Soaring poverty could drag down wages for everyone, experts warn

The volume of people trapped in poverty could have a knock-on effect on how well others are paid, according to new research, with millions unable to contribute to the UK’s recovery from Covid-19.

More than a million children of key workers – one in five across the UK – are living below the breadline, the study by the Trades Union Congress (TUC) showed, including nearly 30 per cent of children in the north-east of England whose families kept the country going in lockdown.

Researchers blamed low pay, insecure hours and unaffordable housing costs for the high level of hardship among supermarket staff, carers and delivery drivers who have worked to keep the UK running during the pandemic.

“It is shameful that the very workers who got us through this crisis are in the firing line when it comes to poor pay and cuts to universal credit,” said Jonathan Reynolds, Labour’s shadow work and pensions secretary. 

“A basic principle of our economy has to be that people are paid a fair wage they can raise their family on.

“The government must immediately stop their cut to universal credit which will take £1,000 a year from millions of working families.”

Key workers have shown courage and dedication during this pandemic.

On behalf of our union movement, thank you for your sacrifice and service.

Now it’s time for govt and employers to repay that debt: Fix their contracts. Raise their pay. Give people dignity at work. #TUC20pic.twitter.com/bgXIbiQGRu

— Trades Union Congress (@The_TUC) September 14, 2020

Reynolds added that Labour would replace universal credit with a new system and introduce a living wage of £10 per hour. 

The policies experts say are keeping families trapped in poverty – such as pay caps on workers in the public sector, which amount to wage losses in real terms, and already-low universal credit payments which are set to be cut by £20 per week after September – will drive child poverty even higher, the TUC report said.

This will “put the brakes” on the UK’s economic recovery from the pandemic by making it difficult for many families to spend money, according to the research – produced for the TUC by Landman Economics – meaning businesses lose out and wages could stagnate for other workers who could then be pulled into poverty themselves.

“Every key worker deserves a decent standard of living for their family,” said Frances O’Grady, general secretary for the TUC. “But too often their hard work is not paying off like it should. And they struggle to keep up with the basic costs of family life.” Researchers used the government’s definition of key worker when carrying out the study.

“The prime minister has promised to ‘build back fairer’,” she added. “He should start with our key workers. They put themselves in harm’s way to keep the country going through the pandemic. Now, we must be there for them too.

“This isn’t just about doing the right thing by key workers. If we put more money in the pockets of working families, their spending will help our businesses and high streets recover. It’s the fuel in the tank that our economy needs.”

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Ministers must raise the national minimum wage to £10 per hour “immediately”, the TUC said, and end the freeze on pay for public service workers as well as raising wages. 

The trade unionists also repeated calls to cancel the £20-per-week cut to universal credit while boosting child benefit above inflation.

The cut is “likely to throw more children into poverty,” said Imran Hussain, director of policy and campaigns at Action for Children, adding: “The government should think again and choose to back the low paid.”