Living standards, poverty and inequality in the UK: 2020

Living standards, inequality and poverty in the UK

Pascale Bourquin, Robert Joyce and Agnes Norris Keiller

© Institute for Fiscal Studies Living Standards, Poverty and Inequality in the UK: 2020

£400

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£520

£54020

02–0

3

2003

–04

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–05

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2007

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2008

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2018

–19Av

erag

e ne

t equ

ival

ised

hou

seho

ld in

com

e (£

per

wee

k in

201

8–20

19 p

rices

)Median real UK household income


1.2% per year

1.6% per year

-0.6% per year

No growthBHC income

£400

£420

£440

£460

£480

£500

£520

£54020

02–0

3

2003

–04

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erag

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hou

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per

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8-19

pric

es)

Median real UK household income


1.2% per year

1.6% per year

-0.6% per year

No growth

AHC income

BHC income

£320

£340

£360

£380

£400

£420

£440

£46020

02–0

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2003

–04

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per

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8-19

pric

es)

Median real UK household (AHC) income, by age group


Aged 60+All

Aged less than 60

Real growth in percentiles of household income (AHC) since 2007-08


-6%

-4%

-2%

0%

2%

4%

6%20

07−0

8

2008

−09

2009

−10

2010

−11

2011

−12

2012

−13

2013

−14

2014

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2015

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Real

gro

wth

sin

ce 2

007−

08

10th percentile

50th percentile

90th percentile

© Institute for Fiscal Studies

How do we measure poverty?

Focus on income poverty

‒ Can be measured before or after housing costs (BHC or AHC) – we focus on AHC

Absolute poverty

‒ Fixed poverty line: 60% of median 2010-11 income (inflation adjusted)

‒ Approx. £13,200 a year for a childless couple (AHC)

Relative poverty

‒ Moving poverty line: 60% of contemporary median income

‒ Approx. £13,900 a year for a childless couple (AHC)

Living Standards, Poverty and Inequality in the UK: 2020


Absolute poverty rate (AHC) by demographic group


0%

5%

10%

15%

20%

25%

30%

35%

2007

‒08

2008

‒09

2009

‒10

2010

‒11

2011

‒12

2012

‒13

2013

‒14

2014

‒15

2015

‒16

2016

‒17

2017

‒18

2018

‒19

Pensioners

Working-age non-parents

All

Children


Percentage point change in absolute poverty rate (AHC) over 8-year periods


-7

-6

-5

-4

-3

-2

-1

0

1961−1969 1970−1978 1980−1988 1990−1998 2000−2008 2010−2018

Chan

ge in

abs

olut

e po

vert

y ra

te

(ppt

.)

Note: The absolute poverty line is defined as 60% of median income in the initial year of each eight-year period.


-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

Lowest income20%

Middle income20%

Highest income20%

All

Cont

ribu

tion

s to

cha

nge

in n

et

hous

ehol

d in

com

eDrivers of mean net income growth between 2016-17 and 2018-19


Total net income growth


-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

Lowest income20%

Middle income20%

Highest income20%

All

Cont

ribu

tion

s to

cha

nge

in n

et

hous

ehol

d in

com



Working-age benefits

Other

Net employment earnings



-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

Lowest income20%

Middle income20%

Highest income20%

All

Cont

ribu

tion

s to

cha

nge

in n

et

hous

ehol

d in

com




Working-age benefits

Other

Net employment earnings


Relative poverty rates (AHC) among workers by job characteristics (2015−2019)


0% 5% 10% 15% 20%

All employees

Employees in shutdown sectors

Employees in other sectors

Employees, can easily work from home

Employees, cannot easily work from home

Note: The sectors classed as being directly affected by the lockdown are (with four-digit Standard Industrial Classification (SIC) codes in parentheses): non-food, non-pharmaceutical retail (4719, 4730–4772, 4776–4799); passenger transport (4910, 4931–4939, 5010, 5030, 5110); accommodation and food (5510–5630); travel (7911–7990); childcare (8510, 8891); arts and leisure (9001–9329 except ‘artistic creation’ 9003); personal care (9601–9609 except ‘funeral and related activities’ 9603); and domestic services (9700). Ease of working from home based on Dingel and Neiman (2020).


Benefit entitlement among workless households (working-age only)

£0

£5,000

£10,000

£15,000

£20,000

£25,000

£30,000

£35,000

AllAll with childrenLone parent, 3+ childrenCouple, 3+ children

Mea

n re

al a

nnua

l ben

efit

ent

itle

men

t (2

020-

21 p

rice

s)

2020-21, no temporary measures

Temporary increases in 2020-21

Note: Entitlements give the mean entitlement among workless households in each category observed in the 2018−19 FRS. To focus on households of working age, we exclude households including any adults aged 60 or over. Monetary values indicate entitlements if making a new benefit claim, ignore free school meals and are expressed in 2020−21 prices using CPI uprating.



Benefit entitlement among workless households (working-age only)

£0

£5,000

£10,000

£15,000

£20,000

£25,000

£30,000

£35,000

AllAll with childrenLone parent, 3+ childrenCouple, 3+ children

Mea

n re

al a

nnua

l ben

efit

ent

itle

men

t (2

020-

21 p

rice

s)

2020-21, no temporary measures

Temporary increases in 2020-21

Note: Entitlements give the mean entitlement among workless households in each category observed in the 2018−19 FRS. To focus on households of working age, we exclude households including any adults aged 60 or over. Monetary values indicate entitlements if making a new benefit claim, ignore free school meals and are expressed in 2020−21 prices using CPI uprating.

Cuts since 2011-12


£1,600

£2,900


Summary

• COVID-19 crisis hit at a time where we are still paying the price of the long hangover from the last recession

• Years of low earnings growth

• Pared-back benefit system

• Disappointing median income growth and poverty trends

• Those who look most at risk during pandemic already doing poorly

• Underlines crucial importance of avoiding such severe persistent effects as we bounce back from this recession


Appendix slides


Real growth in percentiles of household income (BHC) since 2007-08


-6%

-4%

-2%

0%

2%

4%

6%

8%

10%20

07−0

8

2008

−09

2009

−10

2010

−11

2011

−12

2012

−13

2013

−14

2014

−15

2015

−16

2016

−17

2017

−18

2018

−19

Real

gro

wth

sin

ce 2

007−

08 10th percentile

50th percentile

90th percentile


Relative poverty rate (AHC) by demographic group


0%

5%

10%

15%

20%

25%

30%

35%

40%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

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2018

PensionersWorking-age non-parents

All

Children

Jobs and job quality between the eve of the Great Recession and the eve of COVID-19

Pascale Bourquin and Tom Waters


Strong employment growth was one of the success stories of the recoveryEmployment rate 25-64


60%

65%

70%

75%

80%

85%

90%

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Men

Women

All

Change in employment by household incomeEmployment rate 25–64


0

2

4

6

8

10

12

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10

Perc

enta

ge p

oin

t ch

ange

in e

mp

loym

ent

rate

, 20

07

-08

to

20

18

-1

9

Emp

loym

ent

rate

Equivalised AHC household income decile

2007–08



0

2

4

6

8

10

12

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10

Perc

enta

ge p

oin

t ch

ange

in e

mp

loym

ent

rate

, 20

07

-08

to

20

18

-1

9

Emp

loym

ent

rate


2018–19

2007–08



0

2

4

6

8

10

12

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10

Perc

enta

ge p

oin

t ch

ange

in e

mp

loym

ent

rate

, 20

07

-08

to

20

18

-1

9

Emp

loym

ent

rate


2018–19

2007–08Change (right axis)

50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%

All

FemaleMale

Age 25–34Age 35–44Age 45–54Age 55–64

WhiteNon-white

ImmigrantNon-immigrant

Single female, no kidsSingle female, has kids

Female in couple, no kidsFemale in couple, has kids

Single male, no kidsSingle male, has kids

Male in couple, no kidsMale in couple, has kids

● 2007 ● 2019

Sex

Age

Ethnicity

Immigrant

Family type

All

While some groups saw faster growth than others, almost all saw an increaseEmployment rate, 25-64


1. Employment growth in all groups

2. Faster growth for groups with low rates to begin with

3. Doesn’t appear to be ‘hiding’ lower employment rates for others

0.0 1.0 2.0 3.0 4.0 5.0

Wholesale, retail, transportation

Human health and social health activities

Manufacturing

Professional activities incl. finance

Education

Construction

Public admin. & defence, social security

Administrative and support services

Information and communication

Miscellaneous

Accommodation and food services

Agriculture, forestry, mining

Electricity, gas, water supply

Millions of workers

Which sectors did these jobs appear in?


20192007

How did these trends affect exposure to the COVID-19 crisis?


• All of the growth in employment can be accounted for in jobs that can be done from home

• No change in the share of the workforce in industries that have been shut down

• Increase in the share of workers with childcare responsibilities

• Increase in the share of workers classified as keyworkers

Changes in reported job ‘quality’ are mixed




* indicates a statistically significant difference at the 10% level; ** indicates a statistically significant difference at the 5% level.

0.0% 20.0% 40.0% 60.0% 80.0% 100.0%

Job is interesting*Can work independently*

Can help others in jobJob useful to society**

Job uses my skills**

Will work hard to help firm**Proud of firm

Would turn down higher paid job to stay with firmGood relations with colleaguesGood relations with managers

Opportunities for advancement are high**

● 2005 ● 2015

Interest in & value of work

Relations with managers, colleagues, firm

Progression



* indicates a statistically significant difference at the 10% level; ** indicates a statistically significant difference at the 5% level.

0.0% 20.0% 40.0% 60.0% 80.0% 100.0%

Job is interesting*Can work independently*

Can help others in jobJob useful to society**

Job uses my skills**

Will work hard to help firm**Proud of firm

Would turn down higher paid job to stay with firmGood relations with colleaguesGood relations with managers

Opportunities for advancement are high**

Often hard physical work**Often stressful*

Often interferes with family life

Job is secureDo not worry much about losing job*

Flexibility in working hoursEasy to get hour off for personal matters**

● 2005 ● 2015

Interest in & value of work

Difficulties at work

Relations with managers, colleagues, firm

Job security

Flexibility

Progression

-15%

-10%

-5%

0%

5%

10%

15%

20%

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Real

-ter

ms

chan

ge

Percentile of hourly wage distribution

Pay has been very poorReal growth in hourly wages, 2007 to 2019, age 25-64


Women

All

Men

Conclusion

• Employment growth clearly was very strong, esp. for poorer households

• Come at a time when other labour market outcomes have been mixed (job quality) or poor (pay)

• Current crisis: undercut the one thing holding poverty down

• Challenge for poverty is to get employment back to where it was pre-COVID – as well as the (already existing!) issues of poor pay, insecurity


Documents

Living standards, poverty and inequality in the UK: 2020