Focus on low paid jobs should be a priority

The warning from the United Kingdoms’s four children’s commissioners that another 1 million children are at risk of poverty, as a result of further cuts, comes at a slightly awkward time for forecasters. Last week’s official data showing that poverty rates, except among disabled adults, remained fairly flat even after five years of austerity surprised many experts.

One view is that the figures remind us of how complex societies rarely conform precisely to the predictions of neat economic models. Another is that no single data set can tell the full story of people’s lives, such as the types of jobs people are finding in increasing numbers, or the impact inflation has had on poorer households.

What is notable about the children’s commissioners’ report to the United Nations is the way that it tries to engage with all the ways that state actions influence the chances and living standards of under 18s. While the impact of welfare reform features heavily in its analysis, it also considers the impact of wider services on wellbeing and the effects of deprivation on children’s lives. It is particularly strong on the risks of cutting early intervention services.

This autumn’s spending review will set budgets for the next few years. It is vital that local authorities have enough funding to keep investing in early intervention services for families, so that they can reduce the cost of having to tackle problems later.

But, more immediately, there is no doubt that cuts to the incomes of the low paid and those out of work will make a big difference, assuming reports of planned cuts to working and child tax credits are accurate. Specifically, while shifting responsibility for the incomes of low earning families from the state to employers is an appealing idea, there are two challenges to bear in mind.

The first is that tax credits do not simply top-up low pay – they were also designed to assist low income families with the additional costs of bringing up children. Stagnant wages at the lower end of end of the jobs market have made them increasingly important. For a couple with two young children living in social housing, where both parents work full time earning the minimum wage, tax credit payments of £182 per week would make up 27 per cent of their after-tax income.

As state support falls, the hope has to be that the jobs market will fill the welfare gap left in its wake. But this is likely to be a longer term project. Putting up the national minimum wage and more employers paying the living wage can help, but what is really needed is a clear strategy to increase productivity – especially in low pay sectors. This is the only sustainable path to higher wages, and more economic security for families.

The government’s support for economic agglomeration in the north and in other regions could act as an accelerant to this process. Central government also has important convening power however. Within a broader industrial strategy, a focus on productivity within the sectors that employ large numbers of people on low paid jobs must be a priority.

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Frank Soodeen is head of public affairs at the Joseph Rowntree Foundation

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Photo: The Big Lunch

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