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Minimum wage families face new financial crisis

This news post is over 7 years old
 

​Families on the brink as they struggle to cope with rising living costs

Parents on the minimum wage are on the brink of financial crisis as they struggle with basic living costs.

Child Poverty Action Group (CPAG) in Scotland’s report, the Cost of a Child 2015, found families with both parents working full time at the national minimum wage are 16% short of the basic amount needed to provide themselves a minimum standard of living.

For a couple with two children, that’s a gap of £75.75 per week.

The minimum cost of a child from birth to age 18 remains at £149,805 - a 1.6% increase on 2014 and a 5% increase since 2012.

While this cost will rise less steeply in future years, less state support in covering the cost will create a net loss for most low income families.

The report shows a wider gap for out-of-work couple families at 43%. For lone parents, the shortfall is 13% for those in work – 39% for those not working.

John Dickie, director of CPAG Scotland, said it was “shocking” that even the current minimum wage was leaving families unable to meet the basic costs of living.

The hardest hit will be larger families - a punishment for falling on hard times

He added: “Over one in five children already lives in poverty in Scotland and the oncoming barrage of social security cuts will push the number higher – at greater cost to the taxpayer.

“We should be backing parents’ efforts to build a future for their children, not consigning them to financial misery”

The report also finds children’s benefits have deteriorated significantly since 2012, particularly for lone parents.

Child benefit and child tax credit provided a similar proportion of children’s costs in 2015 as in 2014 - improving slightly for lone parents and becoming slightly less generous for couples but the change follows significant deterioration since 2012.

Therefore in 2012, for a lone parent on a low income, child tax credit plus child benefit fell 22% short of covering the minimum cost of a child, and now falls 27% short.

Child benefit currently covers 19.2% of the cost of a child for couple-families and 16.5% for lone parent families.

However the report says the new, extra support for childcare is potentially good news. Extra provision and help with 85% of the costs for Universal Credit claimants from 2016 could bring down costs substantially for families using paid childcare.

But, the report warns, the new financial support will not be available to families on tax credits and the delay in rolling out universal credit will put off any gains for families until 2016 at the earliest.

Donald Hirsch, author of the report, said: "Over the next five years, some of the most vulnerable families will see support for meeting these costs reduce, sometimes leaving them with less than half of their family's minimum needs if they are not working.

“The hardest hit will be larger families - the punishment for falling on hard times if you have more than two children will be something close to destitution.

“However, even with two children, many families with anything more than a very modest rent will hit the new benefit cap levels, and have their benefits reduced to levels that make it ever tougher just to get by."

 

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