Poverty in London

Table of Contents

0 Introduction

1 Definition and General Causes of Poverty

2 Poverty in London
2.1 Employment
2.1.1 Unemployment Among Women
2.1.2 Unemployment Among Ethnic Minority Groups
2.2 Earnings
2.2.1 Demand for Higher-Skilled Employment
2.2.2 Gender Pay Gap
2.2.3 Earnings for Ethnic Minority Groups
2.3 Education
2.3.1 Educational Achievement Among Ethnic Minorities
2.3.2 Truancy and Exclusions
2.4 Housing Costs
2.4.1 The Real Estate Market
2.4.2 The Impact of Housing Costs on Poverty
2.5 Child Poverty
2.5.1 Child Poverty Among Workless Families
2.5.2 Child Poverty Among Ethnic Minorities
2.6 Crime
2.6.1 Home Contents Insurance

3 Plans and Measures to Defeat Poverty

4 Conclusion

0 Introduction

Poverty is a problem as old as mankind and has always haunted parts of society in various forms. The fact that we have entered the 21st century is a clear reason to assume that poverty has been successfully defeated to the greatest possible extent and is only to be found in individual cases. However, the opposite is true and contrary to what one might expect poverty is not only an issue in developing countries. Industrial nations also struggle with increasing poverty and a continuously widening gap between rich and poor¹. The problem is particularly evident in large cities.

This paper examines the extent of poverty in London today. The first section outlines the essentials of poverty in general and its causes. Focussing on main reasons and consequences, the second section provides details about the different faces of poverty in London. This section is mainly based on comprehensive information about poverty provided in a report published by the Mayor of London in 2002. Unless otherwise noted, all figures provided in the second section refer to values after housing costs are taken into account. The third section of this paper describes the government’s future plans to tackle poverty and gives information about countermeasures that have already been implemented. The concluding section considers current achievements and the possible future development of poverty in the capital.

1 Definition and General Causes of Poverty

Poverty is a very ambiguous term. Due to its complexity and because of the entirely different conditions prevailing in the world’s societies, there is no universally valid definition of poverty.

Generally, poverty is considered as the state of not being able to satisfy all basic needs of daily living and describes living standards that do not meet certain minimum requirements. These requirements may concern essential material goods or services and may refer to deprivation over short or long periods suffered by individuals or groups. In its worst form, poverty may be connected with famine, misery and death.

One attempt to measure poverty is the differentiation between relative and absolute poverty. Relative poverty describes deficiencies compared to the average living conditions prevailing in the relevant society. Absolute poverty refers to the inability to reach a standard of living

above the bread line by oneself.¹ In the long term, living in absolute poverty poses a high risk of severe health problems.

In the European Union, households are considered as poor if their net income is less than 60 per cent of the country’s average net household income. This limiting value is also called the poverty line.²

Poverty may be the consequence of individual behaviour or familial causes. However, the most essential factors leading to poverty are wars, political structures, economic disadvantages due to geographic preconditions, a lack of globalisation, high population growth and lack of education and skills. Additional significant conditions that may cause poverty are unemployment, age, gender or racial discrimination, an unequal income distribution and the lack of educational opportunity.³

Generally, those most severely affected by poverty are disabled people, older people, single parents, children and socially disadvantaged groups.⁴

2 Poverty in London

London is usually associated with a bustling and vibrant city life, cultural diversity and an impressive mixture of history and modernity that justifiably attracts millions of visitors from all over the world. Although this picture of the unique metropolis London still prevails, the difficulties of the capital have become increasingly apparent in recent years. Hence, it is not surprising that the issue of deprivation and its consequences have already become part of a London travel guide:

“The number of homeless people in the streets is not just a stain but an adulteration on the rich robes of this, Europe's richest city.”⁵

Today, London is a city divided between the extremes of prosperity and deprivation. Tackling poverty is one of the main items on the local government’s agenda. Reports published by the Department for Work and Pensions in the years 2000 and 2002 drew attention to the severe extent of poverty in London. Providing statistics on households below average income, the

reports found that with 43 per cent, “London had the highest rate of income poverty for children of any region of Great Britain” and that London’s “rates of income poverty for working age adults and pensioners were also high by comparison with national averages.”⁶ The statistics also revealed significant differences between poverty rates in Inner and Outer London and that deprivation was particularly concentrated in Inner London. This difference applied to all population groups considered in the study. While 19 per cent of working age adults were living in income poverty in both Outer London and Great Britain as a whole, the rate of working age adults in poverty in Inner London amounted to 30 per cent. In Inner London, 53 per cent of children were living in poverty, compared to 33 per cent in Outer London and 30 per cent in Great Britain. While the national rate of pensioners living in poverty rose to 25 per cent in 2000/01, this rate came up to 36 per cent in Inner London compared to 21 per cent in Outer London. In 2002, 25.8 per cent of all households could not even afford to put aside monthly savings of ₤10 and 8 per cent of all households could not afford to heat their homes sufficiently. This mainly affected older and younger Londoners, women, some minority ethnic groups and lone parent households.⁶ A comparison of these figures with present rates shows that there has not been a noticeable improvement in the past four years.

Based upon the findings, the Mayor of London published the paper “London Divided” in November 2002. The report provides a comprehensive analysis of key aspects associated with poverty and focuses on the enormous differences between Inner and Outer London, child poverty and ethnic-related disadvantages. “London Divided” reveals how poverty in the capital is linked with the distribution of incomes, housing costs, education, the employment structure and other factors of influence and serves as a basis for the local government’s action to defeat poverty.

2.1 Employment

The most important factor causing income poverty is lack of employment. London’s unemployment rate has been higher than Great Britain’s average for 17 years. 30 per cent of the capital’s working age population is unemployed. In 2000/01, Great Britain’s average unemployment rate was 5.4 per cent, compared with 7.0 per cent in London, the second highest rate at national level. Today, 288,000 people in London are unemployed, which is more than the total number of workless people in Scotland, Wales and Northern Ireland.⁷

There was and there still is a considerable difference between Inner and Outer London – while Outer London’s unemployment rate of 5.5 per cent almost equalled Great Britain’s level in 2000/01, there was a clear concentration of unemployment in Inner London. Here, 9.5 per cent of the working age population was unemployed. There is also a significant variation between the boroughs. The highest concentration of unemployment is to be found in central and east Inner London extending to the boroughs further east.⁸

These increased rates are not only caused by general unemployment rates, but can also be attributed to the low extent of economic activity of the working age population in London. Being economically active means to be either actively seeking employment or to be employed. While 21 per cent of Great Britain’s working age population were inactive in 2000/01, this rate amounts to more than 25 per cent of London citizens. Again, rates are higher in Inner London than in Outer London, with an economic activity of 71 per cent compared to 78 per cent, respectively.8

The extent of economic inactivity is partly due to an increase in full-time education among younger people who enter working life at an older age. However, levels of activity are particularly low among women and most ethnic minority groups. ⁹

2.1.1 Unemployment Among Women

While activity rates for women in Great Britain have continuously risen in the past years (72 per cent in 2000/01), the rate has remained unchanged in London, where only 69 per cent of women of working age were economically active in the reference period. The analysis revealed strikingly low rates of activity for women between the ages of 30 and 45, an age at which they are most likely to be looking after children. In a survey carried out among women in this age group having the wish to work, the most common reason for not working stated by 31 per cent of respondents was the lack of affordable or suitable childcare. The cost of childcare in London is up to 40 per cent higher than the national average.¹⁰

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¹ http://www.mtholyoke.edu/acad/intrel/ungap.htm

¹ http://www.aktionsprogramm2015.de/www/begriffdefinition_14_18_0_f.htm

² http://europa.eu.int/eur-lex/de/com/pdf/2001/com2001_0565de01.pdf

³ http://de.wikipedia.org/wiki/Armutsgrenze

⁴ http://www.un.org/esa/socdev/poverty/subpages/dpi1781e.htm

⁵ http://news.bbc.co.uk/1/hi/england/1896213.stm

⁶ http://www.london.gov.uk/mayor/economy/docs/london_divided_all.pdf

⁷ http://www.alg.gov.uk/doc.asp?doc=16297&cat=2149

⁹ http://www.london.gov.uk/mayor/economy/docs/london_divided_all.pdf

¹⁰ http://www.london.gov.uk/mayor/economy/docs/london_divided_all.pdf