Twenty years ago over two thirds of children in middle-income households (which we define as being in the middle 20%) lived in owner-occupied housing. Just 22% of their households’ income came from benefits. Today only half of middle-income children are in owner-occupied housing and 30% of their household income comes from benefits.

In terms of their sources of income and their home-ownership rates, middle-income families with children are now more similar to low-income families than they were 20 years ago and are increasingly unlike higher-income families. This is not because middle-income families are poorer than 20 years ago. The median (middle) household income of children is around 40% higher than in 1994–95, though only 2% above its pre-recession (2007–08) level.

These are some of the main findings from new IFS analysis on inequality in childhood released today, which form part of the IFS’s forthcoming flagship annual report on Living Standards, Poverty and Inequality in the UK, funded by the Joseph Rowntree Foundation.

Key findings from the analysis include:

  • In 2014–15, middle-income families with children got 30% of their income from benefits and tax credits, up from 22% in 1994–95. This was driven by increasing generosity of benefits for middle-income families with children, particularly for those in work.
  • Home ownership rates for middle-income families with children have fallen substantially. The proportion of middle-income children living in an owner-occupied home has fallen from 69% to 50% since 1994–95. There has been a corresponding increase in the share living in private rented housing, from 11% to 27%.
  • Household worklessness is much less prevalent than it was 20 years ago. Between 1994–95 and 2014–15 the proportion of children living in a workless household fell steadily from 23% to 15%. For the poorest fifth of children household worklessness fell from 60% to 37% over the same period.
  • Falling worklessness means that a much greater proportion of income for low-income children now comes from parental employment compared to 20 years ago. For the poorest fifth of children, the proportion of their household income coming from parents’ employment has risen steadily from 27% in 1994­­–95 to 42% in 2014–15.
  • The incomes of the poorest children have grown faster than those in the middle over the last 20 years. In 1994–95, the child at the median had a household income 80% higher than the child at the 10th percentile. By 2014–15, this had fallen to 70%. Falls in household worklessness were an important driver of this change. Meanwhile, benefit growth in the middle prevented an increase in inequality between middle-income and high-income children over this period.
  • Overall, despite weak growth in incomes of families with children since the recession, the household income of the average child has risen substantially over the last 20 years. Median net household income for children (which now equates to £30,000 per year for a couple with two children) rose by 39% between 1994–95 and 2014–15, although it is only 2% higher than in 2007–08.

Andrew Hood, an author of the report and a Research Economist at IFS, said,

“Over the last twenty years, remarkable falls in household worklessness have played an important role in reducing inequality between low- and middle-income children. Meanwhile rising benefit incomes for many working families acted to prevent an increase in inequality between high- and middle- income children.”

Jonathan Cribb, another author of the report and a Senior Research Economist at IFS, said,

“In a number of ways, middle-income children are more similar to low-income children than they were 20 years ago. This is partly due to higher income growth for poor families with children, driven by falls in worklessness. Combined with increases in the generosity of benefits for middle-income families, this means that the relative importance of employment income has increased for poor children, but has decreased for middle-income children. Moreover, falls in homeownership have affected middle-income families much more than their high- or low-income counterparts.”

Table. Composition of income and household owner-occupation rates for children in the poorest, middle and richest income quintiles

 

Percentage of income from employment

Percentage of income from
benefits

Lives in owner-occupied home

Poorest 20%

 

 

 

1994–95

27%

73%

40%

2014–15

           42%         

61%

37%

Middle 20%

 

 

 

1994–95

77%

22%

69%

2014–15

70%

30%

50%

Richest 20%

 

 

 

1994–95

93%

4%

94%

2014–15

95%

3%

87%

Notes: Income from benefits and employment will not necessarily because of other small income sources and deductions from income. Source: IFS calculations using the Family Resources Survey, 1994–95 and 2014–15.

ENDS

Notes to Editors:

  1. If you have any queries, please contact Bonnie Brimstone or Emma Hyman at IFS: 020 7291 4800 / 07730 667 013, [email protected], [email protected];
  1. This press release is based on a pre-released chapter from our forthcoming flagship “Living Standards, Poverty and Inequality in the UK: 2016” report. The full report will include a detailed analysis of poverty and inequality trends across households and will be released at a launch on the Tuesday 19th July at the Building Centre, Store St, London: http://www.ifs.org.uk/events/1320.
  1. The Joseph Rowntree Foundation is an independent organisation working to inspire social change through research, policy and practice. For more information visit jrf.org.uk JRF is on Twitter. Keep up to date with news and comments @jrf_uk. For press releases, blogs and responses follow@jrfmedia