DWP Research from 2003: Why Some Families Are Worse-Off In Work
“Families (typically lone parents but also couples) who considered themselves financially worse off found it very hard to make ends meet now that they had more outgoings to cope with. There were a number of reasons for this:
• Some had very large families with five or six children but no support of any kind from outside the family for financial aid or help with childcare. This not only meant that incomes had to stretch further, but also limited the hours that could be worked, thus reducing incomes. Otherwise expensive childcare was needed to allow parents to work longer hours.
• Household income was low. This was mainly due to the fact that jobs were low paid (typically cleaning, factory work and caring jobs). For some income was unreliable either because of the nature of the job held, as in the case of a freelance make-up artist, or because of inconsistent payments of other income such as child maintenance or Working Families’ Tax Credit, in the latter case due to an administrative difficulty or delay.
• Additional costs tended to be higher too. In addition to the more common housing costs of rent and Council Tax, formal childcare costs were commonplace, which were ‘crippling’ for families like these on low incomes. The conditions attached to formal care were often very restrictive and made such services artificially expensive. In the case of one couple, with five children ranging in age from eight weeks to 13 years, where the husband worked full time but on a low wage and the wife part time, in order to keep a place for their second youngest child, they were obliged to pay for year-round childcare even in the school holidays. They felt under pressure to keep their child in the nursery for a minimum of four days out of five for fear of losing their place to someone who could fill all five days. As it was, they were obliged to pay 85% of the cost of any day their son did not attend. However, as they had no family support and as this was the only place that they trusted with their son and that had the capacity to take him, they had no other choice but to pay.
• Large debts from a time on benefits had a large part to play in families finding themselves financially worse off. Struggling to pay existing debts on a limited income often led to debts being accrued elsewhere as there was not enough money to cover all outgoings. In the case of the freelance make-up artist, her income was erratic due to the nature of her work, but also low due to the fact that she had to fit her work in and around her two children’s schooling. On top of this she had large debts (bank loans to pay for childcare) from when she had worked in the past. She prioritised repayments to the loan companies over her rent and Council Tax as she could only afford to pay one outgoing at a time. Over time she accrued large arrears with the Council for rent and Council Tax and found herself ultimately threatened with eviction.
• Ineffective budgeting would, in theory, exacerbate such a situation. However, as money was so tight in such situations it was often impossible to spend on non-essentials as there were too many demands on money. Often households tried their best to make their money go as far as possible, juggling what little they had to keep all their creditors happy. These families felt they had not experienced any material gain from moving into work. In fact it was common for these families to report that they now went without things that were affordable or available freely when they were in receipt of benefit. Both parents and children were deprived materially but it was often the children who suffered directly. While on benefits there had been little discretionary spending directed to adults: what little there was, was spent on children. Now that the family was worse off it was the children’s activities, such as swimming at the local pool, which ceased.
Children suffered in other ways too; they missed out on holidays or socialising with their peers. In one extreme case, a child’s health was suffering as his parents could no longer afford to buy the foods that counteracted his food-induced hyperactivity. Another important negative impact for the ‘worse off’ was the power of expectations. Families coming off benefits and into work expected to be better off and this often encouraged behaviour associated with that situation, such as spending more on food and luxuries where really the money was not available. These actions made the financial situation worse as it often led to debt through the use of credit and arrears in areas from where money was siphoned to spend elsewhere”.
From pp. 35-36 ‘Low-income families and household spending‘, Department for Work and Pensions (2003)