David Kingman discusses some new evidence that shows how dramatically the age profile of people who live in poverty has changed over recent years, and ponders what this means for the future of the welfare state
The relationship between age and poverty has shifted dramatically in recent years, a trend confirmed by the latest edition of the Joseph Rowntree Foundation’s annual Monitoring Poverty and Social Exclusion report which was published on 24 November.
No country for young men (or women)
The JRF report highlighted the remarkable divergence that has occurred between the poverty levels of young and old. For this research, a household was judged to be living in poverty when its income equated to less than 60% of the national median once housing costs had been paid, adjusted for the number of people it contained (for the obvious reason that a household with four members needs more money to deliver the same standard of living than a two-person household).
According to this measure, the most significant long-term trend in Britain’s poverty profile over recent decades is that the proportion of pensioner households living in poverty has shrunk from a high of 40% in 1988 to an all-time low of 14% last year.
This has been accompanied by an equally dramatic increase in the share of working-age households who live in poverty, which has gone from 11% in 1982 to 22% currently. The proportion of children who live in poverty has also risen: this has at least been reduced somewhat since it peaked at 35% in the late 1990s, but it still stands at 26%, which means that children are the likeliest of all three of these age groups to be living below the poverty line.
These figures were based on a long-term view of changes in the level of poverty. Over a shorter timescale the shift has been even more dramatic. During the last decade, the level of poverty has risen among all the age groups that make up the under-30s (most severely among people aged 16–19, where it has risen from a quarter to a third). Over the same time span, the level of poverty among the over-65s has halved. Rates of poverty increased slightly for all the age groups between 30 and 65, but not as dramatically as they did for younger people.
The report proposes a number of reasons for why these trends have occurred. Younger generations have borne the brunt of two trends – falling real pay and high housing costs (especially in the private rented sector) – which mean they perform worse on this measure of poverty.
By contrast, older members of society are more likely to be owner-occupiers or sitting tenants (pensioners are the only group among whom the level of poverty falls when housing costs are taken into account), while their earnings have held up because of the protection of pensioner benefits and the generous occupational pension schemes which many members of this age group have benefited from.
What does this mean for the welfare state?
Some of the implications of the way Britain’s poverty profile has shifted by age group were raised by Paul Johnson of the Institute for Fiscal Studies in a recent article he wrote for The Times.
He argued that too much of Britain’s current welfare policy ignores the extent to which pensioners are growing in number and becoming wealthier. He points out that ageing has dramatic implications for the welfare state: we will be spending around £12 billion more each year on state pensions by 2018/19 than we were in 2010/11, while ageing will increase financial demands on the NHS by roughly 9% during a period when its budget is being held flat.
Paul Johnson implies that the fact that pensioners are no longer disproportionately affected by poverty means that we can no longer justify directing so much of the welfare system towards them on a universal basis. Although voters may choose to maintain the status quo, he makes a powerful argument that they deserve to be better-informed about the costs of doing so.
This is surely the right approach, as it cannot be fair to be reducing the amount of public support which is given to working-age families and children who are in the greatest need while continuing to give universal benefits to millions of pensioners who could manage without them. Of course, negotiating the politics of this would be hugely tricky, but in the interests of fairness we must hope that some politicians will be brave enough to consider doing so.