Financial Crisis, Five Years on and the Poorest Pay the Price

The great price of this financial crisis has been paid by the poorest, who did least to contribute to it.

It’s exactly five years ago since “the day the world changed”. Most of us can remember where we were when the first rumblings of economic disaster were heard, when images of finance workers leaving offices clutching cardboard boxes adorned our screens. But most of us had little inkling that, half a decade later, the impacts of the crisis would feel like a long-term new reality.

Financial insecurity, a double-dip recession and repeated setbacks have become so much part of our world that few now seriously imagine that we have any prospect of snapping back to a pre-recession world.

But away from the bankers in the headlights, behind the stories of tumbling markets and shares, there is another story, one that has been little exposed on this most miserable of anniversaries. The reality of what has happened to people and places in poverty is the story that needs to be told, and with just as much emphasis.

So how does the evidence unravel in this sorry tale?

Throughout this period, JRF has been tracking people’s expectations for a decent standard of living, known as the Minimum Income Standard. The first report, published just before the economic crisis broke, used data gathered in 2007. Modest expectations, a very firm grip on reality, and balancing the household budget were the headlines that year. But since then, the ability to meet those very similar needs has got demonstrably harder. So much so that 15 million people are living below the minimum income standard – three million more than in 2008.

JRF research hasn’t just tracked expectations:

• We also track the reality of 50 poverty and social exclusion indicators using publicly available data. With the downturn came levels of unemployment not seen for the best part of 20 years, but what the crash has exacerbated is long-term and underlying trends of underemployment.

• We know jobs that carry decent wages are an essential starting point in climbing out of poverty – yet part-time and short-term work, while useful, do little to address this.

• The dire state of the labour market, and JRF’s projections, suggest that by 2020 things will get a lot worse unless we have a dramatically different set of policy interventions.

Running parallel to the jobs market has been a programme of austerity to balance the books. Our own commissioned research demonstrates how the challenge has been passed onto vulnerable people and places by local authorities.  The little matter of welfare has undergone huge change. Steps to simplify the system have coincided with spending taking a significant hit, with a further cut of £10 billon pencilled in just four years down the line.

The great price of this grim reality is paid by the poorest, those who did least to contribute to the crisis we are in. Looking ahead to the next five years, the price they are paying will be felt long after even this apparently deepening, double-dip recession is over.

Julia Unwin is Chief Executive of Joseph Rowntree Foundation and the Joseph Rowntree Housing Trust. 

This post originally appreared on the JRF Blog on 9th August