Declining incomes and rising poverty: Northern Ireland is falling behind the rest of the UK
Northern Ireland has been hard hit by a weak labour market and growing unemployment, says Adam Tinson.
Today is the launch of Monitoring Poverty and Social Exclusion in Northern Ireland; the fourth such report for the Joseph Rowntree Foundation. The last report in 2012 noted that Northern Ireland was in a sort of ‘holding pattern’ between the recession and welfare reform. Whilst the next wave of welfare reform has not yet been passed by the Assembly, the latest set of figures on Northern Ireland show a situation that has deteriorated.
In the three years to 2011-12, the poverty rate in Northern Ireland was 22% (around 390,000 people), compared to 20% five years previously. The increase has not been uniform, as the poverty rate has increased for working-age adults and children, but has fallen for pensioners.
Over the same time period, the poverty rate in the UK fell for children and pensioners. This is because real median incomes have fallen, and so reduced the poverty line. To see relative income poverty in Northern Ireland increase despite a falling poverty line is a worrying development. In fact, there are 55,000 people in Northern Ireland whose incomes put them above the current poverty line but below the threshold for 2006-07.
Not only have median incomes fallen as mentioned above, incomes across the distribution have fallen in real terms and by more than across the UK as a whole. But the real fall in bottom quintile incomes in Northern Ireland was the largest at 16%. It was also comparatively larger than the fall in the UK. Incomes for the bottom quintile in Northern Ireland were higher than those of the bottom quintile in the UK in 2006-07. They are now lower.
These falling real incomes are partly a consequence of the weak labour market. The proportion of the working-age population who are unemployed has almost doubled to 5.8% between 2007-08 and 2012-13, whilst 4.4% are working part-time because they cannot find full-time work, up from 1.7%. The proportion who are unemployed or economically inactive but who would like work are both lower than in Great Britain, but this is as a result of higher rates of economic inactivity. 27% of the working-age population in Northern Ireland are inactive, compared to 23% in Great Britain. The growth of self-employment and families where the main earner works part-time has been larger in Northern Ireland than in Great Britain, as has the decline in the number of families where all earners work full-time.
The weakness of the labour market will make the next wave of welfare reform more painful. Changes such as the transition from Disability Living Allowance to Personal Independence Payment will be particularly consequential for Northern Ireland given that 10% of the working-age population receive DLA. Although the Welfare Reform Bill remains entangled in negotiations in the Executive, it is expected that there will be some changes relative to how it has been implemented in Great Britain (such as the Under-occupation penalty applying only to new tenants, or Universal Credit payments being made fortnightly rather than monthly). Decisions such as these are an important way of ensuring welfare reform is more palatable. Thought should also be given to having a broader mitigation strategy in place: ensuring well-funded independent advice services, access to affordable credit, and perhaps a more understanding sanctions regime.