Council Tax, and for my wages going up 10p! I don’t get it.
Brenda

55As well as difficulties over tax credits, Amy was having problems with her Housing Benefit through no fault of her own. She had received a letter from her local tax office stating that a previous tenant was living with her. In fact, the other tenant hadn’t lived there for fourteen years. Eventually the mistake was acknowledged, but not before she was threatened with eviction and had suffered considerable worry and anxiety.

Then I got another letter, saying that they’d stop the payments because they had reason to believe, not only was he living in the property, but that he was earning £499 a week. So I said ‘If you find him and he’s earning £499, then tell him he can squeeze into the house any time’. But that stopped my Housing Benefit payments; and then that caused rent arrears on my account. I’m in the middle of trying to sort it out now, because they want me to go to court for eviction for my house, even though the letters and everything had gone in.
Amy

56When her daughter went on an apprenticeship scheme, Zoe saw her Housing Benefit unexpectedly cut.

My Housing Benefit has dropped to £56 a week. I just thought with my daughter it would be classed as education, training. She gets £90 a week and I didn’t think it would affect me that much.
Sue

57She experienced serious stress as a result of mistakes that were made in the way her Housing Benefit was calculated.

I think ‘Housing Benefit’ were a bit naughty though, because they got me so stressed; and, in the end, I hadn’t done anything wrong. It was just that I thought I was going to go to court. And all the letters they sent me, showed that I had given them the changes; but it was their fault. So all that worry and all that ‘Anything you have to say will be taken down’. I was thinking I was going to lose my place.
Sue

58Liz had also had problems with her Housing Benefit, arising from confusion about what she should have been paying.

I get Housing Benefit that changes all the time, because one minute they say I’m entitled to stuff; then they say I’m not entitled to it. Then they say I am again; and then they say I’m in debt to them, and they’re taking money off me. Every year, without fail, it happens; every single year. Then half way through the year I’ll get another letter off them changing their mind again. My Council Tax, I get the sole home occupancy discount; but my Council Tax is still £77 a month or something like that.
Liz

59There had been uncertainty as to whether Sian and Steve should have been getting Housing Benefit.

We don’t get any Housing Benefit [discount] at all. I recently phoned them up because what they had us down for was a lot more than he actually earned. What they had was sixteen and a half [thousand pounds]; and he’s only on thirteen and a half.
Steve

60Joy was prepared to go to court over what she felt was the unfair way in which her Housing Benefit and Council Tax arrears were being dealt with.

My Housing Benefit was overpaid, and now they have cut it down to £100. I appealed against it, and the Council Tax as well, but I still owe them the money. And whereas I was paying £50 a month Council Tax, they now want £300 a month up until April, and then I will go back onto the £100 per month. I’m not entitled to any help now and I’ve got to pay everything out of my wages. I thought they had made a mistake, and that’s why I appealed; but they have come back for £300. I shouldn’t have been getting any Council Tax benefit; but they said they are still entitled to claim it back off you. I think I was paying £50 a month instead of £75, over a couple of years. They said ‘You can either pay it, or not and wait until they take you to court’. I asked if I could come to some other arrangement and they said ‘No, just wait until they take you to court’. Since I got that letter I have made one payment of £100. So I’m not paying, and am going to wait until the court try to sort something out. It was their mistake. Out of my wages, I wouldn’t be able to pay the rent and Council Tax and all the other bills with it.
Joy

61The Disability Living Allowance had made a significant difference to both Cath’s and Amber’s families. Cath said that the extra financial support it provided was crucial.

Now, having a child with special needs, we get that extra money. If he didn’t have his condition then we wouldn’t get that extra money. We would struggle even more because we wouldn’t have that extra you get with the DLA. I think it’s called a ‘premium’ with the Child Tax Credits. So you get a little top up; but it’s got to be a certain rate though. Not everyone qualifies, so you have to be on a certain rate of the DLA, and then you qualify for a little bit extra. Now that’s not a luxury, and I’ve said many times I would prefer my son not to have anything; to have a normal life.
Cath

62Amber had to fight to get Disability Living Allowance for her son.

[Things are] a lot easier now because I have been awarded DLA. I wasn’t awarded DLA two years ago. I can’t get him on transport because of the way he is. That was a massive struggle. We lived so far away from the school at that time; so I was getting a taxi every single morning with him at about £7 a taxi. So we are looking at £14 a day. It was outrageous.
Amber

63Both Ric and Carol’s children had chronic health problems and they were hoping they would qualify for disability support. However, Carol had not had a good experience of applying for the benefit.

I’m just thinking about applying for DLA for the kids actually. I’ve applied for myself but they just turned me straight down. I’ve got this, my leg dislocates; so I spend quite a lot of time on crutches and a leg brace. It certainly is a lot of steps [in the application process] for a leg brace; but I’m kind of stuck, if you know what I mean.
Carol

64Fiona had two children. She was living with members of her extended family, and not with her partner. She was trying to establish her own business, but until she could draw an income from the business her main source of income was Working Tax Credit, amounting to £840 a month. She was paying back debts of nearly £3,500. She was concerned about the changes to the benefits system and how they would affect her. Particularly, she was worried that she wouldn’t be entitled to the new Universal Credit and so would have abandon her business.

What is slightly concerning is what will happen if the Universal Credit scheme comes through, because of the limits on how long you can run a business without making a profit. And that’s a little bit terrifying, especially because no one seems to know how it will work; what the restrictions will be. I kind of keep watching that with hints of terror.
Fiona

65Amy too had concerns about how Universal Credit would work. She was also very aware of the negative stereotyping of welfare claimants.

There’s a lot of talk about people being on benefits; people saying ‘Go out and get a job’. And then there’s other people at the other end of the spectrum, the rich, and when they give statistics about benefits they automatically assume it’s people out of work; but for the majority of the time, it’s not. It’s people who are working on a low-income or part-time wages; and that’s where a lot of the benefits bill comes from. But too often it’s categorised as the ‘too lazy to get off their bums and get a job’ lot. We are just forgotten about. I’m OK in that I’ve got a contract for thirty-seven hours; but there are lots of people with zero-hours. How do you budget with a contract like that? Forty hours one week and ten the next? People need proper contracts and fair pay as well. Pay has to reflect living costs.
Amy

66Karen and Steve had four children; the youngest was just a baby. Karen had been made redundant from her job at the start of the year. They were now relying on Steve’s public sector administration job that gave him about £1,000 a month after tax. Karen didn’t know what the changes would mean for her.

I’m still going to struggle; a massive struggle. You hope something nice is going to happen to you. I don’t think there is going to be any help out there for us. There are going to be a lot of changes in benefits like the Universal Credits. Things are changing. I’ve started with my credit union and I’m trying to put a little bit away. What’s going to change? There should be more help.
Karen

67The thresholds that regulate the tax and benefit system were at least partly responsible for the difficulties and mistakes the families had experienced with routine payments.

If my partner worked more hours, I would lose my Housing Benefit. So we are in a catch. He works twenty hours; then I get my Housing Benefit. But if he was to go up [in hours] I would get working tax [credit] but lose my Housing Benefit. So I wouldn’t gain.
Emma

68Emma was trying to calculate whether she should try to increase her weekly working hours from sixteen to 24. This would have meant asking her mother to pick up the children from school which she felt would be too much for her. The fact that her son was now working plus the fact that she had recently increased her hours up to sixteen, meant that she now had to pay Council Tax and had also lost free school meals for one of her other children.

And the other big thing was when, before I started working the sixteen hours, I didn’t have to pay any Council Tax. Now I have to pay £112 a month. Because Sam works as well, it works out that his wages and my wages are on the cut-off. So I don’t get any [discount]. He works four days; but it’s shift work, so it’s classed as full-time.
Emma

69Gaynor was also finding that if she increased her hours she would lose her Housing Benefit.

I’m only doing sixteen hours for thirty-nine weeks a year; so that entitles me to full Housing Benefit [discount]. So as soon as I do any extra hours or the extra weeks, I won’t get that; and that’s when it’s going to hit me.
Gaynor

70She knew that her benefit payments would be affected when her eldest child became eighteen. However she didn’t yet know by how much, and whether it explained the reduction she had already received.

I seem to be about £70 down a week. I’m not sure why that is. Not sure if it’s because of the change; but I’m sure it will level itself out, won’t it? But it’s £70 a week less than what it was. That’s a lot!
Gaynor

71Uncertainty about entitlements was a common experience for the families. Gill admitted that she and Pete didn’t understand the system.

I’ve said to Pete ‘We’ll have to look into it’, because you get your Child Tax Credits and we’re entitled to Working Tax Credits. But when you don’t know the system… I get Child Tax Credits now, but he’s entitled to Working Tax Credits. We’ve just applied for that. Someone told us you had to work a minimum number of hours to get something. I was thinking that maybe we should look at going to the CAB or something.
Gill

72Phil and Dot discovered that they had been overpaid for their Working Tax Credit, but didn’t understand how it had been calculated.

We’ve got a tax credit debt for an overpayment that was a couple of thousand that they’ve paid us; and we have to pay it back. They really haven’t explained it. They just lumped the figures together and, honestly, you look at it and you phone them up to contest them, and they said ‘No, it’s an overpayment’. We’ve got to pay it back. We are getting tax credits, but we have to pay that back by direct debit; £20 a week. How it is with my partner, she’s scared in case they send bailiffs or someone from the [Local] Authority round to the house.
Phil

73The level of complexity and the errors and inefficiencies in operating the benefit system, coupled with the need for advice on matters such as personal debt and housing, makes the Citizens’ Advice Bureau and other advice services more needed than ever. Carol’s debt problems and uncertainty about her entitlements illustrated this.

I get Child Tax Credit but we don’t get ‘working families’ [Tax Credit]. I’m not sure if you both have to be working for that or not? It’s been checked numerous times. I’ve had lots of help from the CAB. I’ve been to debt counselling and all that. Actually, I am currently, I’m just coming to the end of a―it’s not a bankruptcy order it’s the […]― I can’t remember what it’s called. But basically, it only lasts a year; it wiped out all my debts and I started again with a new bank account. So, I can’t borrow or anything. Basically, it amounted to £10,000 that I just couldn’t pay off. Over the years I’d made an arrangement through the CAB. I was paying them off at like £25 a month.
Carol

74Without the advice they had received from their local Citizens’ Advice Bureau, Terri and Don wouldn’t have known what to do when the bailiff arrived at their door.

I came home one day and there was a letter posted through the door and a man in a van. So I looked at the letter and I said to my partner ‘That’s a bailiff’s letter’. I had only just paid them the £50. So I rang them and said ‘What’s he sitting outside for?’ The man said ‘Would you like to come out and speak to me’. So I said ‘Yeah, I would’. So I went out and said, ‘It’s lowered’ [the repayment amount]. He said, ‘No they want you to pay £50 to me as well and I said, ‘I can’t do that’. So, I flew round to [name at CAB] and I said ‘He is demanding I pay him as well’. She said ‘Hang on’ and she rang the enforcement officer for Liverpool City Council and they said ‘No, £50 and that’s it’.
Terri

75Terri then got advice about her other debts.

Well [name at CAB] told me to put in for ‘support tariff’, and ‘the water’ too. So I did, and I get a letter saying they’d given it to me: which cleared it and put me £15 in arrears. I don’t have to pay them now till 7th April.
Terri

76Support and advice services such as Liverpool Citizens Support Scheme and the local Citizens’ Advice Bureau play a vital role in assisting people who are in crisis and helping them navigate the complexities of the welfare system. At a time when pressures on these services are increasing, the funding they rely upon is diminishing.

77Politicians and the media have made sure that the issue of welfare benefits have never strayed far from the news headlines. Continued media focus on ‘benefit scroungers’ has created a stigma for those receiving benefits. An old and crude stereotype also perpetuated by the media is that of the lone parent having children to access state support. Both Colette and Liz were lone parents who were only marginally better-off working. Despite the hardships of low paid work and the slightness of the resulting financial advantage, contrary to this stereotype they believed strongly in the importance of working.

Funnily enough I was discussing this with my Mum the other day. Because my contract is up for renewal, we worked out the worst case scenario if I lost my job and could not get another one and had to go back on benefits. I would have to move from here because I wouldn’t be able to afford the rent. We worked out I am £10 better-off for working thirty-five hours a week. But I said ‘It is about your own self-respect and for what I am showing them’ [the children].
Colette

78Liz compared her finances with a friend who was also a lone parent, but not in work.

We sat down and worked out that I was £5 better-off than she was a week. I feel like I am working, mainly for my own sanity, and I want to instil it into [her son] as well, because I don’t want him to think that you can just sit at home and get paid for doing nothing, you know. My Dad never did that; my dad’s always worked. My Mum looked after us and brought us up and looked after the home and stuff. But my Dad did work. So in mine and [her son’s] family, I’ve got to be both parents to him. So I think I need to be his role model, and I need to work to show him that he’s got to work as well when he’s older.
Liz

79Even with the importance they attach to working, the families had strong views about low paid employment. Amy and Amber highlighted the failure of the National Minimum Wage to keep pace with inflation.

To be honest with you, I think it’s ‘pie in the sky’ isn’t it, £6.50? The way things are increasing. Everything is increasing: your rent; your Council Tax; your food; your fuel. Everything is going up; and the rate of pay isn’t going up to meet that. To me it doesn’t make sense; and when you think that you’ve got these bigwigs that are on hundreds of thousands of pounds a year, who sit there and get somebody else to do their work for them.
Amy

Like, when you think [about] the minimum wage, ten years ago when I was working in a [well-known fast-food outlet], it was probably about £5.80 something. So that has only increased by 80p in ten years as opposed to the increases; you know, like, you can’t even get a packet of 10p crisps any more. Everything has increased: everything; Council Tax; gas; electric. It is all increasing by a massive percentage and yet the national wage isn’t. I think that’s wrong. I think as well, there are a lot of jobs now that are minimum wage that ten years ago wouldn’t have been.
Amber

80Sue felt that working makes a person feel part of society. She wanted become a nurse so that she could make a difference in the world. She was in the last year of her nurse training and was having to do agency work to cope financially. The agency paid the National Minimum Wage. She estimated that the bursary22 she was getting as a student nurse paid her about £3 an hour for her weekly thirty hours on the ward. She was paying back a debt of nearly £4,000 and had an average of just £8.57 a week left after necessary expenditure. She had a daughter who was living away from home, and a teenage son on an apprenticeship. She made the point that families on the minimum wage rely on tax credits that in effect subsidise employers.

I think we talked about this another time, and I was saying I kind of find that I benefit loads from the Tax Credit system and it’s a fantastic short term measure. But I think as a long-term measure, it does allow businesses that could afford to pay people more, not to pay people more. I don’t at all see how big, massive corporations can justify declaring massive profits, but relying on the Government to pay their workers extra money if they’ve got children to care for.
Sue

81Fiona had reservations about how the National Minimum Wage worked in practice.

I understand why we have the minimum wage and now we’ve got it, it absolutely should be a living wage. But again I have that thing of perhaps, even with good intentions, governments mess things up an awful lot of the time. By having a minimum wage you’re actually setting a lower bar [for the employers], which if they can get away with paying it, they will. So it’s good news for people on the minimum wage that there’s a rise; but it isn’t that much is it? 19p an hour? And it’s not going to make a substantial difference for many people. I like the tax threshold increase more.
Fiona

82Increasing wages to improve the incentive to work was suggested by Colette.

I think as well, with regards to benefits and stuff, I am £10 better-off working full-time and I want to work. There are plenty of people who would say [why work] for the sake of £10? They need to give you more incentive to work and make it more worth your while. Yeah, in that sense wages should go up. You wouldn’t want to be on benefits if you knew you would be earning a lot more working.
Colette

Conclusion

83Based upon the experience of these families we can see that there is a cruel contrast between government rhetoric regarding ‘fairness’ and lifting pay levels, and the reality for those struggling on low pay and their families. An uplift in the National Minimum Wage, still far below the Living Wage, does not by itself eliminate the problems of life for those who must survive on the lowest rates of pay. For that to happen the full complexity of the factors that shape the experience of life on low pay would need to be addressed. So, any potential improvements to living standards for such families arising from an increase in the National Minimum Wage to £7.50, are cancelled out for millions of families by weak enforcement, age caps, cuts to in-work benefits, the introduction of charges for a growing range of essential services, increases in school-related costs, insecure contracts and so on. It is the entirety of these financial pressures and more that create the problem of working poverty. This is what needs to be lifted in order to address the unfairness of wealth distribution that has characterised British society for forty years.

84The paradox then, of policies that purport to ‘end poverty pay’ or to ‘lift the poorest out of poverty’ from successive governments, and the reality of rising poverty rates and the UK’s stubborn position near the bottom of the poverty league tables of the industrialised countries is not so hard to understand. For example, whilst the National Minimum Wage rose to £7.50 in 2017, so also did the numbers of workers on zero-hour contracts and with ‘self-employed’ status even whilst working for the same company over several years. Moreover, the ‘bunching’ of many workers at or slightly above the National Minimum Wage means that it is a double edged-sword, representing both a floor beneath which wage levels should not fall, and a ceiling above which it is difficult to rise. Given the constraints within which minimum wage policy operates then, it should come as no surprise that relative poverty has continued to worsen, and as the gap between the ‘haves’ and the ‘have-nots’ has widened with each successive cycle of employment policy.

85This situation also gives the lie to the claims by successive governments over the last thirty years that their employment and welfare policies have aimed to eliminate ‘benefit-dependency’. The hollowness of that rhetoric lies in the fact that the real effect has been to create a new type of dependency; the dependency upon low paid work with no escape through significant improvement in wage levels, short-erm use of benefits, upskilling or retraining. Whilst the benefits are being reduced and removed, the dependency upon work that is poorly paid and insecure remains. The only real beneficiaries in this situation are the state as it regressively relinquishes its responsibilities towards low paid workers, and employers who continue to pay their workers at or marginally above the minimum required of them.