This report explores the connections between low income, poverty and protected characteristics, how these can shape the experience of poverty, and whether this can result in a similar inequality in terms of when and how poverty premiums are incurred. The economic consequences of the coronavirus pandemic look likely to throw many more people into poverty, and this poverty is falling hardest on those with protected characteristics. The goal of this study is to examine the links between poverty and people with protected characteristics, focussing specifically on evidence relating to factors that can contribute to the poverty premium, and exploring the extent to which different groups incur different levels and types of poverty premium.
The study comprises the following:
- A targeted literature review of recent key evidence on the links between poverty and people with protected characteristics to understand why and how different groups are more vulnerable to poverty and its impacts, focussing specifically on evidence relating to factors that can contribute to the poverty premium, such as credit use, paying for energy, use of insurance, or levels of digital use.
- Secondary analysis of consumer survey data from poverty premium research conducted by the University of Bristol’s Personal Finance Research Centre in 2016 (n=947), and 2019 (n=1,000). The survey data was collected from households whose income was below 70 per cent median income equivalised for household size; the sample in 2016 came from a nationally representative sample whereas the sample in 2016 came from people who had sought help from the charity Turn2Us. As such, the study treats the two datasets separately.
- The analysis on the survey data looked at significant differences amongst protected groups, and controlled for other factors using binary logistic regression.
The study was commissioned by Fair By Design, a charity.
Groups with increased risk of poverty: There are some protected characteristics that are associated with an increased risk of poverty in the UK: race, sex (in the case of single mothers), and disability. In relation to age, while pensioner poverty has fallen over the last few decades – although it has started to rise again - younger workers are much more likely to be in poverty than other age groups.
Going without: An element of the poverty premium that is harder to capture is that rather than pay the premium, some people opt to go without goods or services. For example the evidence suggests that pensioners may avoid poverty premiums by cutting back, particularly in relation to fuel.
Intersectionality also has an impact: the more protected characteristics a person has, the more risk they bear. Intersectionality operates both within and between protected groups. For example, it was estimated that the greatest losers from the welfare reforms since 2010 were disabled women of ‘Mixed ethnicity’ or ‘Other’ ethnic groups; the study also found intersectionality with youth compounds poverty particularly amongst BAME young people.
Poverty premium: Overall, the evidence does suggest that certain groups with protected characteristics are more likely to incur poverty premiums, compared with low income households as a whole. The risks of paying a premium where evidence was found were the following:
- Non-standard payment methods (energy)Costly tariffs (energy)
- Geographical based premium
- Risk of underinsurance
- High cost credit premium
The study reports on differences that are statistically significant where p<0.05.
Points to consider
Methodological strengths/weaknesses: Few details are given of the approach taken to the literature review. There are around 80 papers included, and they are taken from reputable organisations, albeit largely charities with an interest in poverty, such as Joseph Rowntree Foundation and Resolution Foundation. Some are government publications, and some are from peer reviewed journals. It is not possible to know how the papers were chosen or if any were excluded.
- There is little information given about either of the two datasets used for the analysis, other than the sample sources, and that they were analysed separately.
Generalisability/ transferability: The analysis is specific to the UK and the markets where poverty premium occur, such as energy, insurance and credit are also specific to the UK. However the overall findings that there are links between protected group membership, poverty and, to an extent, poverty premium are likely to hold true in other developed countries.
Relevance: Highly relevant in the light of the impact of coronavirus on low-income households
- The study would be of use to anyone with an interest in low-income households or in markets for financial products, utilities and services, including people in government, regulators, policy makers, policy implementers and support agencies.