JRF - Households below a Minimum Income Standard 2008/09 - 2015/16

Over much of the past decade, households on low incomes have been finding it ever harder to make ends meet, as their incomes have risen more slowly than living costs. The middle of the present decade saw a period of more benign conditions, when prices stabilised and both individual earnings and household disposable incomes started to increase. This report shows that in the period from 2013/14 to 2015/16, the likelihood of having an income below MIS or below 75% of MIS fell for working-age adults and children. However, by the end of this period, the proportion of individuals in these groups below MIS remained well above that in 2008.

Of the three broad demographic categories focused on in this report, children continue to be most likely to be living in households with incomes below that needed for a minimum socially acceptable standard of living. Despite a fall between 2013/14 and 2015/16, 44% of children in the UK – around 6 million – are growing up in households with incomes below MIS. The proportion of working-age adults below MIS has also fallen slightly since 2013/14, but there are 11.1 million living below this level in 2015/16, nearly 2 million more than in 2008/09.

Conditions have now once again become less favourable for working-age households on low incomes. Since 2016, earnings increases have slowed, prices have started rising again, and many families on low incomes are losing out from the freeze on benefit and tax credit levels, as well as other selective cuts in benefits. This makes it unlikely that the modest improvements noted in this report up to 2015/16 are currently being sustained. It makes the prospects for families and single people already struggling to get by on incomes below MIS seem, at best, fragile.

One finding in this report that may seem unexpected is that pensioners’ likelihood of being below MIS, which is far lower than that of most other groups, continued to rise steadily during the period when the likelihood of working-age adults being below MIS was falling. This may partly be due to a lag: real increases in earnings only feed into higher pensions the year after they are earned. But it is also partly linked to some increases in pensioners’ costs (particularly for single pensioners) at above the rate of inflation, which can mean that increasing pensions by at least the CPI does not systematically guarantee an improving standard of living. Given that many pensioners’ incomes are close to the MIS line, the implications of a rapid increase in the percentage below it should not be exaggerated: in many cases it means slipping just below the threshold. Moreover, pensioner likelihood of low income remains well below that of working-age adults and children. Nevertheless, the clustering of pensioners close to the MIS level demonstrates that while fewer pensioners than in the past are in dire poverty, many remain on incomes modest enough that an increase in costs not matched by income can be painful.

In 2018, the MIS programme will publish new benchmarks for pensioners and for working-age adults without children, reflecting what members of the public in these groups now consider to be the minimum requirements for an acceptable standard of living. This will give fresh evidence of how the cost of living in the contemporary world is evolving. Of significance will be the similarities and differences between pensioners and non-pensioners, since earlier research in this series has shown the income requirements of those groups converging. These results will provide the basis for continued monitoring of the adequacy of the incomes of different types of household, and whether the likelihood of falling below a socially defined minimum is rising or falling.

Please download the report below