Households living below a Minimum Income Standard: 2008–2023

Figure 1 also shows the proportion of individuals in the UK who were living in households with incomes below 75% of what is needed for a minimum socially acceptable standard of living between 2008/09 and 2022/23. More than 1 in 5 of the UK population – 15.1 million – were living on an income of less than 75% of MIS in 2022/23; people living below this threshold have a substantially greater risk of material deprivation (Hirsch et al., 2016). While cost-of-living support payments during 2022/23 may have offset some of the most severe consequences of rising inflation and dramatic increases in energy costs, it is clear that a growing number of households have incomes that fall well short of enabling them to meet all of their minimum needs.

Even more concerning is that, in 2022/23, 1 in 10 individuals were living in households with incomes below half of what is needed to live with dignity in the UK today. Although the proportion living below this level remained relatively stable over the period explored here, households with incomes so far below MIS will face significant challenges in meeting their essential needs.

In the period immediately before the pandemic, which hit the UK early 2020, the percentage of all individuals living in households with inadequate incomes had been falling gradually. Support schemes, including the £20 uplift in Universal Credit, introduced at the height of the pandemic to protect those on the lowest incomes, meant that the proportion of individuals living below 75% and below 50% of MIS fell in 2020/21.However, post-pandemic in 2021/22 and 2022/23 there was an increase across all 3 indicators, as Covid-specific support measures came to an end and the cost-of-living crisis really began to bite.

Households with children

In keeping with the pattern of previous years, children continue to be the group most likely to be living in a household with inadequate income (see Table 1b in Chapter 1). The latest data shows that 7.0 million – almost half of all children in the UK – were living below MIS in 2022/23, an increase of 1.8 million over the entire time series, and up by 1 million since 2021/22. Before the pandemic, the proportion of children living in households with incomes below MIS had been falling gradually from a peak in 2013/14. As mentioned earlier, government support during the Covid period moderated some of the potentially most damaging consequences of the pandemic for living standards, but it is clear that with these protections no longer in place, alongside the rapidly increasing cost of many essentials and the falling value of benefits in real terms, the risk of children growing up without what they need to be able to participate in the world around them has dramatically increased.

There has also been a substantial increase in the proportion of children living below 75% of MIS, with 1 in 3 children – 33.1% or 4.8 million – in 2022/23 living in households with incomes below the level at which the risk of material deprivation increases greatly (see Figure 2) (Hirsch et al., 2016).

While the removal of the two-child limit, resulting in 300,000 children no longer being in poverty (Child Poverty Action Group, 2024), would be welcome, on its own it would not be sufficient to fully address this problem, and, importantly, it would not guarantee that they are living in a household with the income needed to live with dignity.

The consequences of poverty are all too apparent. For example, in recent years there has been a substantial increase in the use of food banks, with two-thirds of food parcels going to households with children, with a particular increase for those with more than two children (Trussell, 2024).

Working-age adults

Figure 3 shows the proportion of working-age adults below MIS, below 75% of MIS and below 50% of MIS. In 2022/23, more than 1 in 3 working-age adults were below MIS, while more than 1 in 5 were below 75% of MIS and more than 1 in 10 were below 50% of MIS. The years before the pandemic were relatively stable, but as for households with children, the removal of additional support intended to help households cope with a loss of income during the pandemic years contributed to a sharp increase in the proportion of individuals with inadequate incomes in 2022/23.

In 2022/23, the cost-of-living crisis disproportionately affected those on lower incomes. Increases in income before housing costs have been outstripped by inflation for all income levels outside of the top 20%, with more pronounced reductions for those on incomes below the median (Department for Work and Pensions, 2024). Meanwhile, those in the top 10% saw increases in their incomes. To some extent, this reflects that lower-income households, even when in work, often also rely at least in part on income from state benefits (Department for Work and Pensions, 2024). The annual uprating of state benefits each April uses Consumer Price Index (CPI) data from the previous September. 

In the period from October 2022 to March 2023, fuel and food prices increased considerably, so benefit increases were insufficient to keep pace. In recent years, the ‘triple lock’ on the State Pension, which ensures annual increases are pegged to the highest of earnings growth, inflation or 2.5%, has meant that State Pension increases have outpaced increases to working-age state benefits. Lower-income households also spend more, proportionally, on budget areas such as food and domestic fuel, which have seen particularly high rates of inflation since late 2021 (Stone et al., 2023). Taken together, this real-terms reduction in incomes and a rapid rise in the cost of essential goods and services have made it more difficult for working-age households to make ends meet, and to reach a minimum standard of living.

Pensioners

Throughout the period from 2008/09 to 2022/23, children were the group most likely to be living below MIS. Across the same period, pensioners were the group least likely to be living below this level. In 2022/23, although pension-age households continued to be the group with the lowest risk of falling below MIS, the proportion of pensioners lacking the income needed for a dignified living standard increased to almost 1 in 4 – 10.5 percentage points higher than in 2008/09 and 8.2 percentage points above that in 2020/21 (see Figure 4). The proportion of pensioners below 75% of MIS was relatively stable between 2008/09 and 2020/21, but rose from 5.9% in 2020/21 to 9.5% in 2022/23. This means that nearly 1 in 10 pensioners were living below the level at which the risk of material deprivation increases substantially. The proportion of pensioners living below 50% of MIS remained low and relatively constant throughout the period from 2008/09 to 2022/23, in contrast to the same measure for other demographic groups.

In 2022/23, there were 2.8 million pensioners living below MIS, 1.1 million of whom were below 75% of MIS, up from 1.5 million and 0.6 million, respectively, in 2008/09. This is consistent with recent findings from the Institute for Fiscal Studies (IFS), which reported an increase in pensioners experiencing material deprivation in the years since the pandemic: the number who lacked the income needed to afford key essentials increased from 700,000 in 2019/20 to 1 million in 2022/23 (Cribb et al., 2024).

Before the pandemic, there was a prolonged period of stability, with little change in the proportion of pensioners below MIS. To some extent, this was attributable to the triple lock on the State Pension. Increases in the State Pension are applied each April, based on data from the previous September. During the pandemic, lockdowns led to a drop in average earnings and a subsequent ‘bounceback’, which resulted in a high increase in average earnings growth in September 2021 (Age UK, 2021). This prompted the Government to pause the triple lock for one year, preventing an 8% rise in the State Pension in April 2022.¹ This ‘pause’ will have affected poorer pensioners, who are dependent on the State Pension alone. Furthermore, they spend a greater proportion of their income on essentials, such as food and energy, both of which had higher rates of inflation, but they also benefited from increased state support during the cost-of-living crisis. These measures have now ended and the loss of the Winter Fuel Payment for all but the poorest pensioners in 2024/25 will also have an impact on pensioner income adequacy in future years.

Figure 5 also shows the proportion of children living in households with an income below 75% of MIS, by household type. In 2022/23, 2.0 million children in lone-parent households and 2.8 million children in couple-parent households were living in a household with an income below 75% of MIS.

Before the pandemic, the proportion of children living below 75% of MIS was relatively stable. In 2020/21, there was a sharp decline in the proportion of children in lone-parent households living below 75% of MIS, pointing to the substantial impact that the £20 temporary uplift to Universal Credit had in increasing the adequacy of incomes.² There was a sharp increase in the risk of being below 75% of MIS in subsequent years, with 6 in 10 children in lone-parent households living in households with inadequate incomes in 2022/23, compared with 1 in 4 children from couple-parent households. This was likely due to a combination of dramatic increases in the cost of living and the falling adequacy of benefits relative to the cost of essentials.

Figure 6 looks at economic activity in households with children, focusing on the relationship between parental employment and the risk of children being below MIS or below 75% of MIS. It shows that, in 2022/23, 96.6% of children in households without work were living below the minimum socially acceptable standard of living and the vast majority (84.2%) were living below 75% of MIS. Even in those households where there was at least one adult in work, there were still 4 in 10 children (41.9%) living below MIS and just over a quarter (25.9%) living below 75% of MIS. However, there were 3 times as many children living below MIS in working households (5.3 million) than there were in workless households (1.7 million), highlighting that work does not necessarily provide a clear way out of inadequate income. 

Working-age adults

Figure 7 shows that, in 2022/23, working-age adults with children continued to be more likely to live in households with inadequate incomes than those without children. Four in 10 working-age adults with children were living below a socially acceptable standard of living, which equates to 5.4 million people. Both of the charts in Figure 7 show a pronounced spike across all categories for 2022/23. It is concerning that just over 1 in 4 working-age adults with children were living below 75% of MIS, the level at which there is a substantial increase in the risk of material deprivation, after a pronounced dip in 2020/21 when additional support was provided during the pandemic.

Figure 8 focuses on working-age adults without children, showing the risk of being in a household with inadequate income by partnership status. Throughout the entire period from 2008/09 to 2022/23, there was a persistent gap, with single working-age adults without children faring much worse than those in couples. However, for both household types, 2022/23 marked a peak in the risk of living below MIS, with 45.2% of single working-age adults and 22.2% of couple working-age adults having an inadequate income. While the period when additional cost-of-living support was being offered to low-income households contributed to a decrease in the likelihood of having an inadequate income, these ‘gains’ had disappeared by 2022/23: single working-age adults without children saw a substantial rise in their risk of being below MIS, from a low of 32.4% in 2019/20 to 45.2% in 2022/23.

Pensioners

Increases in the risk of living on an inadequate income over recent years extend beyond working-age adults to pensioners, especially for those who are single. Figure 9 looks at the risk of being below MIS for pensioners by partnership status. Before 2022/23, the risk of single pensioners being below MIS had peaked in 2017/18 at 29.9%, before falling to 22.4% in 2020/21. In 2022/23, more than 1 in 3 single pensioners (34.5%) – 1.5 million – were living without the income needed for a minimum socially acceptable standard of living. Couple pensioners saw a less pronounced increase in 2022/23, with 17.0% (1.3 million) living below MIS.

Figure 10 looks more closely at single pensioners, this time breaking down the risk of being below MIS by sex. Across the period examined here, single female pensioners were the group who faced the highest risk of living below MIS: 36% compared with 31.5% for single male pensioners in 2022/23. However, analysing the numbers of people affected further highlights the contrast in the likelihood of living on a low income between the sexes, as well as differences in longevity – of those single pensioners living below MIS in 2022/23, 1.1 million (70%) were female and 0.5 million (30%) were male.

Age group

Figure 11 shows the risk of being below MIS or below 75% of MIS for working-age adults, by age group. For the first time since this series began, in 2022/23 the majority of 16–24 year olds (51.5%) were living on an income below the MIS benchmark. Other age groups were closely clustered together, with a range of 30.5% to 34.1% living below MIS. Younger workers have been disadvantaged in having a lower minimum wage and lower out-of-work benefits. For example, in April 2022, there were substantial differences between the minimum hourly wage rates for the youngest workers: the minimum wage for young workers ranged from £4.81 (for those aged 16 and 17) and £6.83 (for those aged 18–20) to £9.18 (for those aged 21 and 22), compared with £9.50 for workers aged 23 and over (UK Government, 2024).

The annual increase in minimum wage rates in April 2022 further disadvantaged the youngest workers – those who were aged 16–20 had a 4.1% rise, compared with a 9.8% rise for 21–22 year olds and a 6.6% increase for those aged 23 and over (UK Government, 2024). In April 2024, eligibility for the National Living Wage was changed to include everyone aged 21 and over. Further increases are anticipated in 2025 to improve the situation for the youngest workers, with larger percentage rises for those under 21 – taking the 16- and 17-year-old rate to £7.55 an hour and that for 18–20 year olds to £10 an hour. Future analysis in this series will reveal whether or not these changes in rates and eligibility have started to improve the adequacy of incomes for younger workers.

Housing tenure

In Figure 12, we examine the relationship between the risk of being in a household below MIS and housing tenure. Across all housing tenure types, the proportion of people living on an inadequate income increased sharply in 2022/23. Those in private rented accommodation saw the most substantial rise in their risk of being below MIS in 2022/23, with an increase of 10.2 percentage points, to 56.9%. This likely reflects the large increases in private rents, which increased by 4.8% in the year to April 2023 (Office for National Statistics, 2023c). Those in social rented housing have consistently been the group most likely to lack the income needed to participate in society; they also saw an increase in their risk of living on an inadequate income in 2022/23, to 72.3%. Social housing has not seen such large increases in rents as in the private rented sector, with the median weekly rent increasing from £89 in 2021/22 to £93 in 2022/23 (Department for Levelling Up, Housing and Communities, 2024). However, this increase is against the background of average real-terms falls in incomes, with incomes after housing costs dropping by £7 (1.3%) a week since 2020 (Department for Work and Pensions, 2024). As for other groups at high risk of being below MIS, social housing tenants are more likely to be on low incomes and derive a greater proportion of their income from benefits, and working-age benefits have failed to keep up with inflation. Furthermore, for those on low incomes, even a modest increase in rent can stretch their already limited funds.

Although owner-occupiers have fared relatively better, the proportion of those who owned their home outright and were living on an inadequate income increased to almost 1 in 4 in 2022/23. Meanwhile, those who owned with a mortgage were the group least likely to have an income below MIS, although their risk of living on an inadequate income increased by 3.9 percentage points in 2022/23.

Throughout the financial year ending in 2023, mortgage interest payments increased, pushing up housing costs for owner-occupiers who are still paying for their home. However, those who own their home outright are more likely than those with a mortgage to be living below MIS. This in part reflects that those who own their home outright are more likely to be pensioners and therefore more likely to be living on constrained income than working-age households. However, it is also likely that rapid rises in house prices in recent years mean that those able to afford a mortgage are increasingly those on higher incomes. In 2022, a first-time-buyer household was estimated to need an income of £57,000 a year on average, with an average home costing £276,000 – for an employee working full time on the National Living Wage, this would be 14 times their annual earnings (Office for National Statistics, 2023b).

The changing relationship between tenure and reaching pension age is demonstrated in Figure 13. It shows the proportion of adults below MIS for each housing tenure, for working-age adults and pensioners. In comparison with 2021/22, the 2022/23 data shows that the proportion of people living on inadequate incomes has increased across all housing tenure types for both working-age individuals and pensioners. Most working-age people in rented accommodation are now living on incomes that are insufficient to participate in society, with the greatest increase in risk for those in private rented housing – from 41.0% in 2021/22 to 52.3% in 2022/23. Those of pension age who live in rented accommodation have also experienced a substantial increase in their risk of being below MIS since 2008/09, especially those in social housing.

Across the time series, for working-age people, the percentage below MIS has been notably higher for those in social housing than for those in private rented housing. This reflects that while rents in social housing are ostensibly more affordable than private renting (Shelter, 2024), the lack of availability of social housing means that for those of working age it tends to be available mostly to households with some degree of additional need, who are likely to be on a low income. For example, in 2021, lone-parent households with dependent children represented 17% of households living in social housing, compared with just 11% of households in the private rental sector (derived from Office for National Statistics, 2023e).

Among pensioners, all renters had a similar risk of being below MIS in past years. This was most likely driven by differences in state support for housing costs for those above and below State Pension age. Among those living in social housing, working-age people are subject to both the benefit cap (if they have little or no work) and the social sector size criteria (often referred to as the Bedroom Tax), while pensioners can usually have their full rent paid by Housing Benefit. This may help to push down the risk of being below MIS for pensioners in social housing.

However, for those in private rented housing, all households will be restricted in the maximum amount of rent that can be covered by social security due to the Local Housing Allowance. Therefore, pensioners will not be guaranteed to have their full rent paid by Housing Benefit if they are private renting, and their likelihood of being below MIS is not mitigated in the same way as for those in social housing. Nevertheless, it is pensioners in the social rented sector who have seen the steepest rise in their risk of being below MIS, increasing from 45.5% in 2021/22 to 54.2% in 2022/23, suggesting that even among pensioners, social housing is becoming increasingly occupied by those on the lowest incomes.

UK country and region

Figure 14 shows how the risk of being in a household below MIS varies by country and region of the UK, and how this has changed over time. As in last year’s report, the West Midlands remains the area with highest risk of individuals living with an inadequate income. For all countries and regions of the UK, the proportion of individuals living below MIS has increased since the previous report and in every region more than a quarter of all individuals are living on an inadequate income.

Figure 15 shows a similar pattern for children, with the West Midlands having the highest proportion of children living in households with incomes below MIS, followed by the North West and Merseyside. This is consistent with the latest child poverty data, which shows that, in 2022/23, the West Midlands and the North West had the highest rates of child poverty (39% and 37%, respectively) (Department for Work and Pensions, 2024).

The shift towards inactivity is in part explained by the impact of the pandemic and lockdowns, during which people who would normally be available and searching for work were unable to do so (Low Pay Commission, 2023); but the trend continued after the pandemic, and in July 2023, the number of people aged 16–64 inclusive who were classified as inactive remained over 600,000 higher than in February 2020 (Office for National Statistics, 2024b). The increase was driven primarily by a rise in the number of people who were inactive due to long-term sickness, including mental health conditions; between 2019 and 2023, the number of people inactive because of long-term sickness who reported depression, ‘bad nerves’ or anxiety rose by 386,000 (Office for National Statistics, 2023d).

The shift towards inactivity also appears to be more pronounced in certain subgroups. Figure 18 shows that, in 2008/09, 79.6% of non-working singles were classified as economically inactive, rising to 88.0% in 2022/23. The change was less pronounced for couples where neither was in work, with the proportion classified as inactive at 82.8% in 2008/09, and 87.5% in 2022/23. Reflecting this, the proportion of working-age couples without children in workless households who were below MIS increased less than for singles, at 80.6% in 2008/09 and 84.0% in 2022/23.

Nevertheless, the proportion below MIS is still extremely high for both singles and couples not in work. In 2023, out-of-work benefits left working-age adults without children with a disposable income just less than a quarter of MIS (Padley and Stone, 2023). Therefore, the inadequacy of out-of-work benefits, both for those who are unemployed and for those who are unable to work due to disability, for example, remains a pressing issue.

The gap between working and non-working households has narrowed considerably, not just because of a fall in the proportion of workless households below MIS, but also because incomes have become increasingly inadequate for working households. For single working-age adults without children who are in full-time work, the proportion below MIS increased from 10.2% in 2008/09 to 17.9% in 2022/23. Although the proportion below MIS among couples without children, both working full time, was lower overall, it still increased from 4.2% in 2008/09 to 7.6% in 2022/23. For those working less than full time or who were self-employed, the situation was far worse. For single adults in this group, the proportion below MIS grew from 44.5% in 2008/09 to 53.1% in 2022/23, with an even more pronounced rise for couples, from 40.6% to 61.4%. This reflects the fact that insecure work has been one of the key drivers of rising in-work poverty in the UK in recent years (All Party Parliamentary Group on Poverty, 2022).

Rising housing costs have also played a major role in constraining disposable incomes more and more over time, with a disproportionate impact on lower-income households (Cribb et al., 2023). This is a particular challenge for working households, who are more heavily reliant on the private rented sector than those who are not working (Department for Levelling Up, Housing and Communities, 2023); as shown earlier in this report, housing tenure is strongly related to the risk of being below MIS, with those in the private rented sector seeing the most pronounced rise in the proportion of households below MIS since 2008/09.

Figures 19 and 20 demonstrate, for lone-parent and couple-parent households, respectively, the risk of being below MIS by economic activity status. The vast majority of workless households were below MIS in all three time periods shown, reaching 97.8% for lone-parent households (Figure 19) and 98.4% for couple-parent households (Figure 20) in 2022/23.

Figure 21 shows that, similarly to households without children, the proportion of parents who are not working, who are classified as economically inactive rather than unemployed, has risen over time, but to a lesser extent than for single working-age adults without children, and we do not see the same decline in the proportion of workless households with children who are below MIS.

For lone parents in particular, Figure 19 highlights that paid employment is often insufficient to enable them to reach a socially acceptable standard of living, and this has worsened over time. In 2023, the typical disposable income³ available to a lone parent with two children, working full time on the National Living Wage, only covered around two-thirds of what they would need to reach the MIS benchmark for an adequate living standard, falling from 82% in 2016, when the National Living Wage was introduced (Padley and Stone, 2023, Appendix, Table 2). Reflecting this, Figure 19 shows that for lone parents working full time, the proportion of households below MIS increased from 28.7% in 2008/09 to 43.0% in 2015/16 and 54.2% in 2022/23. For those working part time or who were self-employed, there was a similarly striking rise in the proportion below MIS, from 62.0% in 2008/09 to 81.7% in 2022/23.

For couple-parent households where both parents were in full-time work, the proportion of households below MIS was much lower overall but has still risen markedly over time, from 11.3% in 2008/09 to 20.2% in 2022/23. For couple households where at least one parent was working, but where there were not two full-time workers, the proportion below MIS was much higher, with two-thirds of these households below MIS in 2022/23. It is apparent, therefore, that for couple households with children where full-time work is not available or feasible for both parents, due to the cost and/or availability of childcare, for example, they remain at high risk of falling short of an adequate living standard even if at least one parent is in work.

Figure 22 shows, for households below MIS, how the balance of employment status has changed over time. In 2008/09, workless households made up the largest proportion of households below MIS (44.5%), with fully working households representing just over a third (36.3%) of those below MIS. Over time, this gradually shifted, until 2022/23, when half (50.9%) of households below MIS were those where all adults were working. This again emphasises how paid employment has become increasingly insufficient in providing households with the income needed to achieve a minimum socially acceptable standard of living.

From the end of 2021 until June 2023, average wage growth consistently fell short of very high rates of inflation (Office for National Statistics, 2024c), meaning that rising costs were outstripping incomes across the UK. For low-income households, increases in the National Living Wage, while welcome, are smaller than increases in costs based on the updated MIS budgets agreed by members of the public (Padley and Stone, 2023). Furthermore, many low-income, working households will still be reliant on means-tested benefits – primarily Universal Credit – in addition to their income from earnings: in June 2023, 38% of people receiving Universal Credit were in employment (Department for Work and Pensions, 2023b). The freeze on working-age benefits from 2016 to 2020 means that, even though benefits have subsequently been uprated based on inflation, this has not brought the rate of benefits into line with rising living costs. It is no surprise, therefore, that even working households on low incomes are struggling to bring in enough income to reach a minimum socially acceptable standard of living.