In-work poverty: a definition

When a working person’s income, after housing costs, is less than 60% of the national average, they don’t earn enough to meet the cost of living – they are living in poverty*. In the UK, this already affected one in eight workers before the current cost of living crisis emerged.

A combination of factors can make it difficult for many working people to escape poverty:

  • Low income, with pay rises failing to keep up with the rising cost of living.
  • Poor job quality and employment practices leading to financial instability, and trapping people in low-paid roles.
  • A lack of genuine, two-sided flexible working practices that enable people to fit their work around their caring responsibilities and health needs.
  • Underemployment (where people work insufficient hours to cover their cost of living).
  • Financial hardship caused by unforeseen setbacks in personal circumstances, such as relationship breakdown, bereavement or illness.
  • The ‘poverty premium’ which traps those on lower incomes in a cycle where they pay more for goods and services (see What’s it like to live and work in poverty?).

* Calculated using data from the ONS households below average income statistics.

The UK’s cost-of-living crisis in 2022

UK households are in the midst of an enormous-cost-of living challenge. Inflation rates are at their highest in decades, and individuals and business are all feeling the impact of soaring energy, food, housing, and transport costs. But those on the lowest incomes will be hit the hardest. According to the Joseph Rowntree Foundation, low-income families are living through a ‘frightening year of financial fear’, with many falling behind on bills, going without essentials, or taking on high-interest debt.

The National Living Wage already failed to protect many households from poverty before the crisis emerged, so the 6.6% increase in April 2022 hasn’t been enough to offset the rising cost of living. According to The Institute for Fiscal Studies, workers who earnt £30,000 in April 2021 needed to see their wages grow by more than 7% to maintain the same standard of living a year later.

Overall inflation is predicted to hit 14% in October 2022, although the poorest households may face an even greater increase (14%), as they spend a higher proportion of their budget on gas and electricity. Organisations who are under pressure from their own rising costs, will be hard-pressed to help their lowest-paid employees. But, there are other ways to help.

Employers should make an extra effort to understand people’s needs and circumstances, treat them with dignity and respect, identify ways to support their financial wellbeing, and help to break down any barriers preventing them from securing a liveable income.

'Crucially', says Charles Cotton, Senior CIPD Policy Adviser, Performance and Reward, 'employers need to normalise conversations about money so people don’t feel embarrassed seeking help. The earlier they can act, the less likely money problems will impact their mental wellbeing and productivity.'  

According to the CIPD Good Work Index 2022, organisations should also focus on skills development for lower-paid workers to improve their career progression and earning potential.

Calculate the minimum income needed for different family types with the minimum income calculator:

What in-work poverty really looks like

Work can and should be a reliable route out of poverty. But one in eight UK workers struggle to make ends meet. So, what does in-work poverty look like?

We’ve teamed up with JRF to create a series of seven fictional characters, based on JRF’s extensive insights into lived experiences of in-work poverty:

In-work poverty in the UK today

There’s been little improvement in the number of people living in poverty over the past 15 years, and for some, the situation has worsened. The Institute of Public Policy and Research found that the chances of being pulled into poverty have doubled for households with two people in full-time work.

While work can and should help people escape poverty, it often doesn’t. The Joseph Rowntree Foundation’s UK Poverty 2022 report also found that work is becoming less effective at warding off poverty. Over the last 15 years, all areas and nations of the UK have seen increases in in-work poverty. Where higher-than-average levels of unemployment, poverty and deprivation already exist (such as in London, Wales and the North of England), levels of in-work poverty tend to be highest.

IPPR logo

For increasing numbers of working families around the country, the promise of social mobility through “hard work” as a route out of poverty alone is failing to deliver.

Institute of Public Policy and Research

Who is most vulnerable?

In-work poverty isn’t limited to those in the lowest-paid roles and the risks of being trapped in poverty are not equal. It can depend on the sector people work in, their hourly pay and number of hours worked, where they live, as well as their age, gender, ethnicity and disability. Barriers like access to childcare and transport can also determine whether people are able to escape poverty through work.

Those most vulnerable include children, as well as people in:

  • families without full-time workers
  • single-parent families
  • families with a disabled person
  • families with three or more children
  • rented accommodation
  • households headed by someone of non-white ethnicity (particularly those of Pakistani, Bangladeshi or Black ethnicity).

Workers in certain sectors – particularly accommodation and food services – are far more vulnerable to in-work poverty, while other sectors at risk include administration and support services, wholesale and retail, construction, health and social work, and manufacturing.

What can employers do to help?

We believe work can and should benefit everyone, so we’re asking every employer to consider and implement a three-strand financial wellbeing policy that minimises in-work poverty:


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