Economics of Working Poverty
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Last updated 12 Feb 2023
Working poverty refers to a situation where individuals are employed in a full or part-time jobs but still struggle to make ends meet and live below the official poverty line and have to claim income-related welfare benefits.
This can be caused by a number of factors:
- Low wages: Many jobs pay inadequate wages that do not keep up with the cost of living, leading workers to struggle with poverty despite being employed.
- Inadequate benefits: Jobs that do not provide benefits such as health insurance, paid time off, or retirement benefits can make it difficult for workers to make ends meet and achieve financial stability.
- Part-time or insecure work: Some workers may be employed part-time or in unstable, temporary positions that do not provide a reliable source of income or benefits.
- Unaffordable housing: Housing costs in some areas can be so high that even those with jobs may struggle to afford a place to live, leading to working poverty.
- Lack of access to education and training: Individuals who lack access to education and training opportunities may be limited to low-paying jobs and struggle to escape working poverty.
- Discrimination: Certain groups, such as women, people of color, and individuals with disabilities, may face discrimination in the workplace that limits their earning potential and contributes to working poverty.
Overall, working poverty is a complex issue that requires a multifaceted solution, including policies that raise the minimum wage, improve job security, and increase access to education and training.
Policies to Reduce Working Poverty
- Increasing the minimum wage: Increasing the minimum wage (or real living wage) can help lift low-wage workers out of poverty and increase their purchasing power
- Improving job quality: Improving job quality by increasing the availability of full-time, secure, and well-paying jobs can help reduce relative poverty among working families.
- Increasing access to affordable housing: Providing access to affordable housing can help reduce the burden of housing costs on low-wage workers, freeing up more of their income
- Providing access to affordable childcare: Improving access to affordable childcare can help low-wage parents, particularly women, enter and remain in the workforce
- Improving access to education and training: Improving access to education and training opportunities can help workers acquire the skills (human capital) they need to secure higher-paying jobs in a changing labour market, reducing poverty in the long term.