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Low-income families in Britain

A hard copy of this report summary can be obtained by contacting Paul Noakes  [E-Mail: Paul.Noakes@dwp.gsi.gov.uk] or by writing to him at the 'Social Research Division, Department for Work and Pensions, 4th Floor, Adelphi, 1-11 John Adam Street, London WC2N 6HT'.

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Research Report No. 138

By Alan Marsh, Stephen McKay, Alison Smith and Augusta Stephenson

In 1998 the Policy Studies Institute, together with the National Centre for Social Research, was commissioned to carry out a survey of Britain's lone parents and low-income couple families with dependent children. A sample of families, including lone parents, was drawn primarily from Child Benefit records and booster samples from Family Credit records. Interviews with around 5,000 families were carried out in July/August 1999.

The main focus of the research was to examine the effectiveness of work incentive measures in enabling low-income families with children to obtain and remain in paid employment. The survey also looked at issues of family welfare such as housing, health, morale, optimism, hardship and debt, and in-work support.

The key findings are:

Demographic changes

Work

Family welfare

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Characteristics of low-income families with children

The inclusion of higher income lone parents means that couples and lone parents should not be compared (Section 2.2) unless the sub-groups of lone parents and couples are themselves comparable – such as Family Credit recipients

Work and benefit status

Thirty eight per cent of lone parents were in work of 16 hours a week or more (Section 2.2.1) and six per cent were in work of less than 16 hours (Section 2.7.1). Half the working lone parents claimed Family Credit. Three-quarters of low-income couples had at least one partner in work of 16 or more hours per week (Section 2.2.1). These included 14 per cent of couples in which at least one partner was self-employed. Just over one quarter of working low-income couples claimed Family Credit.

Type of family

Most of the lone parents were women; six per cent were men. Three per cent were widows. Two-fifths (42 per cent) of lone parents were women who had been married to their last partner and more than half of these had since divorced. The remainder, who had not been married, comprised 26 per cent who were separated from cohabitation and 23 per cent who were ‘single’. Single in this case means that they had not lived as a couple with anyone since a point approximately a year before the birth of their oldest dependent child (Section 2.2.2).

Almost half of lone mothers who had been married were in work of 16 or more hours per week, compared with one third (32 per cent) of mothers separated from cohabitation and one-quarter of single mothers (Section 2.2.3). Eighty five per cent of non-working lone parents had not worked in the previous two years (Section 2.7.1), but most moderate and higher income lone parents had spent all of this time in work.

Personal and family characteristics

The average age of lone parents was 35 (Section 2.3.2), and they had an average of 1.7 children (Section 2.3.3). Just over one-third of lone parents had a child under five (35 per cent) (Section 2.3.4). Respondents in couples were typically 35 years old and had a 38 year-old partner (Section 2.3.2) sharing an average of 2.2 children (Section 2.3.3). Almost half had a child under five (47 per cent) (Section 2.3.4).

Ninety-one per cent of lone parents described themselves as being white, as did 87 per cent of respondents in couples (Section 2.3.5).

Health

Three out of ten lone parents and respondents in couples, plus a third of partners, reported a long-standing illness or disability (Section 2.4.2). Ill-health was concentrated among out-of work families: 35 per cent of the lone parents, 41 per cent of couple respondents and 62 per cent of partners in non-working families had a long-standing health problem. A quarter (26 per cent) of respondents in out-of-work couples cared for someone other than their children because of illness or disability (Section 2.4.3).

Housing

Social tenancy was strongly associated with being out-of-work or claiming Family Credit. A narrow majority of lone parents were in social housing (53 per cent) while 28 per cent were homeowners (Section 2.6.1). Two-thirds of out-of-work lone parents were social tenants while two-thirds of the moderate income and 81 per cent of the higher income lone parents were homeowners. More than half the couples were owner-occupiers (55 per cent) and 34 per cent were social tenants, which is more than double the national rate of social tenancy of 14 per cent (Section 2.6.2). Sixty-one per cent of non-working couples and 48 per cent of Family Credit recipient couples were social tenants.

Education and training

Just over one quarter (27 per cent) of lone parents had remained at school beyond the minimum age and eight per cent had continued their full-time education after the age of 18 (Section 2.8.1). More than one third (37 per cent) had no academic qualifications and 13 per cent had a highest qualification at ‘A level’ or beyond. Among those out of work 44 per cent had no academic qualifications. Only among the six per cent of lone parents in the ‘higher income’ group did a majority have academic qualifications at ‘A level’ or beyond, and nearly four in ten of these had degrees (Section 2.8.2). Fewer had vocational qualifications (45 per cent) than had academic ones (Section 2.8.3).

Education levels among the respondents in couples were similar to those of the lone parents (Table 2.24). Among their partners achievement was lower: 46 per cent had no academic qualifications. Among out-of-work couples education levels were lowest: 54 per cent of respondents and 63 per cent of partners had no academic qualifications. Again, fewer respondents had vocational qualifications (43 per cent) than had academic ones (Section 2.8.3).

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Changes in families since 1991

During the 1990s, the proportion of lone parents who had not previously been married rose above half, increasing from 46 per cent in 1991 to 52 per cent in 1999. Among the formerly married the trend was away from divorce, declining from 36 to 27 per cent of lone parents overall (Section 3.2.1).

The average age of lone parents rose from 33 to 35 years between 1991 and 1999. The proportion younger than 25 fell from 18 to 12 per cent and the proportion aged 40 or over increased from 21 to 29 per cent over that period (Section 3.2.2). Lone parents’ children’s ages also rose. Where 47 per cent had a child under five in 1991, this had fallen to 39 per cent by 1994 and to 37 per cent in 1999 (Section 3.2.1).

Among low-income couples, the rate of cohabitation doubled in the eight years between 1991 and 1999 (Section 3.3.1). Among couples on income-tested benefits (Income Support and Family Credit) and living in social accommodation, it doubled from 15 to 30 per cent (Section 3.3.3). Family size fell a little, from 2.4 to 2.2 children, while the average age of low-income mothers in couples rose from 33 to 35 (Section 3.3.2).

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Family formation, contact and maintenance payments

Lone parents’ histories

Three-quarters of lone parents had lived with a partner at some time before or since the point about 12 months before their eldest child was born. Eighty-three per cent of all lone mothers had had all their children with only one father. In 1991 this figure had been 87 per cent. Among those with two or more children, 28 per cent had had children with two fathers, three per cent with three (Section 4.2.1).

During the final year of their relationship, 35 per cent of lone parents said that they had experienced physical violence from their partner. Of these, three-quarters (27 per cent of all those who had lived with partners) said they were injured, though the extent of injury is not known. Violence increased the likelihood that a lone parent took the initiative to end a relationship, and reduced the likelihood of reconciliation (Section 4.2.3).

Half of lone parents and one third of their children no longer saw the non-resident parent. Three out of ten lone parents had no information about non-resident parents’ new family circumstances and half had none about their economic activity. Among those whose circumstances were known, or guessed at, about half had settled down with someone else and the majority of these (60 per cent) were said to have children in their households (Section 4.2.4).

Rates of unemployment among non-resident parents were reportedly high: of all those known about, a third (35 per cent) were thought to be unemployed (Section 4.2.4).

The proportion directly in receipt of child support payments had apparently fallen since 1991, from 30 to 25 per cent. This may be associated with higher collection rates operated directly by the Child Support Agency (Section 4.2.5).

Rates of compliance with child support a reactivation of debts in work or problems associated with the loss or reduction of Housing Benefit when moving into work (Section 6.4).

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Family welfare and hardship

This chapter uses a combined measure of hardship to identify families with children whose living standards were particularly low. The index drew on the dimensions of living standards explored in Chapter 6 and included measures of difficulty affording key items of expenditure, problem debts and financial worries, and indicators of poor housing. Two important groups were identified from this index: families in moderate hardship who experienced problems with one or two of the nine measures of well-being in this index and those in severe hardship who experienced problems with three or more measures.

The largest difference in living standards was between families where at least one adult was in paid work of at least 16 hours per week and those without anyone working. Around one in five of the non-working families avoided hardship and almost two in five were in severe hardship (Section 7.3.2). This affected lone parent families disproportionately since fewer were working.

Working and claiming Family Credit increased living standards but did not eradicate hardship. Overall, more than one fifth of Family Credit recipients were in severe hardship. Around one third were not in hardship - about half the proportion of the moderate income group (Section 7.3.2). Across all dimensions of living standards, people eligible for, but not claiming, Family Credit had higher living standards, on average, than the Family Credit recipients.

Severe hardship was rare among the moderate income groups suggesting that income would not have to rise by a large amount to move people out of hardship (Section 7.3.2). In fact, the average difference in equivalent household income, after housing costs, between those not in hardship and those in severe hardship was around £34 per week – a figure similar to the gains from work made for those claiming Family Credit. However, some families had particular circumstances that made them more likely to experience hardship, even controlling for income. These characteristics included long standing ill health or disability, caring responsibilities, having four or more children, being of a non-white ethnic group, being a tenant, having few educational qualifications, and, if a lone parent, not receiving maintenance (Section 7.3.4).

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Constraints on moving into work

Respondents who were not currently working identified three main constraints on moving into work: childcare issues; ill health and disability; and a lack of relevant skills and work experience.

Childcare

Childcare was the most common reason that lone parents gave for not working. Many expressed concerns about the cost (23 per cent) and availability (16 per cent) of childcare and 27 per cent did not want to spend time away from their children (Section 8.2.2). These concerns were reflected in the significant proportion that did not anticipate using childcare even if they got a job (48 per cent) (Section 8.2.7). One third of lone parents said they would only work during school hours and 19 per cent said they would not work until the children were old enough to look after themselves. Only one quarter expected to use formal childcare. Informal sources were anticipated by 29 per cent of lone parents, and 22 per cent expected to pay for this childcare (which would not be eligible for help under WFTC).

Childcare was a less important consideration for couples as many expected to split working and childcare between them (Section 8.3.7). The proportion of women in couples who said they did not want to be away from their children was the same as for lone parents (27 per cent). Again, around half of women in couples did not expect to use childcare (other than that which they provided) when they worked themselves.

Ill health and disability

Illness and disability were common among non-working couples and typically the biggest constraint on working (Section 8.3.6). One quarter of non-working couples contained both a respondent and partner that did not expect to look for work in the future. Half the non-working couples were receiving disability benefits. Substantial proportions had caring responsibilities (26 per cent) or children with ill health or a disability (41 per cent).

Among lone parents, 35 per cent had a long-standing illness or disability and the same proportion reported health problems among their children. Ten per cent had additional caring responsibilities (Section 8.2.6).

Relevant skills and work experience

A lack of relevant skills and work experience were less commonly mentioned as barriers to looking for work (six per cent of lone parents and respondents in couples), but few appeared to have enough recent work experience and qualifications to get a well paid job. Just 15 per cent of lone parents and 34 per cent of couples had worked 16 or more hours at some stage in the previous two years (Sections 8.2.4 and 8.3.4).

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Jobs and childcare

The inclusion of higher income lone parents means that overall figures for couples and lone parents should not be compared (Section 9.1).

Some 38 per cent of lone parents, 28 per cent of couple respondents, and 68 per cent of partners were in work of 16 or more hours per week at the time of their interview (Section 9.2). A majority of lone parents were employees with low incomes that brought them into eligibility for Family Credit. Dual earning (Section 9.2.1), longer or more continuous work histories (Section 9.3.1), and work of 30 or more hours a week (Section 9.3.2) were associated with higher incomes, and Family Credit facilitated part-time work (16-29 hours).

Short hours and low income went hand in hand with lower quality jobs. Lone parents and partners employed for at least 30 hours a week tended to have ‘better’ jobs than their counterparts employed part-time (16-29 hours) (Section 9.3.5). Self-employed individuals tended not to own large businesses – fairly substantial majorities owned their own businesses (63 per cent among lone parents, 79 per cent among respondents in couples, and 73 per cent among partners), but only around one-quarter in each group employed other people (Section 9.3.6).

Four-fifths of lone parents and nearly half of the couples had at least one source of income in addition to earnings and Child Benefit (Section 9.4). Lone parents working full-time, eligible non-claimants, dual earner couples and moderate income couples were less likely to have extra income. State benefits - in particular Family Credit, Council Tax Benefit and Housing Benefit - were the most common additional sources of income. Benefit receipt was more common among lone parents working part-time (16-29 hours each week) and among couples in which only the respondent was working 16 or more hours.

Free childcare was widely used (Section 9.5). Among those who paid for childcare the average weekly cost was £30 for lone parents and £34 for respondents in couples. The types of childcare which would not have qualified for the Family Credit childcare disregard were much more widely used than those which would. The former tended to be provided free, but they cost those who did pay around £20 per week on average. In contrast, among those paying for types of childcare which could qualify for assistance the average cost was £36 per week. The younger their youngest child, the more likely the parent was to use childcare and to pay for it, and the more they tended to pay if they were a lone parent. They were also more likely to use types of childcare which could qualify for the Family Credit childcare disregard, and paid more for these types (if they were lone parents).

Working parents had largely reliable per cent ended their Family Credit claim because the single earner stopped working (Section 11.2.4).

Among those who experienced the end of a partnership, about half started or finished a claim for Family Credit around the same time. Among new partnerships, in around a third of cases the commencement date occurred within three months of the start or the end of a Family Credit claim. Having a child was also commonly linked to claims for Family Credit, particularly movements on to Family Credit for couples (Section 11.2.5).

Movements into work

Among lone parents who moved into work over the two years before the survey interview, 69 per cent had claimed Family Credit at the same time they started their job and nine per cent claimed a few months later. Only 22 per cent of lone parents moving into work got a job that did not involve claiming Family Credit (Section 11.3.1).

Movements into lone parenthood

Becoming a lone parent reduced the overall economic activity of respondents. But this rate of activity was already low before the start of lone parenthood: 38 per cent were working before beginning lone parenthood compared with 34 per cent immediately after. Among respondents who had been in paid work before they became lone parents, there was clear evidence that Family Credit helped them “remain” in work. Three quarters of the small group who had claimed Family Credit while in a couple continued to claim after they became lone parents. Among those who had previously been working unsupported by Family Credit, 21 per cent stopped work but 33 per cent remained in work and started claiming Family Credit (Section 11.3.2), with 46 per cent continuing in work without Family Credit.

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From Family Credit to Working Families’ Tax Credit (WFTC)

WFTC replaced Family Credit in October 1999. WFTC was designed to provide higher levels of in-work support by increasing the earnings level for receipt of the maximum amount and by reducing the rate at which support is withdrawn for every pound earned above that level. It also expands the size of the population eligible for in-work support. When interviewed before this change, about one quarter of Family Credit recipients knew that change was on the way. Such knowledge had reached one in ten of those not in work.

Since April 2000, WFTC has generally been paid through the wage packet. In 1999, before any experience of the new payroll system, few respondents, and only seven per cent of Family Credit recipients, said they would prefer this payment route over more familiar methods (Table 12.2). These responses are based on the main respondent, and it is possible that the (male) partners would have expressed a different view. At that time it was still a hypothetical question.

Those likely to be brought into range of WFTC by its higher income threshold had much in common with eligible non-claimants of Family Credit – only more so. That is to say, they were more likely to be couples, and dual earners, to be owner-occupiers, and to have had no experience of means-tested benefits for families (Section 12.3).

The survey estimates suggested that about 1.5 million families will be eligible for WFTC, each entitled to an average of £59 at October 1999 rates. Those who would be brought into range of WFTC by its higher rates of support, and lower taper, comprised about one third of the potential caseload. However, they were closer to 10 per cent of the potential expenditure, since their average WFTC entitlements were smaller than for those (already) eligible for Family Credit.

Projecting a total caseload from this requires estimates of the take-up rate, flows in and out of the eligible population, and any underlying growth of the eligible group. Taking these factors into account, the WFTC caseload could reach around 1.4 million, but 1.2 million would be a more realistic target for its first year (Section 12.3.2).

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Attitudes and morale

The majority of lone parents doubted the value of the two-parent family but substantial minorities of married women and about a fifth of their partners shared these doubts (Section 13.2.1).

Lone parents and couples alike rejected views discouraging or even prohibiting mothers with children from working, including those with very young children (Section 13.2.2). Views were more evenly balanced between the amount of personal fulfilment and advantage seen to be associated with work, compared with looking after the home. But work was seen as a sure route to a woman’s independence and this was valued (Section 13.2.3.). On balance, there was a strong attachment to work, strongest among the male partners in low-income couples (Section 13.2.4).

Low-income families rejected the idea that claiming benefits should be accompanied by a sense of shame and that debt was anything other than to be avoided. Propositions that benefits should be reserved for the poorest were also rejected, though about a quarter of claimants themselves felt this might be a good idea (Section 13.2.5).

A key item “‘Women have the right to choose to be supported by the State at home with their children, even if they have no husband or partner’” evenly divided the sample. Support for this proposition declined significantly between 1991 and 1999. Support declined most among lone parents receiving income-tested benefits: from 75 to 59 per cent among Income Support recipients and from 74 to 48 per cent among Family Credit recipients. (Section 13.2.5.).

A fifth of lone parents said they were unhappy, twice the proportion among women in couples, and they were more likely to say they never really got what they wanted out of life (59 versus 43 per cent) (Section 13.3.1). Lone parents had lower self-esteem than couples, but the difference was not large. Some aspects of morale were low in all families. A quarter of all women felt, for example, they had little to be proud of and almost half the lone parents (48 per cent) said they ‘felt useless’ at times (Section 13.3.2).

Morale was lower among out-of-work families than those in work. Among those who were ill and who were experiencing hardship morale was very much lower. Fifty three per cent of those both ill and in severe hardship scored in the bottom fifth of the range of morale scores among all low-income families compared with only seven per cent of those free of illness and hardship. (Section 13.3.2).

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Conclusions

Change in families

The decline in the pre-eminence of traditional families who marry, have children and stay together was at least as steep among low–income families as it was among others, possibly steeper. Fewer lone parents had ever married since starting their families. By 1999, just under half of lone parents (excluding widows) had been married, though cohabitation had been common among the remainder. More low-income couples cohabited, especially those receiving income-tested benefits.

One of the central problems identified in 1991 – the extent of worklessness among low-income families with children – had eased, especially among couples. Among lone parents, the proportion working 16 or more hours a week remained a minority in 1999 but one that had risen since 1991 from 29 to 38 per cent. This was due partly to demographic factors – lone parents were older and fewer had children under five. Labour market conditions were also better in 1999. Improvements meanwhile to Family Credit rules had also improved incentives to work, which continued to be instrumental in getting lone parents into paid jobs.

Problems moving into paid work

Improvements in labour market conditions meant that the remaining out-of-work families in 1999 faced greater barriers to work than the barriers faced in 1991. At a time of higher employment, people with children to support who do not work tend to be those with particular difficulties. Couples in particular faced problems with poor health and disability and low qualifications, as did a large minority of lone parents, who often had ill children too. Problems with childcare were also important but were rarely the sole reason given by lone parents for not working. This is not to deny the effectiveness of Family Credit in helping families from benefit into work or in helping them to stay in work when family incomes suddenly fell. It emphasises the need, particularly among lone parents, to get everything else right at the same time. Policies such as the New Deal for Lone Parents since 1998, and the experimental ONE service for new benefit claimants are addressed to these greater barriers to work.

Incomes and living standards

The impact of Family Credit on people’s incomes could also be seen relative to a commonly accepted income threshold, but this differed for lone parents and couples. More than half of the lone parents receiving Family Credit had incomes that were above 60 per cent of the national median, but most of the couples receiving Family Credit remained below it. It is important to stress therefore that Family Credit was a useful measure for improving incentives and living standards in work, but families using it still had a long way to go to establish the kinds of living standards that most families would see as comfortable.

This point was seen clearly in the measures of relative hardship. It was clear that many families on Income Support were not sustaining a standard of living consistent with good health and family well being. Family Credit lifted many families away from the worst of these conditions. Not all the differences between families in hardship and those who were not were accounted for in cast terms: their average difference in incomes was £34 a week. Greater hardship was independently associated with ill health and with larger families, for example.

The largest difference in living standards was between families where at least one adult was in paid work (of at least 16 hours per week) and those without a worker. This is one of our clearest results, and one that makes plain the importance of moving families into work where possible.

The challenge for Working Families’ Tax Credit

In moving families into work, and in keeping them there, the evidence suggests that WFTC ought to inherit Family Credit’s positive functions effectively, and help ease other factors such as the need sometimes to pay for childcare. It should improve living standards in work too, better than Family Credit could.

But it will also inherit some of the problems that always remained with Family Credit and may revive some from earlier times. For example, the take-up “rate” of Family Credit rose as a proportion of eligible families between 1991 and 1999. This reflected better knowledge, and the eligible non-claimants were increasingly confined to those with small entitlements and who had other advantages. Few of them stayed eligible for long. WFTC aims to extend eligibility further up the income distribution by using higher income thresholds and by withdrawing a smaller fraction of the award against each increase in wages (55p in the pound compared to 70p under Family Credit.) This will include families unused to claiming extra money from a Government department. Their social profile will be typical of those that research has shown to be characteristic of eligible non-claimants of Family Credit. The proportion among eligible families entitled to small awards will grow, which is also associated with low take-up rates. Though for many of them, the new income will be significant enough to prompt a claim, once the advertising has found its mark. These changes, and their effects, should have been visible when these families were interviewed again in the summer of 2000.

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Publication details:

Marsh, A, McKay, S., Smith, A. and Stephenson, A. “Low-income families in Britain: work, welfare and social security in 1999 ”(2001) (DSS Research Report Number 138) Leeds: CDS (£53.00)

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Other relevant publications

Bradshaw, J. and Millar, J. (1991) “Lone Parent Families in the UK”, London: HMSO.

Bryson, A., Ford, R. and White, M. (1997) “Making Work Pay: lone mothers, employment and well-being”, York: JRF.

Bryson, A. and Marsh, A. (1996) “Leaving Family Credit”, London: HMSO.

Burghes, L. (1994) “Lone parenthood and family disruption: the outcomes for children”, London: Family Policy Studies Centre.

Finlayson, L and Marsh, A. (1998), “Lone Parents on the Margins of Work”, (DSS Research Report No. 80), Leeds: CDS.

Finlayson L, Ford R, Marsh A, McKay S and Mukherjee A (December 2000) “The British Lone Parent Cohort 1991 to 1998” (DSS Research Report Number 128) Leeds: CDS

Ford, R. (1996) “Childcare in the balance: how lone parents make decisions about work”, London: PSI.

Ford, R., Marsh, A. and Finlayson, L. (1997) “What Happens to lone parents: a Cohort Study 1991 to 1995,” London: The Stationery Office.

Ford, R., Marsh, A. and McKay, S. (1995) “Changes in Lone Parenthood”, HMSO: London.

McKay, S. and Marsh, A. (1994) “Lone parents and work”, London: HMSO.

Marsh, A., Ford R. and Finlayson, L. (1997) “Lone Parents, Work and Benefits”, London: PSI.

Marsh, A. and McKay, S. (1993) “Families, Work and Benefits”, London: PSI.

Payne, J. and Range, M (1998) “Lone Parents’ Lives”, (DSS, Research Report No. 88), Leeds: CDS

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