Recent reports such as those from the Institute for Public Policy Research and the Joseph Rowntree Foundation, have highlighted that there has been a significant rise in working poverty in the UK. Working poverty is the experience of poverty in a household with at least one adult in work - the adage that ‘work pays’ is no longer always entirely true and, in my opinion, serves little more use than to defer blame. deference. It may be surprising for many that working poverty is even an issue, as employment rates are often cited as a complete measure of success and especially so when the UK rates have been steadily increasing and having experienced its highest levels pre COVID-19 at 76.6% .
IPPR analysis highlights that an average person in a working household is 32% more likely to be in poverty now than in 1996 . Certain groups such as single parents, families with 3 or more children – and those living in areas of the country such as London, Wales the North and the Midlands are more likely to experience working poverty . The reasons for this are multifaceted and have been developing for some time, such as the restructure of the housing market in the late 70s, which many accredit the rising private rent costs to, partnered with the reduction in low-income state support available for those who are most in need . While being in paid work reduces the chance of facing poverty, it doesn’t do enough to pull those struggling out, and with costs increasing, it’s pulling many in.
This is a vast issue that needs addressing at a societal level, led by government intervention and policy. Companies however can and should take action to identify and remove working poverty from their workforces and supply chains. An example of this comes from PayPal’s Employee Financial Wellness initiative, where after the company saw more requests to the employee emergency fund with seemingly small issues that shouldn’t derail someone’s finances, an internal financial security audit was run. This found that around a third of their employees were struggling “pay-check to pay-check” , while being on competitive or above market salaries. Four steps were then taken with the aim of addressing this: increasing wages to liveable standards, reducing the cost of healthcare access (US), allocation of stock to everyone, and financial security education programs. This has been reported as a success as employees now have more net disposable income, accessing more healthcare benefits, reporting less financial related stress, and seeing higher rates of retention and engagement .
Financial wellbeing and removing working poverty should be a HR priority
This is in line with research from Just Capital in the US and The Living Wage Foundation in the UK, that going above the legally required minimum pay to aid employee financial wellbeing, has proven returns on investment, and has aided in recovery from COVID-19 impacts . Financial wellbeing and removing working poverty should be a HR priority - support doesn’t have to only be in the form of a pay rise. For example, offering support for struggling parents to aid in the covering of childcare costs will help many manage with the increasing rates they’re facing. Financial security training may be useful in some cases, but caution should be taken to ensure that the delivery and content is not out of touch with the realities many face.
At HappyMaven we have long stressed that employee health = business health. This extends to financial wellbeing, with inclusive workplaces recognising that for employees to contribute their best they need an environment where more than basic needs are met. To meet your business priorities, start with a meaningful investment in your people priorities – we promise, supporting your employees will pay dividends.
1. ONS (2022), Employment rate (aged 16 to 64, seasonally adjusted). Retrieved from: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/timeseries/lf24/lms
2. IPPR (2021), NO LONGER ‘MANAGING’ THE RISE OF WORKING POVERTY AND FIXING BRITAIN'S BROKEN SOCIAL SETTLEMENT. Retrieved from: https://www.ippr.org/files/2021-05/no-longer-managing-may21.pdf
3. JRF (2020), What has driven the rise of in-work poverty? Retrieved from: https://www.jrf.org.uk/report/what-has-driven-rise-work-poverty
4. McKinsey (2022), Emphasizing the S in ESG. Retrieved from: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/emphasizing-the-s-in-esg
5. Just Capital (2020) Chart of the Week: Companies Paying a Living Wage Fare Better in Recovery. Retrieved from: https://justcapital.com/news/chart-of-the-week-companies-paying-a-living-wage-fare-better-in-recovery/