Work alone cannot tackle the causes of childhood inequality

Naomi Eisenstadt
Tuesday, March 14, 2017

As she stood on the steps of Number 10, the Prime Minister promised to address the huge issues of inequality in our country.

But there are a range of terms that are used in the debates on disadvantage. Understanding the differences between the terms helps to determine policy responses. The standard poverty measure in the UK along with the Organisation for Economic Co-operation and Development and other international bodies has been 60 per cent of median income, a measure that is fundamentally about money. The coalition government disliked this measure as too simple for measuring child poverty, lacking in the key issues that they consider drivers of poverty like worklessness, family breakdown, educational attainment and drug abuse. However, a relative measure based on median income allows for international comparisons and measures of progress.

To be clear, median income is not the same as average income. Median is the figure where half of households earn more than that figure, and half of households earn less. Average income is the total of income divided by the total number of households. Inequality is the difference between the highest income earners and the lowest income earners. Hence, if the average income is well above the median income in a particular country, that country is highly unequal because the average is skewed by a small number of extremely high earners at the top of the income distribution. In the UK, the median household annual income is about £26,000. The average is about £38,500.

Social mobility is the likelihood that a child born into a particular income group will in adulthood wind up in a higher or lower income group. We tend to think of social mobility in terms of the chances of some groups going up the scale, but rarely in terms of those from the higher groups going down. Poverty can be dealt with by generous income transfers as was characteristic of the last Labour government. But inequality increased, as incomes of the richest rose faster than incomes of the poorest. Inequality can mainly be dealt with by progressive taxation, crucially including inheritance tax. Growing up knowing that you will someday inherit wealth transforms life chances. Countries that have a narrower span between the richest and poorest tend to be more socially mobile.

All this matters because young people of today not only are stalled in social mobility terms, their actual incomes are likely to be less than that of their parents at the same stage of life. They are less likely to be able to buy a home, less likely to have access to social housing at controlled rents and if they are from a disadvantaged family, less likely to be able to enter high-paying professional roles. As good-paying jobs require higher and higher qualifications, those less likely to do well at school are most likely to be left behind. But even good qualifications no longer guarantee success.

Back to the what the government has called the main drivers of child poverty: worklessness, family breakdown, educational attainment, debt and addiction. Families of working age where no adult is working are indeed highly likely to be poor. But that does not mean that work alone gets families out of poverty. Indeed, there are now more children living in poverty where at least one adult is working than children living in workless families. Work is essential, but not sufficient. Low wages, limited hours of work and insecure work all add to the chances of working families still being poor. Likewise, for the other identified drivers: poor educational attainment, family breakdown, debt and addiction to drugs or alcohol are all co-related with poverty. That means all of these factors increase the likelihood of poverty, but they are not deterministic, nor do they represent a majority of families in poverty.

There are many intact families in poverty who are not plagued by addiction, and many families on good incomes with high levels of debt and problems with alcohol. Not all children from better-off families do well at school. But they are more likely to have additional help in terms of extra private tuition, educational activities outside of school and parents who can choose where to buy a house based on the quality of local schools. Better-off parents can buy educational advantage for their children.

If the current government is serious about addressing inequality, it needs to think about the drivers that are not linked to individual behaviours, but linked to systemic unfairness. A government serious about inequality would not be putting increasing pressure on families on the bottom half of the income distribution in terms of service cuts and benefits reductions.

The Brexit vote has shown that a significant portion of the population are seriously dissatisfied and feel with some justification left behind. Only serious political will at local and national level can address this discontent. I see no sign that this is happening.

Naomi Eisenstadt is senior research fellow at the University of Oxford

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