[UK] Minimum-wage earners must work 6 days a week to equal combined benefits

In the UK, new research has revealed that a National Living Wage worker must work more than 50 hours (the equivalent of six days a week) to take home the same income as a claimant on combined benefits.

The analysis was conducted by the Centre for Social Justice (CSJ). It found that a single economically inactive claimant receiving Universal Credit health and housing support alongside Personal Independence Payment (PIP) can receive approximately £27,400 tax-free annually.

An employed individual would need to earn more than £33,000 before tax to take home the same amount. That figure reportedly rises to nearly £35,000 when a minimum pension contribution is made.

The report, published on October 13, cautions that the rapid growth in mental health-related claims has turned this situation into a “new benefit trap”. 

Despite claimants being permitted to keep some benefits in work, CSJ’s research supports recent findings from the Milburn Review that, for young people with a health condition, inactivity could offer “higher income, less hassle and lower risk than trying to find work”.

The findings are included in State of Dependency, a 250-page report and part one of the CSJ’s landmark Welfare 2030 inquiry, chaired by Sir Iain Duncan Smith MP, the former Work and Pensions Secretary.

The report estimates that the take-home pay of 6.2 million full-time workers (around one in four) is less than the combined benefit package.

The UK Government reduced the Universal Credit health element for the majority of new claims from £429.80 to £217.26 a month, reducing the package to approximately £24,800 a year. This does not affect over three million claimants already on the system.

This gap is reportedly even larger when compared with part-time employment. For average part-time work at 16.5 hours a week at the National Living Wage, an individual earns approximately £10,900 a year. 

The combined benefit package is worth approximately £16,500 more than those earnings, or more than £300 a week.

The CSJ report concludes that, despite Universal Credit strengthening work incentives, the growth of combined benefits risks encouraging claimants to remain on welfare rather than move into work.

An estimated 1.3 million people now receive the combination of income, health and housing support examined in the analysis. Other “passported” entitlements include healthcare discounts, Motability cars, council tax reductions and a range of other perks and benefits.

Despite PIP being permitted to be claimed in work, fewer than one in six PIP claimants are in employment. Around two-thirds of working-age PIP claimants also receive the health element of Universal Credit.

Joe Shalam - policy director at the Centre for Social Justice - said, “The welfare state must provide security for people who genuinely cannot work, but the Government is right to recognise perverse incentives pushing people away from employment, especially through claims for milder mental health conditions.

“When someone who has chosen work over welfare has to graft for six days a week on the National Living Wage to match a combined benefit package, something has gone badly wrong.

“The next generation of reform must go further to restore work incentives and give claimants the care and attention they deserve, rather than simply writing a cheque and waving goodbye.”

Currently around 6.7 million people across England, Wales and Scotland reportedly receive at least one out-of-work benefit, equivalent to one in six working-age adults.

Source: The Centre for Social Justice

(Link and quotes via original reporting)

In the UK, new research has revealed that a National Living Wage worker must work more than 50 hours (the equivalent of six days a week) to take home the same income as a claimant on combined benefits.

The analysis was conducted by the Centre for Social Justice (CSJ). It found that a single economically inactive claimant receiving Universal Credit health and housing support alongside Personal Independence Payment (PIP) can receive approximately £27,400 tax-free annually.

An employed individual would need to earn more than £33,000 before tax to take home the same amount. That figure reportedly rises to nearly £35,000 when a minimum pension contribution is made.

The report, published on October 13, cautions that the rapid growth in mental health-related claims has turned this situation into a “new benefit trap”. 

Despite claimants being permitted to keep some benefits in work, CSJ’s research supports recent findings from the Milburn Review that, for young people with a health condition, inactivity could offer “higher income, less hassle and lower risk than trying to find work”.

The findings are included in State of Dependency, a 250-page report and part one of the CSJ’s landmark Welfare 2030 inquiry, chaired by Sir Iain Duncan Smith MP, the former Work and Pensions Secretary.

The report estimates that the take-home pay of 6.2 million full-time workers (around one in four) is less than the combined benefit package.

The UK Government reduced the Universal Credit health element for the majority of new claims from £429.80 to £217.26 a month, reducing the package to approximately £24,800 a year. This does not affect over three million claimants already on the system.

This gap is reportedly even larger when compared with part-time employment. For average part-time work at 16.5 hours a week at the National Living Wage, an individual earns approximately £10,900 a year. 

The combined benefit package is worth approximately £16,500 more than those earnings, or more than £300 a week.

The CSJ report concludes that, despite Universal Credit strengthening work incentives, the growth of combined benefits risks encouraging claimants to remain on welfare rather than move into work.

An estimated 1.3 million people now receive the combination of income, health and housing support examined in the analysis. Other “passported” entitlements include healthcare discounts, Motability cars, council tax reductions and a range of other perks and benefits.

Despite PIP being permitted to be claimed in work, fewer than one in six PIP claimants are in employment. Around two-thirds of working-age PIP claimants also receive the health element of Universal Credit.

Joe Shalam - policy director at the Centre for Social Justice - said, “The welfare state must provide security for people who genuinely cannot work, but the Government is right to recognise perverse incentives pushing people away from employment, especially through claims for milder mental health conditions.

“When someone who has chosen work over welfare has to graft for six days a week on the National Living Wage to match a combined benefit package, something has gone badly wrong.

“The next generation of reform must go further to restore work incentives and give claimants the care and attention they deserve, rather than simply writing a cheque and waving goodbye.”

Currently around 6.7 million people across England, Wales and Scotland reportedly receive at least one out-of-work benefit, equivalent to one in six working-age adults.

Source: The Centre for Social Justice

(Link and quotes via original reporting)