Vidhya Alakeson is Research and Strategy Director for the Resolution Foundation
It has been clear for months that the government has no hope of meeting its legal target on reducing child poverty.
That realisation has kicked off a lively debate about whether or not the legal target itself should be scrapped.
While that debate has distracted many, a more important issue lurks beneath: how far can you reduce child poverty (whether or not you are trying to hit a target) by getting parents into work rather than through redistribution.
The current government thinks it can make employment alone an effective route out of poverty and is cutting back tax credits accordingly. But even in good economic times, employment was not sufficient.
Tax credits played a major role in making work pay. In fact, the challenge of trying to raise family incomes with less support from tax credits is the troublesome one of improving wages for Britain’s growing number of low paid workers.
Labour made in-roads in terms of reducing child poverty by moving lone parents into work. Worklessness among lone parent households fell by 10 percentage points between 1997 and the start of the recession.
But according to analysis by professor Richard Dickens, investment in tax credits and benefits contributed three times as much as employment to reductions in relative child poverty among lone parent households.
If Labour could not make a child poverty strategy based on work alone successful when the economy was strong, the chances of success in the current environment of a double-dip recession, high unemployment, significant under-employment and stagnant median wages seem remote.
However effective the work programme and universal credit prove to be, the government has set itself a tough test.
• Tackling child poverty: the story so far 13 Jun 2012
• Child poverty: Absolute and relative 30 May 2012
Today’s economic malaise won’t last forever but the challenge of raising incomes simply by moving people into work will remain because of the dominance of low pay in Britain.
Five million workers in Britain earn less than the ‘living wage’, which is designed to provide a minimum acceptable standard of living.
In six of the 16 sectors in the economy, nearly a third of workers earn below the living wage, with retail having the highest percentage of low-wage workers. And it is not just a problem for younger workers.
One in seven people between the ages of 34 and 45 is low paid and wages tend to plateau after this age. Add to this the fact that the minimum wage has been falling in real terms and wages in the bottom half of earnings are not expected to regain their 2003 level until 2020, it is hard to see how the government’s plan to move people into ‘mini-jobs’ will be adequate to move families out of poverty.
If the government sticks with its current focus on employment, it will have to find ways to raise the wages of low-paid workers, either through better hourly pay or by improving their prospects of progression, and it will have to reduce the costs of working, notably childcare and transport.
Making work pay before redistribution through the tax and benefits system is a goal that we could all agree with as a good route out of poverty. But it is one where policymakers in and out of government are struggling to find good answers.
Sign-up to our weekly email • Donate to Left Foot Forward