David Young is a PhD Candidate at the University of Bath Institute for Policy Research (IPR).
Income security is receiving increasing attention as the financial consequences of COVID-19 are becoming clear for millions of households. Unprecedented income replacement measures have been implemented and the limits of existing social security provision are being experienced by a new wave of claimants. The social security system has a long-standing role in addressing low income and its consequences but there has been less focus on the role of short-term income change and insecurity.
My recently completed research involving in-depth interviews and income and expenditure diaries with low-income households has revealed what income insecurity meant within their lives over time. This involved the experience of inadequacy or not having enough but crucially also of income change and resulting income inadequacy over time. In fact, income change over time shaped the way in which participants managed money and coped. Rather than providing income security, features of Universal Credit’s design created and exacerbated income change and insecurity.
Firstly, people felt insecure when they did not have enough money to meet their needs. One participant, Sadia lived with her nine-year-old daughter and received two sources of income (Child Benefit and Universal Credit) as she recovered from heart surgery. This meant she relied heavily on the adequacy of these sources of income. Here she reflects on repeated incorrect Universal Credit payments and the consequences for her life:
“It makes me feel insecure and I’m thinking how am I going to manage all the time, how am I going to get to hospital appointments and doctor’s appointments and things because I know that every month: incorrect amount.” (Sadia)
These inadequate payments were the result of a failure to invite her for a work capability assessment and were later changed, and Sadia received a backdated lump sum payment. While this payment was welcome, Sadia reflected on the consequences of not receiving the money when she needed it. In her view the stress of this contributed to her slow recovery from major surgery. Income insecurity was therefore not just about inadequate levels of support but also about inadequacy over time, and specifically inadequacy in short periods of need.
Secondly, people felt insecure when their income changed in unpredictable ways over time. For the Oakleys, a couple with a young child, work income and Universal Credit interacted to create unpredictable monthly payments:
“You have a feeling what you will get paid but some months it’s obviously quite a lot lower from what he’s paid, so in terms of saving and things like that, you can’t really do that and you can’t really budget for the month until you know what exactly you’ve got.” (Sarah Oakley)
For the Oakleys, this destabilising interaction disincentivised short-term increases in hours and pay, such as taking overtime. Although Peter Oakley was looking for full-time hours, these temporary hours were all that was currently available to him and were seen by his partner Sarah as destabilising to their household finances.
Another participant Rachel spent two months waiting for her first Universal Credit payment because of the date of her last wage interacting with her monthly assessment period:
“They said that if I got paid on 22nd August, I would have got Universal Credit, but since I was paid on 25th I wasn’t entitled to any Universal Credit, I would then have to live on the wage until 29th of this month [October] and that is where the deep hole happens.” (Rachel)
She also received deductions from her ongoing payments (including for a small advance payment) and this caused hardship and worsening debt. Inconsistent monthly deductions also made Rachel’s income unpredictable and so she was experiencing both inadequate and unstable income.
Insecurity by design
Although there is no agreed policy definition of adequacy, several indicators including poverty statistics, minimum income standards and qualitative evidence have consistently shown the inadequacy of social security benefit rates in providing an acceptable standard of living.
Design decisions also limit social security provision even further from the start of a claim and on an ongoing basis. The monthly assessment of Universal Credit creates a five-week period in which no standard award is paid. The government have indirectly acknowledged this period of income inadequacy with policy changes. Firstly, they reduced the wait from six to five weeks by scrapping the seven waiting days; secondly, they introduced a two week Housing Benefit run-on which was recently extended to other legacy benefits, which effectively reduces the initial wait to three weeks for those moving from legacy benefits; and thirdly, they have increased the availability and generosity of advanced payments, which means up to 100% of final awards can be paid straight away and then paid back through future deductions. While this final policy lever acknowledges inadequacy in these periods it also ensures inadequacy over time, with up to 40% taken from future award payment. For those within my study on the lowest incomes and with the least support this meant debt was inevitable, or what the Trussell Trust have described as hardship now or hardship later.
The rigid nature of Universal Credit’s monthly assessment periods also means claimants have fixed monthly assessment periods (starting on the date of their claim) which make the date on which change happens, or is reported to happen, vital. If a change of income happens within an assessment period, it is taken into account for the following month’s pay but if it does not, it is not taken into account until a month later with no backdating. This can mean an extension of the initial waiting period if previous wages are paid on one date, and a normal waiting period if they are received on another. It can also mean fluctuating ongoing income receipt.
COVID-19 has brought the experience of income insecurity into sharp relief, but it is also a longstanding and important social security concern. Qualitative research and evidence is vital in understanding how insecurity is experienced, but also in guiding policy to address the experience of how it is designed. Greater understanding of lived experience at the start of the policy process, when important design decisions are being made, could prevent future policy design flaws. My research in particular draws attention to the need to place the principle of security at the heart of future social security policy.
This blog is based on my doctoral research, currently underway at the IPR. The names used above are pseudonyms.
All articles posted on this blog give the views of the author(s), and not the position of the IPR, nor of the University of Bath.