Business must spearhead action on decreasing in-work poverty
A report launched today commissioned by the Webb Memorial Trust discusses how in-work poverty is the product of three variables: levels of pay, levels of in-work benefits, and the levels of hours worked.
Traditionally, the focus has been on lobbying government to adjust these three variables to find solutions to in-work poverty. This approach has two main problems:
Firstly, government no longer has the levers to make successful interventions to mitigate in-work poverty. With councils and other public bodies facing unprecedented cuts to services, there is a real crisis of agency.
Secondly, to assume that government can and should do all the heavy lifting when it comes to tackling poverty is to patronise businesses and exclude them from the conversation.
A mixture of welfare reforms and reduction in public service provision mean that most local councils in low-income areas are on their knees. Service provision is being restricted to those in extreme need. More fundamentally, we have to ask whether the tax payer should be asked to subsidise the toxic combination of low wages and soaring housing costs in the private sector. Unless something changes, spending on tax credits for people in work is set to rise by an estimated £2.5 billion over the next Parliament.
Secondly, if we are to see long-term improvements on tackling in-work poverty, employers must be part of the solution, not viewed as some sort of outsider who gets a kicking every so often when statistics become embarrassing for governments. Businesses must step up to tackle in work poverty.
None of the major parties are currently leading the way in opening up this conversation in a collaborative way with the private sector. It is a conversation not about punishing or blaming businesses but rather asking how government can best respond to the needs and challenges faced by the business community in paying a living wage and improving conditions for those within their workforce living in poverty.
A good place to start might be increasing employer awareness of the problem. How many CEOs would be able to provide a figure for the numbers of their workers living below the poverty line? How many managers hear the stories of families in their firm struggling to make ends meet? How many businesses are aware of the number of employees who received food bank assistance last year? Labour has pledged to require all listed companies to report on whether they pay the living wage if they win on 7th May. However, as discussed earlier, poverty is not merely a question of wage levels, but a combination of the three variables of pay, benefit levels and hours worked. Perhaps publishing the numbers of workers living in poverty might help to provide a more rounded picture of a company’s efforts to tackle this issue within their workforce and help to empower employers and consumers alike?
The government’s flagship Universal Credit programme sees new requirements on the numbers of hours worked. A couple both earning national minimum wage would need to work 51 hours a week between them under the new system before they are no longer subject to requirements to look for other employment. This stands in stark contrast to the 24 hours tax credit claimants currently have to work to move out of conditionality altogether.
The report published today examines how many hours it is reasonable to expect parents to work and asks in the same way as the living wage question, whether increasing hours alone is enough to help lift families out of poverty. Families earning less have to work far more hours, which as the research indicates, a majority of families found unfair. The research shows that a cross-section of parents believe those on low pay should be able to make the same choices about work-family balance as those on higher salaries: spending time with one’s children should not become a luxury that only a privileged few should be able to afford. Employers want to accommodate parents’ needs as far as possible but are more likely to do this for more highly valued employees. Low paid parents are often doubly discriminated against: they are more likely to be on casual or short-hours contracts that have fewer formal rights attached, and their retention is less likely to be prized by their employer.
The fact is that out of the three variables associated with in-work poverty, two are under the direct control of employers – hours and pay. Surely the role of the business community cannot be to act as passive recipients of government policy on pay and hours.
Business must not just join, but lead the debate on how to decrease in -work poverty and whoever forms a government after May 7th must take a collaborative rather than punitive or relaxed position on fostering this approach with employers.
Barry Knight is Director of the Webb Memorial Trust