19 June 08 – Publication of DWP research report 506: “Employment transactions and the changes in economic circumstances of families with children: Evidence from the Families And Children Study (FACS)”

This study uses longitudinal data to explore the impact of movements in and out of paid employment on the economic circumstances of families with children. It also looks at the circumstances of families that received in-work tax credits to investigate how their economic circumstances change following employment transitions.

The research was carried out by Matt Barnes and Nick Lyon from the National Centre for Social Research and Professor Jane Millar from the University of Bath. It uses data from five waves (2001-2005) of the Families and Children Study (FACS), which is a Government-funded survey of families with dependent children living in Britain.

Key Findings

• Moving into work was the main factor associated with a movement out of income poverty and living standards hardship over time. Couple families were more likely to move into work than lone parents; 21 per cent and 12 per cent respectively moved from being out of work to in work, over one year.
• Most families who moved into work moved out of income poverty in the first year of work – 70 per cent of families who were initially in income poverty moved out of it within one year. This figure was the same for couple and lone parent families.
• Many families only moved out of living standards hardship after remaining in work for two consecutive years. Fifty-seven per cent of couple families remained in living standards hardship after one year in work, falling to 37 per cent after two years. The respective figures for lone parents were 60 per cent, falling to 45 per cent.
• The majority of families who moved into work and received in-work tax credits moved out of poverty; 75 per cent of lone parent families and 62 per cent of couple families who made this transition moved out of poverty after one year in work.
• Receipt of in-work tax credits did not always lift families on low wages out of poverty: 16 per cent of lone parent families and 28 per cent of couple families receiving them remained in income poverty after one year in work.
• Relatively few families moved from working to being out of work – 3 per cent of families initially in work moved out of work over one year. Lone parents were more likely to move out of work than couple families; 8 per cent and 2 per cent respectively moved from being in work to not working, over one year.
• Moving out of full-time work was the main factor associated with moving into income poverty and living standards hardship. Families who did so entered income poverty more quickly than living standards hardship.

Notes to editors:

1. This report is published on 19 June 2008 in the DWP research report series (report number 506). It can be found on the internet at http://research.dwp.gov.uk/asd/asd5/rrs-index.asp.
2. This project was carried out by an independent research organisation, the National Centre for Social Research. The report authors were Matt Barnes, Nick Lyon, and Jane Millar.
3. ‘In-work tax credits’ refers to receipt of Working Families Tax Credit and Working Tax Credit, which replaced Working Families Tax Credit in 2003.
4. The Families and Children Study is a refreshed panel study of approximately 7,000 families in Britain, investigating the circumstances of all families with dependent children. It covers a range of topics including: health; disability and caring; education; income; childcare; child maintenance; housing; transport; and labour market activity.