Work should be a reliable route out of poverty, but the majority of people in poverty are now in working families; seven in ten children growing up in poverty live in a working family; and four million workers (about one in eight) live in poverty (Innes 2020). This is in spite of the UK's employment rate hitting an all-time high in the years leading up to the Covid-19 pandemic in 2020 and the UK having one of the highest minimum hourly wages in the world. Over the last 20 years, the risk of living in working poverty has risen, particularly during two periods of time: in the five years leading up to the Great Recession in 2008 and in the recovery from that recession, from 2012 onwards. Three factors drove this sorry situation: earnings, housing costs and social security.

JOBS AND EARNINGS

During the first period of rising in-work poverty, from 2003/04 to the recession in 2008, earnings grew more slowly for those at the bottom than they did in the middle. At the same time, housing costs rose faster for those on low incomes than the better off. During the 2008 recession, earnings fell fastest for low-income families as employers cut back their hours, but they were protected by the tax and benefit system and so in-work poverty again stayed flat (falling housing costs helped both those on low and middle incomes so didn't affect the poverty levels). The recovery from 2012/13 onwards saw earnings grow at about the same rate for low-income families as they did for those in the middle, but rising housing costs hit those at the bottom hard and swingeing cuts to benefits pulled hundreds of thousands into poverty.

It might seem strange that earnings for those at the bottom weren't outstripping those in the middle, given that the rising minimum wage meant that hourly pay did go up more at the bottom than higher up.