Northern Ireland has the lowest poverty rates in the UK
Northern Ireland is perhaps the poorest region of the UK.
However, according to new research, it also has the lowest rates of poverty.
The Joseph Rowntree Foundation (JRF) last week published its latest annual report on the nature and scale of this issue, UK Poverty 2019/20.
Around 14 million people are in the UK are living in poverty –more than one in five of the population (22%). Those 14 million are made up of eight million working-age adults, four million children and two million pensioners.
However, in Northern Ireland 18% of the population live in poverty, the lowest of all regions of the UK. Several regions have a 19% poverty rate (including Scotland and the South East) while the highest rates of poverty are found in Wales and the West Midlands (both 24%) and, in particular, in London (28%).
That sounds like good news – and it is – but it comes with complications. To understand why this happens, it is first worth understanding how poverty is defined.
There are several ways to characterise poverty. JRF uses one of the most common (and fair) – relative poverty after housing costs.
Any household with an income of lower than 60% of the median household income is considered to be in poverty. This figure is equivalised (weighted) for the number of people living in a given household (because more people need more money to live).
And it turns out Northern Ireland’s low housing costs are key to our relatively low rate of poverty.
Northern Ireland is not a wealthy part of the UK. In fact, recent government figures placed it the lowest of all UK regions in terms of median weekly household income before housing costs.
For the period 2014-15 to 2016-17, NI’s median household income before housing was £439, slightly lower than Wales (£440), while the UK average was £486 and the regions with highest income were London (£536) and the South East (£544) – again, all these figures are weighted to take into account the number of people living in individual households.
However, for the same period NI moves up to 8th of all 12 regions for median household income after housing costs.
The JRF report notes Northern Ireland has the most affordable housing in the UK.
It states that changes in poverty are most commonly caused by four main drivers: the employment rate; how earnings for low-income families change compared with middle-income families (high earnings growth can reduce poverty if those with low incomes see their earnings grow at least as fast as earners around the median); how benefits and other income sources change compared with average earnings; and how housing costs for poorer households change compared with income.
The paper identifies four solutions for tackling poverty. The short version of each is:
We need as many people as possible to be in good jobs. While the proportion of people in employment has risen consistently for six years, weak local economies in some parts of the country have led to higher unemployment, underemployment and more low pay than in the UK as a whole.
We need to improve earnings for low-income working families, helping people in the lowest-paid jobs or working part-time. Too many people are stuck in low-paid, insecure jobs, with little chance of progression and too few hours of work to reach a decent living standard.
We need to strengthen the benefits system so that it provides the anchor that people need in tough times. The current system needs to be improved to ensure it gives adequate support.
We need to increase the amount of low-cost housing available for families on low incomes, and increase support for people with high housing costs.
Northern Ireland’s welfare reform mitigations will certainly have played a part in its relatively low poverty rate. Per the JRF report: “For people living in those families claiming an income-related benefit… Northern Ireland has a substantially lower poverty rate of 33% compared with other areas of the UK for people living in families claiming an income-related benefit. Since 2013/14–2015/16, Northern Ireland has witnessed the greatest fall in this poverty rate relative to other areas of the UK.”
However, that is only part of the story.
“Some areas of the country – including cities and towns in the Midlands and north of England, Wales, Northern Ireland and Scotland – have employment rates and pay far below the national average. It is much harder to find work that releases your family from poverty's grip if you live in a place where good jobs that pay well are not available or accessible…
“For someone with the same life circumstances such as qualifications, wage, and family type, progress out of poverty is more likely if they live in Scotland or Northern Ireland than the rest of the UK, and least likely if they live in London or the North East.
“Our analysis cannot identify the exact reasons for these regional differences, but part of the explanation is likely to lie in two key differences across regions: the availability of good-quality jobs, and housing costs.”
NI has a small number of high-paying jobs. In truth, we are a low wage economy. Housing affordability, however, makes this in some ways a much easier place to live than other parts of the UK.
“[I]t may be that it’s harder to progress out of poverty in the North East as it has a higher unemployment rate and lower average earnings than other regions, but it’s also more difficult to progress out of poverty in London because higher housing costs mean families struggle to meet their costs even when moving onto higher earnings; housing costs are lower in Scotland and Northern Ireland on average.”
For decades the UK has prized ballooning house prices as some sort of great increaser of national wealth.
This is true on a grand scale but the simple fact is that this wealth is not truly realisable by a large majority of people. In fact, if you own and live in a single home the rise in value of your assets exists in theory and not in a practical sense. Sell your home and you are likely to buy a new one in the same housing market.
Meanwhile, for those in the rental sector, housing costs simply go up and up. Rising house prices means rising mortgage prices means rising rates from landlords.
House prices in Northern Ireland have generally grown more slowly than in the rest of the UK over the past 20 or 30 years, and so we have a smaller percentage of people in poverty.
Ultimately, it’s better to have lower rather than higher poverty rates, although the whole picture behind these figures is not cause for celebration. NI still has too few good jobs.
Nevertheless, there is a clear lesson here. Affordable housing is an extremely important part of any society, one which the UK – and our neighbours south of the border – have neglected or even chased away.
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