The New Poor

The “new poor” tend to live in households where there is someone in work. Only a third of children below the government’s absolute poverty line now live in a workless household – two thirds of those classified as poor are poor despite the fact that at least one of their parents is in work.

In key respects middle income families with children now more closely resemble poor families than in the past. Half are now renters rather than owner occupiers and, while poorer families have become less reliant on benefits as employment has risen, middle- income households with children now get 30% of their income from benefits and tax credits, up from 22% 20 years ago. Mothers’ earnings are increasingly important for households with children. For middle-income children the fraction of household income coming from women’s earnings rose from less than a fifth in 1994–95 to more than a quarter in 2014–15; and it doubled from 7% to 15% for the poorest fifth.

Europe is sinking into a protracted period of deepening poverty, mass unemployment, social exclusion, greater inequality, and collective despair as a result of austerity policies adopted in response to the debt and currency crisis of the past four years, according to an extensive study from the Red Cross. Mass unemployment – especially among the young, 120 million Europeans living in or at risk of poverty – increased waves of illegal immigration clashing with rising xenophobia in the host countries, growing risks of social unrest and political instability estimated to be two to three times higher than most other parts of the world, greater levels of insecurity among the traditional middle classes – all combine to make a European future more uncertain than at any time in the postwar era. "Many from the middle class have spiralled down to poverty…” it said. European Union official figures report that 24% of its non-poor population (122m citizens) are currently at risk of descending into poverty or social exclusion. This means that they were either at risk of income poverty (their disposable income was below their national at-risk-of-poverty threshold), severely materially deprived and/or living in households with low work rates.

A study by the German Institute for Economic Research in 2013 found that 40 percent of income inequality in Germany could be explained by family background.