Tax Credits and In-Work Poverty in the UK: An Analysis of Income Packages and Anti-Poverty Performance

Abstract

This article examines the relationship between tax credits and in-work poverty, drawing on the findings from a major national study on in-work poverty. We present an analysis of (i) the income packages of working families and (ii) the performance of tax credits in relation to anti-poverty objectives, drawing on data from the Households Below Average Income survey between 2004/5 and 2014/15. Our study generates five novel findings, including that tax credits reduce the poverty gap of recipient households by two-thirds; that tax credit cuts post-2010/11 have served to focus payments on single parent families and households with greater numbers of children; and that tax credits make up just one third of the social security income of working households. We argue that understanding in greater depth the interaction between tax credits and income adequacy amongst working families is necessary to provide a firmer foundation for an effective assault on in-work poverty.

Moving In and Out of In-work Poverty in the UK: An Analysis of Transitions, Trajectories and Trigger Events

“…It thus appears that the labour market triggers result in a U-shaped exit risk, which increases from the average either when the positive or the negative trigger is experienced. This makes sense if we think of the working poor as a better-off subset of people who experience poverty (see also Hick and Lanau, 2017). It is also important in policy terms as it reminds us of the significance of supporting positive transitions while seeking to minimise negative ones.…”

“…This focus on all (working-age) individuals in the household has at least one significant advantage over the standard European approach: if we only count workers in the definition of in-work poverty, then the employment and income variables will be measured using different units of analyses, since the income variable (and thus the poverty status) considers all income sources in the household and thus, implicitly, all individuals, while the employment variable focuses on workers only. In our view, the exclusive focus on workers frustrates understanding in-work poverty as a problem requiring a ‘whole household’ solution and risks the common, if erroneous, conflation between in-work poverty and low pay (see Hick and Lanau, 2017, for a discussion).…”

“…Finally, the literature on in-work poverty has been substantially dominated by analysis of the relative income poverty measure (see Hick and Lanau, 2017, for a discussion). In this paper, we extend the analysis of in-work poverty by incorporating a measure of in-work deprivation in our analysis, as this measure can provide an alternate and, at times, divergent perspective on poverty trends (Hick, 2015, inter alia ).…”

“…In December 2013, a report published by the Joseph Rowntree Foundation found that, ‘for the first time on record, the majority of people in poverty are in working families’ (MacInnes et al , 2013: 26). Working families have accounted for a growing share of people in poverty over the past 15 years (ibid), and a recent study finds that as many as six in ten people in poverty in the UK were living in working households in 2014–15 (Hick and Lanau, 2017).…”

Rethinking growth: Towards the well-being economy

“…The weakness in this approach is that, even in areas of significant economic activity, high growth, employment opportunities and infrastructure investment, like London, poverty and economic inequality continue to be prevalent. Nor is securing jobs at any rate desirable, as 60% of people of all ages living in poverty are now living in working households (Hick and Lanau, 2017). Simply moving the location of desired growth may not be enough to achieve social and economic equality.…”