Covid hits poorest families hardest

The latest Joseph Rowntree Foundation annual report, finds that those who had been struggling to make ends meet before the pandemic have suffered the most financial damage during the crisis. These include low-paid and part-time workers, Black, Asian and minority ethnic households, lone parents, private renters, and those living in areas with existing high levels of poverty and unemployment.

While welcoming the unprecedented range of labour market support and benefits changes the government put in place, the report notes that, nevertheless, low paid workers were more likely to have experienced a cut to their income and hours, as well as an increase in costs associated from being at home. Workers in the lowest income quintile had the largest drop-in mean hours worked at the start of the pandemic while workers in the highest income quintile had the smallest decrease in mean hours worked.

Noting that the unemployment rate has already risen from 3.9% in March to 4.9% in the three months up to October, the report warns that “we are still only at the foot of an oncoming wave of unemployment”. Highlighting the uneven economic impact caused by the pandemic and the government response to it, the report finds that four in ten workers on the minimum wage face a high or very high risk of losing their jobs, compared with 1% of workers paid more than £41,500 a year.

With average incomes falling during the pandemic, the relative poverty line will have fallen. The report suggests that this might result in the proportion of people in relative income poverty having fallen. But this measure hides the fact that Covid-19  has had a “catastrophic effect on those already struggling”.  The JRF Grassroots Poverty Action Group reports that its members were struggling even more than pre-pandemic to budget and plan, a situation made worse by high levels of uncertainty as to current and future incomes. Although members welcomed the additional Universal Credit, it was outstripped for many by the combination of higher costs and a loss of earnings. They saw no way out of poverty and feared that in future they would be falling deeper into poverty.

The report emphasises that even before the pandemic struck millions in the UK had lived through a “decade of deprivation” with little progress made on reducing poverty, rising hardship among working households, and a steady increase in child poverty. The social security system, suffering from a decade of government cuts, was failing to “protect people sufficiently, leaving many families at greater risk of being pulled deeper into poverty”. The four-year benefit freeze from 2016, which followed from three years in which benefit increases had been limited to below inflation levels of 1%, had left benefit levels at increasingly inadequate levels.

Going forward, the report recommends that, at a minimum, the temporary £20 per week increase to Universal Credit and Working Tax Credit is made permanent and extended to people on legacy benefits such as Jobseeker’s Allowance and Employment and Support Allowance. It further highlights a range of policy areas where action is needed including:

  • bold action to retrain workers and create good quality new jobs.
  • extending employment rights and investing in strong and effective enforcement for workers in insecure employment
  • improvements to the current benefits system, to ensure it gives adequate support.
  • investment in social housing as part of a stimulus package, and to reverse the long-term trend of falling availability of social housing.

The full report, UK Poverty, 2020/21 can be downloaded here.

A summary of the findings can be downloaded here.

 

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Publication date: 
Jan 13 2021