The national living wage is still not enough for working families

Working families are not feeling the benefit of national living wage, claims a new study, leaving them stuck with a no-frills standard of living.

The Child Poverty Action Group (CPAG) found that rising prices and a combination of benefits and tax credit freezes alongside the benefit cap and two-child limit, the bedroom tax and the Universal Credit roll-out have made families feel the pinch.

And despite pay rises in recent years, including the adoption of former Chancellor George Osborne’s national living wage at £7.83 an hour for over-25s, it is yet to have an impact on low and modest income families.

Rising prices, benefit freezes, the benefit cap, two-child limit, bedroom tax, cuts to housing benefits and the rolling out of universal credit have all hit family budgets #costofachildhttps://t.co/okMl3T1d56pic.twitter.com/dHNKE8f4nc

— Child Poverty Action Group (@CPAGUK) August 20, 2018

The charity estimates that the cost of raising a child over 18 years as £150,753 for a couple and £183,335 for a lone parent, taking into account rent and childcare.

Though this does represent an improvement from last year when couples faced a cost of £155,100. The deficit they face has also dropped from a 13 per cent shortfall to an 11 per cent – or £49 per week – shortfall of achieving an acceptable, no-frills living standard.

As for lone parents, even median earnings will leave the 15 per cent – or £56 per week – shy of an adequate income, due to the high cost of childcare. If they work full-time, the charity found that the deficit will be even higher – around 20 per cent or £74 per week.

CPAG also found that childcare was placing strain on low and middle-income families. With full-time costs at around £80,000 over the course of childhood, even Universal Credit is not alleviating the impact with its policy of reimbursing 85 per cent of costs. As the new benefits system is paid in arrears and reporting is complex, it is hard for families to pay in advance.

The new 30 free hours early years entitlement has helped parents of toddlers working more than 16 hours a week at minimum wage, according to the charity, but the choice of whether to limit working hours or pay a childminder remains for low-income families.

It’s just not right that parents working full-time can not afford a decent basic standard of living. Parents need more support to make work pay. https://t.co/Gzi03GEk2c

— Louisa McGeehan (@LouisaMcGeehan) August 20, 2018

Chief executive of Child Poverty Action Group Alison Garnham said: “While the number of parents in work is increasing, income from work alone is not sufficient to enable some to meet their families’ needs or escape poverty and the cost of a child is substantial.

“There is strong public support for government topping-up the wages of low-paid parents and investing in children is the best long-term investment we can make. By using the forthcoming budget to unfreeze benefits and restore work allowances, the government can take steps towards making work really pay.”

A DWP spokesperson insisted that fewer families are living in absolute poverty and pointed to employment figures.

“The employment rate is at a near-record high and the national living wage has delivered the highest pay increase for the lowest paid in 20 years, worth £2,000 extra per year for a full-time worker,” a spokesperson said.

Image: EPA/Andy Rain