Tackling ‘traditional breadwinner’ family poverty

ID-10047327The following article is a response to the new Joseph Rowntree Foundation report ‘Taclking in-work poverty by supporting dual-earning families.’

The Joseph Rowntree Foundation (JRF) and The Institute for Public Policy Research (IPPR) has this week published a new report which has found that families with one working parent and non-earning parent (or what they call ‘breadwinner families’) are the largest group of households with children living in poverty. As such, they have called for the following:

a.)    More efforts to be made to incentivise the second non-earner back into paid employment.

b.)    An increase in childcare provision (which the Coalition Government and Labour Party have embraced) so that both earners can work longer hours.

c.)     More shared responsibility for parenting and working.

Whilst focus on this often forgotten (in terms of public policy) group is welcome, with much to commend the JRF and IPPR regarding this new publication, there are a number of disputable points.

Before I discuss these however, it’s worth saying that the fact that one-earner couple families are at particular risk of poverty shouldn’t really come as any great surprise. CARE, a Christian social policy charity who for a number of years have conducted research into family taxation, have highlighted the unfairness these families in particular face in terms of tax and benefits both domestically and internationally. A one-earner couple with two children on the OECD average wage for instance (who would be in the lower half of the income distribution) faces a tax burden that is some 42% greater than the OECD average. Even worse, poorer one-earner families on 75%, 50% and 36% (the UK 2011 minimum wage) of the average, face Marginal Effective Tax Rates of 73%. This means that for every extra £1 a primary earner receives (through overtime for example), they would only see 27p come into the household.

This latter point is especially important in the context of this new JRF research because as noted earlier, they argue incentives for second earners need to be improved in order to tackle the poverty facing these families. However, in light of the figures cited by CARE this is rather puzzling. Why not also focus on bettering incentives for primary earners? After all, it is these who are already participating in paid employment, and focusing efforts on these earners would help enable families who have chosen this household structure to remain so, whilst also potentially increasing their amount of take home income, thus helping alleviate any financial problems.

Indeed, in light of figures from the Department for Work and Pensions obtained for CARE, which suggest that of all one-earner couples 61% in the UK have at least one child under the age of 5, significant caring responsibilities, or disabled person within the household, getting the non-earning spouse or partner into work might not be preferable or possible.

Whilst it is to the credit of the JRF that they acknowledge that many households make a deliberate and informed choice to have one spouse/partner stay at home and the other work, they argue that policies designed to help them, such as raising the income tax threshold and introducing a transferable tax allowance for married couples are poorly targeted. Whilst this may be true in the case of the former, with the Institute for Fiscal studies (IFS) demonstrating that most of the benefit goes to those in the upper half of the income distribution, it isn’t true for the transferable allowance, the IFS again demonstrate that in the case of this policy, most of the benefit would go to those in the lower half of the income distribution, although increases in the income tax threshold might lessen the impact on one-earner families in poverty. Nonetheless, the Government should be looking to significantly increase the generosity of its recently announced transferable allowance policy, which would mean the non-earner would be able to transfer more (or ideally all) of his or her unused tax allowance to their spouse or partner.

Further, it’s disappointing that the report doesn’t do more to moot policies that help one-earner couple families in poverty while allowing these families to remain as such. Why not mention income splitting, a measure which currently operates in Germany which would allow both spouse’s income (or lack of) to be taken into account when deciding how much tax is payable? This measure whilst significantly helping poor one-earner households lower their tax bills (thus alleviating their poverty) could also be optional, meaning that dual earner couples or those who wished to be taxed separately could continue this arrangement. Britain could also consider implementing spousal tax reliefs or credits which give financial recognition to the non-earning spouse. If the UK was to implement something along either of these lines, it would be doing what many nations (Germany, Belgium, Denmark, Norway, Poland and the USA for example) already do. Thus, it’s clear that there are a number of viable policy options out there to help one-earner couple families without them having to become dual earner households.

Moving on, it’s encouraging to see the report mention the long hours’ culture that is prevalent in many one-earner couple families. The authors are right to call for more to be done to help fathers play a greater part in family life. Again though, I believe this could be done without changing the entire structure of these families. Why not consider for instance tackling the crippling primary earner incentives mentioned earlier? Doing so could have a positive effect in helping fathers keep more of their earnings and thus perhaps lessening their need to take on extra hours in order to financially provide for their families.

All in all, whilst it’s encouraging to see the IPPR and JRF raise the issue of one-earner couple family poverty and associated issues (such as the long hours culture and a lack of paternity leave), I believe there are viable policy responses which could help these families whilst also allowing them to remain one-earner couple families. Unfortunately, the authors have given scant attention to such options, or neglected to mention them altogether. What is more, in pushing for more dual-earner households, the unpaid work and efforts of stay-at home parents in caring for loved ones is in real danger of being undermined on a socio-political level. Thus, for those in poverty that genuinely wish to remain one-earner couple households, governments should consider ways in which support can be given to these families so that their poverty can not only defeated but so that they can continue to structure their families in a way which they see fit.

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