Benefits and the cost of living ‘squeeze’: the attitudes of working households

We might expect people’s attitudes towards benefit claiming to be influenced both by whether they themselves feel they are struggling financially to live on earned income, and by whether they think that many other people are struggling on low incomes. We have used the following question to identify people who live in ‘working households’ – that is, working-age households whose main source of income is not benefits, containing a person in work[8] – who are struggling financially, as well as those who live comfortably:

Which of the phrases on this card would you say comes closest to your feelings about your household’s income these days? 

1. Living really comfortably on present income 

2. Living comfortably on present income 

3. Neither comfortable nor struggling on present income 

4. Struggling on present income 

5. Really struggling on present income

In 2013, only a minority (44 per cent) of people living in working households in Britain feel that they are living comfortably on their current income (Table 6.4). While a similar proportion (38 per cent) of people report that they are neither financially comfortable nor struggling, our particular interest is in the one in five people (18 per cent) who tell us that they are struggling. These are the people who are earning money from work, but who find it difficult to make ends meet on that income. 

Unsurprisingly, those with low household incomes are much more likely to feel they are struggling than those with higher incomes (for instance, those in the lowest income quartile are more than seven times more likely to say so than those in the highest income quartile – 42 per cent compared to six per cent). However, the fact that some higher income households struggle financially (perhaps due to the number of dependents on that income)[9] highlights the importance of using this subjective measure of financial ‘coping’ rather than simply raw figures on household income. It is striking that even among the second-highest income quartile, a majority (57 per cent) say they are not living comfortably.

British Social Attitudes does not include a question which captures people’s perceptions of how far other people in Britain are struggling financially. However, a reasonable proxy is a question which asks about people’s perceptions of poverty in Britain:

Some people say there is very little real poverty in Britain today. Others say there is quite a lot. Which comes closest to your view … 

… that there is very little real poverty in Britain …

… or, that there is quite a lot?

Almost two-thirds (62 per cent) of people in working households believe that there is “quite a lot” of real poverty in Britain today. Although this is the view of a majority of people in each income quartile, slightly fewer of those in the highest-income households think this (54 per cent compared to 65 to 67 per cent of people in other income groups).

While the focus here is on financial struggles among working households, in order to speak to current debates, we should also be aware of the much greater financial struggles of households whose main income source is benefits. Indeed, the majority of these households say they are struggling financially (58 per cent). It is also crucial to realise that ‘working households’ and ‘benefit-claiming households’ are neither mutually nor permanently exclusive categories. Most people who claim benefits do so for short periods and work at other times, and many British people claim benefits at some point in their lives. Moreover, the respondent or their partner in a small number (4 per cent) of these ‘working households’ claim out-of-work benefits while 15 per cent claim tax credits; it is just that these are not their main source of income. Similarly, just over 20 per cent of these ‘working households’ include an adult who is not working (either the respondent or their partner). 

Still, our main interest is in the attitudes to benefits of working households, and whether their views differ dependent on the financial situation of their own household, and on their perception of how well others in Britain are faring financially. We are interested both in the current picture, and in whether attitudes converge or diverge in times of economic prosperity or austerity over the past 10 to 15 years. 

The current picture

So, in 2013, around one in five people in working households say their household is struggling financially and almost two-thirds believe there is quite a lot of poverty in Britain – but how does this relate to their attitudes to the benefits system? As set out in the Introduction, we might expect the attitudes of the ‘squeezed middle’ to be different to those able to live comfortably on their income. Likewise, among people in working households, we might expect different views from those people who feel that there are a lot of British people living in poverty and those who think poverty is less common. However, it is hard to predict who will be more or less positive about the benefits system. The answers to this question are shown in Tables 6.5 and 6.6, where we show how levels of support for benefit claiming varies between those struggling financially and living comfortably, and those who think there is more or less poverty in Britain, revisiting six of the key questions that were discussed earlier in the chapter.

In each table, higher percentages indicate a greater level of sympathy with claimants or support for the benefits system. In order to identify how someone’s financial situation is associated with their views on benefit claiming, we have controlled for the socio-demographic differences between those who were struggling and those who were comfortably off. (For example, those struggling financially are more likely to be women, middle-aged (25–44) and to have lower qualifications than those living comfortably). So, the percentages in the tables assume that the profile of people in the two groups were the same in terms of gender, age, and education.[10]

In several respects, people in working households who are themselves struggling financially are more supportive of the benefits system than those living comfortably. They are statistically significantly more likely to think that unemployment benefits are not enough to live on (9 percentage point gap) and that they are too low (seven percentage point gap). They are also more supportive of welfare spending than those who are comfortably off (16 percentage point gap). However, the other differences are not statistically significant, meaning that they are small enough that they could simply be down to chance.

The parallel results for those who think there is a lot or little poverty in Britain are shown in Table 6.6. Again the table focuses on people living in working households, and again we have controlled for differences in the socio-demographic profile of those who perceive a lot or little poverty. We also control for people’s views of what ‘poverty’ is.[11] Holding these other factors constant, people who think there is quite a lot of poverty in Britain today have different attitudes to the benefits system than those who perceive very little poverty. There  are statistically significant differences across several measures: the perceived generosity of benefits, the view that unemployment benefits are too low and cause hardship (similar patterns are seen for the other deservingness questions, but the differences are smaller and not statistically significant), and whether people want more spending on benefits per se. So for example, 36 per cent of those who perceive quite a lot of poverty agree that we should spend more on welfare benefits for the poor, compared to only 20 per cent of those who perceive very little poverty (a 16 percentage point gap).

It remains quite possible that people do not have different attitudes because they are struggling financially themselves or perceive others as having financial difficulties, with these patterns instead reflecting other, unobserved factors.[12] Still, in 2013, it seems that working households who perceive cost-of-living pressures (either their own struggles or wider poverty) are often more sympathetic to the plight of people living on benefits and more in favour of higher benefits spending than those who are more comfortably off. But has this always been the case, and do recent pressures on the cost of living appear to have affected the views of these working households? To answer this, we must first understand whether there have been changes in households’ financial struggles and, likewise, whether people in working households have shifted perceptions on the amount of people in Britain living in poverty.

Trends in financial struggling and perceived poverty levels

While there is little question that public discourse about the cost of living has grown, underpinned by some hard economic data (see Introduction), there is relatively little evidence on whether, over time, people in working households have come to feel more or less able to cope on their household’s earnings, or feel that increasing numbers of people around them are living in poverty. British Social Attitudes offers an opportunity to examine this, having asked questions on these two issues for at least twenty years. The answer categories for the question on the extent to which people themselves are living comfortably or struggling on their current income changed in 2010, moving from a four to a five-point response scale, and from asking about “finding things difficult” to “struggling”.[13] Although these changes do appear to have affected how people answered the question (and therefore the periods 1995 to 2009 and 2010 to 2013 are shown separately in Figure 6.2), they provide a pattern of how working households feel they have coped over the past two decades.[14]

Within working households, people’s views on their financial situation do appear to have followed what has happened in the British economy over that period. In the period of economic growth from the mid-1990s to 2002, the proportion of people in working households who found things financially difficult fell from 14 per cent in 1995 to 10 per cent in 2003. (Appendix Table A.2 shows there was also a reduction in those saying they were merely coping, and an increase in those feeling comfortably off.) Proportions reporting financial difficulties began to increase from 2003 when median incomes stopped rising, at which point ever-fewer people felt financially comfortable and increasing numbers found things difficult. But there was a step-change from 2007 with the financial crisis, with 21 per cent of people in working households saying they were finding things financially difficult in 2008. Since the change in question wording from 2010, the numbers reporting financial struggles have increased from 14 to 18 per cent. Likewise, the number perceiving “quite a lot” of poverty rose from 58 per cent to 62 per cent between 2009 and 2013, and there was a particularly sharp rise in people thinking that poverty had risen over the past ten years (from 47 per cent in 2009 to 64 per cent in 2013).[15] The recent rise in perceived poverty is particularly striking as people have become slightly less generous between 2010 and 2013 in what they take ‘poverty’ to mean.[16] All of these changes are statistically significant.

If we assume that the year-on-year changes would have been the same with the old question responses as we see with the newer ones, then the numbers of people struggling or finding it difficult in 2013 is at the same level as in 2008 but otherwise higher than any other time during the period 1995 to 2013 (see also note 14). This also fits much of the picture that we can get from other sources.[17]

Attitudes towards benefit claiming and trends in financial struggling and perceived poverty levels

We know that, in 2013, people struggling financially within working households are generally more positive about the benefits system, as are people in working households who feel that quite a lot of people in Britain are living in poverty. Is this feeling of cohesiveness or support for their benefit dependent working-age counterparts from these groups a function of the recent increases in pressures on the cost of living? Or has this been the case in earlier times of greater economic prosperity?

To address this question, we focus on those questions in the section on ‘the current picture’ that were measured repeatedly over time: whether unemployment benefits are too low and cause hardship (or too high and disincentivise work), whether many dole claimants are fiddling, whether many claimants don’t deserve help, and whether people think we should spend more on welfare benefits for the poor. Clearly, there may well have been some changes in the socio-demographic profile of those who view themselves as “struggling financially” or “living comfortably” over this period. If we want to understand whether the gap between the two groups has narrowed or widened over time, we need to control for these differences, as we did in Tables 6.5 and 6.6. The changes over time in the benefit attitudes of those struggling vs. those living comfortably are therefore shown in Tables 6.7 and 6.8, after controlling for any changes in age, gender and education, separating the results for 2000–2009 and 2010–2013 due to the change in question wording.

So for example, in 2000 in Table 6.7, 55 per cent of those who were finding it difficult financially and 33 per cent of those who were living comfortably thought that unemployment benefits were too low: a 22 percentage point gap. By 2009, these figures were 41 per cent and 24 per cent, with the gap between them now 17 per cent. Although this appears to be a convergence of opinions between the two groups, this five percentage point narrowing of the gap was not statistically significant. However, between 2010 and 2013 in Table 6.8, the gap has narrowed statistically significantly. In 2013, those who are struggling financially are still more likely than those who are living comfortably to support the benefits system. However, their views are not as different to those of the more comfortably off than they were in 2010. This is consistent with the hypothesis set out in the Introduction that people struggling financially but not claiming benefits may become more sensitive to a perceived lack of incentives to work in a context where real median wages are not rising. 

Looking at the rest of Table 6.7 and 6.8, we see no other such statistically significant shift in the attitudes towards welfare spending. However, in nearly every case the direction of change has been for the gaps between those with financial struggles and those living comfortably to narrow both 2003–2009 and 2010–2013. (Furthermore, the 2010–2013 change is close to being statistically significant for the question on whether many on the dole are fiddling).[18] In other words, working households struggling financially are generally more supportive of the benefits system than those living comfortably, but the extent of this has fallen since the year 2000 – particularly for views about unemployment benefits since 2010. The one exception to this is for agreement that we should spend more on welfare benefits for the poor in the more recent period: 17 percentage points more of those struggling financially agreed with this in 2010 than those living comfortably, and this increased to a 21 percentage point gap in 2013.

This is noticeably less pronounced when we look at people’s perceptions of whether other people in Britain are struggling financially. Working households who believe there is quite a lot of poverty are considerably more supportive of the benefits system than those who believe there is a little (as above), but the size of this gap has changed little over the entire period 2000 to 2013.[19] 

So for example, in 2000, 45 per cent of those who believed there is quite a lot of poverty in Britain agreed that there should be more spending on welfare benefits for the poor, compared to only 26 per cent of those who believe there is very little poverty. However, the respective figures in 2013 are almost identical at 43 per cent and 23 per cent (after holding constant people’s age, gender and education).

Overall there is therefore some support for the idea that people’s cost of living pressures have been associated with a greater sensitivity to the disincentives to work in the benefits system, in that the additional support for unemployment claimants among those struggling financially and those living comfortably has narrowed between 2010 and 2013. However, we only see a statistically significant pattern for this on one measure. Otherwise, the general picture is therefore much as it was described above: people’s financial struggles are only a relatively weak determinant of most attitudes, while the perception of widespread poverty in Britain remains a moderately strong determinant of what people think of benefits claimants and benefits spending.