Employment alone won’t turn the tide on child poverty, new analysis warns

The UK government’s reliance on employment growth to tackle child poverty will fail to deliver the reductions needed, unless it is backed by the removal of the controversial two-child limit and the benefit cap, according to new Nuffield Foundation funded research published today.

The analysis, by the London School of Economics and Political Science (LSE) and the University of Glasgow, shows that even if the government achieves its ambitious target of raising employment from 75 per cent to 80 per cent by 2029/30, this would lift only around 100,000 children out of poverty. With existing policies such as the two-child limit and benefit cap set to push 200,000 more children into poverty by the end of this Parliament, this would mean a higher child poverty rate at the end of this government than at its beginning. There are currently 4.5 million children living in poverty, most of them already in working households.

Keir Starmer has said that reducing child poverty should be treated as a test of his government’s term in office. The new analysis underlines the importance of urgent and far-reaching policy action, beyond support for employment, if the government is to meet this test.

The analysis comes as the government prepares to announce its Child Poverty Strategy around the same time as the November 26 budget.

The analysis concludes: “Combined with the high prevalence of child poverty in working households and the limited impact wage increases can have on a family’s risk of being in poverty, it is clear that employment alone cannot make a significant impact on rates of child poverty. Investment in social security must be a key pillar of the upcoming Child Poverty Strategy, starting with the removal of the two-child limit and benefit cap, as the most effective way of lifting children out of poverty.”

Professor Kitty Stewart of LSE’s Centre for Analysis of Social Exclusion (CASE), which is publishing the briefing on November 12, said:

“More and more parents are in work, and working longer hours – yet child poverty continues to rise. This is because wages don’t adjust to family size, and because balancing paid work with care means many parents aren’t free to do the hours or take the jobs they might at other times in their lives. The UK needs to learn from other countries and from its own past policy successes: reducing child poverty means providing adequate support through child benefits to help families meet the temporary costs of raising children.”

Key Findings

• Rising child poverty: Without action, the number of children living in poverty in the UK is set to rise from 4.5 million to 4.7 million by the end of this Parliament.
• Limited gains from higher employment: Achieving an 80% employment rate would only modestly reduce child poverty, lifting around 100,000 children over the poverty line.
• High public cost: Reaching this highly ambitious employment target would be extremely costly. Costs of past employment programmes suggest it could cost £3 billion/year in personalised employment support to move 200,000 parents into work by the time of the next election (net of expected welfare savings), without including extra costs of barriers such as childcare access, transport and lack of local job opportunities. Reaching the 80% employment target would require 2.1 million people in work, including nearly 600,000 parents.
• Work doesn’t guarantee escape from poverty: Over 70 per cent of families in poverty now have at least one adult in work, compared to 49 per cent in 2000/01. Families with young children, disabilities, or health conditions face the most persistent barriers.
• Social security remains the most effective tool: Evidence from previous decades shows that investment in benefits such as Child Tax Credit played a decisive role in reducing child poverty, while cuts and freezes to family benefits have driven recent increases.
• Cuts to social security have hit working families as well as those out of work: Policies like the two-child limit have made it harder for families to escape poverty through work, because the cuts have removed support for children in low-income working families, and wages are often not enough to compensate. In the most recent data, among families with 3+ children where an adult entered full-time work, only two in five were lifted out of poverty as a result – a significant drop from the two in three families lifted out a decade ago.

Researchers say the upcoming Child Poverty Strategy presents a crucial opportunity for the government to reset its approach. The briefing urges ministers to combine employment initiatives with meaningful investment in the social safety net, recognising the additional costs families face while raising children. The most urgent actions are to:

• Remove the two-child limit and benefit cap
• Restore the value child benefits have lost over the last 15 years, and ensure they keep pace with price and wage inflation going forward

Professor Ruth Patrick, of CASE and the University of Glasgow, said:

“The mantra that work is the best route out of poverty has been a popular one, which has dominated political and policy discussions for many years now. But what our new analysis shows is that we cannot talk with legitimacy about reducing child poverty unless we also take action to invest in social security as an essential ingredient in meeting the additional needs that come with children and helping ensure every child has the very best childhood possible.”

Alex Beer, Assistant Director of Strategy at the Nuffield Foundation, said:

“This research is an important reminder that the vast majority of children in poverty live in working families. The health, care and other barriers that parents face mean that increasing hours of work is not a practical or cost-free option for many. The forthcoming child poverty strategy needs to take a multi-faceted approach that includes improvements to the social security system for families with children.”

Why We Won’t Turn the Tide on Child Poverty with Employment Alone, is due to be published by LSE’s Centre for Analysis of Social Exclusion on Wednesday November 12.

This research draws on analysis done for a major Nuffield Foundation funded study looking at the impact of the benefit cap and two-child limit on families with three or more children.

It was written by Kitty Stewart, Ruth Patrick and Aaron Reeves with input from Kate Andersen, Eleni Karagiannaki, Henry Parkes and the Child Poverty Action Group.