Is low pay the reason for the working poor? Low pay and in-work poverty in Ireland today.
Posted on April 23, 2018 by Lisa Wilson
There has long been an assumption that work is the best and most effective route out of poverty. This maxim however has been questioned recently by a report published by Social Justice Ireland who posit that there is over 104,000 people in employment in Ireland who are living in households with an income which is less than the official poverty line - about €250 per adult per week. The working poor.
Social Justice Ireland argue that in-work poverty and the fact that poverty figures for those in employment have moved very little over the last 10-years reflects a persistent problem with low earnings. Some commentators however have been highly critical of the proposition that low earnings are the key explanation of in-work poverty, arguing that the explanation put forward by Social Justice Ireland is at least imprecise, if not incorrect.
What then can we make of these conflicting claims? Is low-earnings the best explanation for in-work poverty? Or are the responding commentators correct in saying that this explanation is an inaccurate one? As like most social issues, the answer to this question is less straight-forward than a simple Yes or No.
To be counted as in-work poor one must have a job and, at the same time, belong to a household at-risk-of-poverty. This is because low earnings are measured at the individual level, while risk of poverty is measured at the household level. What this means is that you can have a low paying job, but not live in poverty. And, despite having low earnings, substantive proportions of low paid workers do not live in households which are classified as poor. We can conclude from this that there is some merit to the proposition that being in low earnings employment does not necessarily imply that you will have a low standard of living, or that you will live in poverty. This is because the household circumstances of individual workers are key in determining whether or not a low-paid worker will be classified as poor.
Nevertheless, how much you earn does play a significant role in increasing your chances of being in poverty. Those with a low paid job are much more likely to be poor.
But, as said, risk of living in poverty for low earning individuals also depends importantly on the household in which they live - and indeed it is the role which the low earnings play in the household that are critical in determining the likelihood that the household will be in poverty.
So, if you are a low paid worker and are the sole earner of the household there is a much higher risk that your household will be classified as poor, than if you live in a household with one or more other workers.
Some of the latest figures show that 17% of low paid individuals who are the sole earner in their households are poor. This figure drops to 1 or 2% for those low paid individuals who live with another worker. We can conclude from this then that for a significant proportion of the low paid – work only becomes a route out of poverty if one lives with another worker. Thus, for low paid workers, work is by no means a guaranteed route out of poverty.
This is all the more concerning in the context of research which shows that the in-work poor have a higher risk of being in poor health than the unemployed or economically inactive.
Additionally, whilst there has been much debate and discussion lately about the extensity of jobless households in Ireland with many commentators arguing that if we are serious about reducing poverty in Ireland we must concentrate on reducing joblessness and getting more people into work. In the context of the above data which suggests that for many people work only becomes a route out of poverty if a second member of the household also works, we must tread with caution.
Labour market activation strategies for reducing the number of jobless households could have the unintended consequence of increasing in-work poverty. This could happen if one becomes employed in a low paid job which does not pay enough to bring the household above the income poverty threshold. We must ensure that the jobs created to reduce joblessness are decent ones.
All of this is in the context of a labour market marked by a reduction in full-time, permanent jobs and a general decline in the terms, conditions and quality of employment. This has especially been the case for those employed in certain sectors such as retail or the accommodation and food sectors or those in lower skilled occupations such as routine or elementary occupations which are often low paid, insecure and offer little opportunity for career progression or upskilling. Those furthest from the labour market face the greatest likelihood of entering a labour market under these poor employment conditions under the pretense that it will provide ‘a stepping stone’. In many cases, it is not at all obvious that it will.