Incentives matter, d'ye see?

We would put much less weight on this statistic than many others. In fact, we’d put near no weight on it at all:

Back in the 1990s just over a third of those living in poverty (or to put it another way, towards the very bottom of the income distribution) were living in a household in which someone was in work. That fraction has now reached something like 60 per cent. The majority of the poor are in work or live in a household where someone is working.

The reason we think it’s unimportant - in the sense of being some horror that requires a solution - is that we changed the benefit system over that period of time. For certain benefits - working tax credits for example - it’s necessary to work 16 hours a week. Which isn’t enough to climb out of poverty. But someone working 16 hours a week to gain access to that benefit is someone described as “being in work”. We’re absolutely certain that if we went back to the benefits structure of those 1990s then we’d see the level of poverty in families with someone in work return to those 1990s levels.

Incentives do matter, d’ye see?

The other reason we’d not change anything to deal with this perceived problem is that at least something has already been done. Universal Credit shakes up those incentives and we really should wait and see how people react to those changes.

That change in the number of “working families” who are in poverty is driven at least in part by the changes made to the welfare system. Not, as all too many are assuming, by the structure of the underlying economy. Even if we did insist that this was some problem that must be dealt with the changes should therefore be in the welfare system, not the economy.