The rising tide of income inequality

For once the headlines have not exaggerated – the latest figures on households which do not have an acceptable standard of living from Joseph Rowntree Foundation are grim news for the battle to turn the tide on low incomes in Wales.

Worryingly, the research warns that the current economic recovery may not help.

The research, the latest in a series of annual reports tracking the Minimum Income Standard, shows that the numbers of households which cannot afford a socially acceptable standard of living rose right across the UK over the 4 years to 2013 but increased most in Wales [1]. Nearly 30% of households in Wales are now below the threshold.

That figure is bad enough but when broken down the figures become even more alarming.  Taking the UK as a whole, they suggest that nearly 40% of all families with children are below the threshold.  The report does not provide a full geographical analysis – but everything suggests that the figure for Wales will be in excess of 40% – more than 4 families in every 10. The figures are highest for single parent households but the tide has swept across couple families as well, especially where they have a single breadwinner.

For those who think that the current economic recovery will push back the waves, the report has some salutary warnings. For households with children, the numbers below the Minimum Income Standard really began to rise from 2010-11 but it turns out that job numbers were not the biggest factor.  Worklessness had not risen much among families with children in the recession. The real culprits are the amount and reliability of work, the steady real terms cuts in wages and the recent cuts in benefits and tax credits.  The Auditor General has sounded a clear warning on the impact of welfare reform and housing benefit in Wales.

So although job numbers are rising, that may not be enough.

If the recovery creates mainly jobs with unstable hours and prospects (families where adults are part-time or self-employed being particularly at risk) and the current squeeze on tax credits and welfare continues, the numbers of families with children below the threshold could actually increase.  Any further cuts in welfare for working-age households would make an increase in the number of households that are below the Minimum Income Standard all the more likely.

At what point does everyone recognise the impact on children for the growing scandal it is?

Davos is apparently full of hand-ringing about inequality but this is not about the long-term. It is with us now.  If we are to reverse the trend, action is needed by employers and government.  It is needed on pay, on improving the labour market and on welfare. Much of this is down to the UK Government but action in Wales is also important. The Welsh Government is consulting now on its child poverty strategy – it closes on 29^th January – and a key issue will be the extent to which it meshes its policies on the economy and labour market with those on poverty.  Without a stronger economy and a stronger labour market, the prospects for child poverty look bleak.

Michael Trickey is an adviser on public policy in Wales. 

[1] The Minimum Income Standard is defined through in=depth surveys of the public on what constitutes a minimum acceptable standard. The figure is higher than the poverty threshold, which is measured in relation to median household incomes.