Tackling in-work poverty by supporting dual-earning families

This research reviewed employment trends among couples with children, and examined four areas affecting their employment rate: family leave, childcare, the labour market and the tax and benefit system.

Key points

• The risk of poverty is greater for children in couple families with only one earner; sole-earner families comprised 30 per cent of families with children in poverty in 2011/12.
• Although the share of sole-earner families has fallen considerably, around a quarter of couple families with children had only one earner in 2012.
• Most non-working partners are mothers, with lower employment levels among mothers with pre-school children compared to those with school-age children.
• Enabling more mothers to work would boost household incomes and help tackle in-work poverty.
• Paid family leave allows parents to spend time with young children while protecting incomes, helps keep mothers in the labour market and increases fathers’ involvement in family life. However, family leave is badly paid in the UK and too short for fathers.
• Childcare enables parents with young children to work, particularly mothers, but remains expensive for many low-income families.
• Despite some improvements in the conditions of low-paid work, many mothers can only access poorly paid part-time jobs because of their childcare responsibilities.
• Many fathers work long hours, making it harder for them to get involved in family life and more difficult for mothers in low-income families to work.
• Universal Credit will raise incomes among many low-income couple families, but weaken work incentives for many second earners.
• To enable both partners in more low-income families to work, the study recommends: allowing second earners to keep more income before withdrawing means-tested benefits; expanding publicly funded affordable childcare; and more generous family leave, including longer paternity leave.

Background

Having both partners in work offers strong protection against poverty for couple families, even when wages are low. Although employment is expected to rise considerably over the next decade, sustained reductions in poverty among families with children will be muted unless more is done to support dual-earner families. This study considers the progress made over the last two decades in helping families to have both parents in work; it also looks at remaining barriers, and sets out the lessons for policy and wider change.

Poverty and work among couple families with children

The risk of poverty is much higher for children in couple families where only one parent works. In 2011/12, around 20 per cent of children living in sole-earner couple families in Britain fell below the poverty line (defined as 60 per cent of median household income before housing costs). This compares with 4 per cent where both parents worked full-time, and 6 per cent where one worked full-time and the other part-time. In the same year, sole-earner families accounted for nearly 30 per cent of all families with children in poverty.

The share of sole-earner families has fallen considerably over the last half century as many more women have moved into the workforce, including large numbers of mothers with dependent children. However, around a quarter of couples with children had only one earner in 2012, equivalent to around 1.6 million families. Most of these couples had a working father and a non-working mother. Just over half of the non-working mothers had a youngest child aged below five; the likelihood of the mother not being in work fell considerably as children got older. However, substantial numbers of nonworking mothers had school-age children.

The recession has not had a universally negative impact on employment among mothers in couple families, including those who are particularly likely to be out of work. Employment levels among mothers in couple families with pre-school children have risen since 1997 and continued to do so between 2008 and 2012. However, low-skilled mothers in couple families have seen their employment prospects weaken considerably in the aftermath of the economic crisis.

Policy and labour-market context for couple families

Paid family leave provides important protection against poverty for families with very young children, enabling parents to spend time at home while protecting their income. Well-paid maternity leave also helps to keep women in the workforce. Well-paid paternity leave helps to tie fathers into family life and childcare, which is associated with positive early child development and could make it easier for mothers to return to work.

Mothers in the UK are entitled to a long period of maternity leave, but most of it is not well paid. Paternity leave is very short and badly paid from the beginning. Low levels of maternity pay increase the risk of poverty among lower-income families, while poorly paid paternity leave discourages less well-off fathers from taking their full entitlement. Plans to allow mothers to transfer part of their leave entitlement to fathers are a positive step, but are unlikely to have a significant impact. Fathers are much more likely to take leave when it is well paid and offered on a ‘use it or lose it’ basis.

For families with pre-school children, the availability of affordable childcare is one of the most important determinants of whether the mother decides to work, especially for low-income families. Longer hours of affordable childcare also make it easier for mothers to work longer hours, helping to raise earnings and enabling women to access better-paying jobs. Good quality early care and education can boost early child development, providing some protection against the negative effects of growing up in poverty.

Despite major increases in public funding for childcare, costs remain high for many low-income families. Public funding is fairly generous for some families (for example, low-income families with a child aged two or over) but not for others (for example, a family with a one-year-old and earning just enough to make them ineligible for tax credits). The government has also reduced the level of support available through the tax credit system, damaging work incentives for mothers in low-income families.

The long period of economic growth that preceded the 2008/09 recession created many new employment opportunities for mothers. The minimum wage and new rights for part-time workers have had a disproportionate impact on women, and may have encouraged some mothers to enter the workforce. However, part-time jobs continue to be associated with relatively low wages. In the UK, many more working mothers are in part-time employment than in most advanced economies, which may in part be linked to the lack of full-time subsidised childcare. Conversely, fathers in Britain are more likely to work long hours than in most major European countries, which makes it harder for them to help with childcare. In turn, this can make it more difficult for mothers to work or to work more than a few hours a week.

Once children start school, mothers become much more sensitive to financial incentives in the tax and benefit system. More generous support through the tax credit system has raised incomes among low-income couple families, but weakened the work incentives of many second earners. Universal Credit will raise incomes for most low-income couple families, but work incentives for second earners will, on average, weaken further. This will act against a sustainable anti-poverty strategy founded on jobs and wages rather than ever higher cash benefits.

Conclusion

The number of families able to share childcare and paid work has risen steadily over the last 40 years, but significant barriers remain. The choices of less well-off parents tend to be particularly constrained. Supporting more couples to have both partners in work requires a combination of policy reforms and wider changes in the labour market and workplaces. It demands improvements in the financial returns of work for mothers, combined with help for fathers to spend more time looking after their children.

Change is required in three areas to enable more low-income families to have both partners in work:

1 A second earner disregard in Universal Credit

This would allow mothers in low-income couple families to keep more of their earnings before means-tested benefits are withdrawn, making it financially rewarding for mothers to work and to increase their earnings up to a threshold. It would also complement efforts to raise wages among low-earning mothers, since they would be able to keep a larger share of any extra pay.

2 Expanding the provision of affordable childcare

The long-term ambition should be for comprehensive affordable childcare for all pre-school children (following a period of family leave). Given current fiscal constraints, there are important questions about how affordable childcare and paid leave should be advanced over time, in a way that supports mothers to work in decent jobs, enables fathers to get more involved in family life and is best for children. Difficult decisions will need to be taken about how to fund more affordable childcare and continue to raise the quality of early education.

3 Making it easier for fathers to spend more time at home

Low-earning fathers with young children could be supported to take more time off work to spend with their families if dedicated paternity leave, paid at a decent rate, were available for a longer period. As children get older, families would benefit if fathers could work shorter hours, making it easier for mothers to work and for fathers to get involved in family life.

About the project

This project combined original quantitative analysis of the Labour Force Survey with analysis of policy reforms over the last 15 years.