More UK poor in work, but jobs downturn would hit them hardest: IFS

[LONDON] Britain's poorest households now rely more on jobs than government benefits for their income, reducing inequality but leaving them more vulnerable to any post-Brexit downturn in the labour market, research showed on Tuesday.

The Institute for Fiscal Studies (IFS), a non-partisan think tank, said income from employment made up half the income of the poorest fifth of working-age households in the 2014-15 financial year, up from less than a third in 1994-95.

"While this is good news it does mean that the poorest are now more vulnerable to any downturn in the labour market than they would have been in the past," the think tank said.

Britain's labour market has recovered strongly since 2013 and more people are in work than ever before. However, wage growth has been weak and last month's vote to leave the European Union has clouded the outlook for the economy.

New Prime Minister Theresa May said in her leadership campaign the government needed to do more to help lower-paid Britons.

Before the referendum, the International Monetary Fund and Britain's National Institute of Economic and Social Research predicted wages, rather than employment, would bear the brunt of any adjustment from leaving the EU.

The IFS said there was less scope than in the past to reduce child poverty through getting parents into work.

"The falls in worklessness that we've already seen, plus the fact that rates of poverty among working families have risen, mean that only one third of children in income poverty now live in workless households," the IFS said.

Inequality in earnings had also fallen since the financial crisis, the report showed.

"Given the economic recovery and cuts to benefits over the last few years we might have expected inequality to rise," said IFS researcher Andrew Hood.

"But the combination of strong employment growth, some earnings growth for low-paid workers, and a lack of earnings growth for others, has kept inequality below its pre-recession level."

Middle-income families with children had become more similar to the poorest, with half renting and 30 per cent of their income coming from benefits and tax credits.

REUTERS