Policy Centre publishes report on low income in Jersey

The Policy Centre has published a new report Low income in Jersey https://www.policy.je/papers/low-income-in-jersey. The discussion paper brings together available statistics and research in a form designed to facilitate an informed discussion about the nature of low income in Jersey and policy options for addressing the issue. The report’s summary is set out below -

• Low income can be analysed in absolute or relative terms. “Relatively low income” is generally defined as income below 60% of the median.
• Absolute low income has reduced sharply over time. In the UK, the proportion of people in absolute low income (60% of median income in 2010/11, adjusted for inflation) fell from 86% in 1961 to 12% in 2017/18.
• Over time the composition of those in relatively low income has changed from pensioners to children and working-age adults.
• Causes of relatively low income include poor education and skills, weak relationships, chaotic lives and inadequate tax and benefit systems. There are some issues specific to Jersey including housing and grocery costs and policy towards immigrants.
• In Jersey, 16% of households have relatively low income before housing costs, rising to 24% after housing costs. The proportions are slightly lower than in the UK and have fluctuated over the last few years in a fairly narrow range. However, the way housing costs are treated means that it is wrong to conclude that it is housing costs that push people into low income, as many of those in the lowest income groups have some or all of their housing costs met by the benefit system.
• Policies to reduce relatively low income need to address the causes.
• Policies are also needed to deal with the effects of relatively low income. These can seek to reduce the cost of those goods and services that low-income people buy or to increase their income.
• Raising tax thresholds and limiting rent increases do not benefit most of those in the lowest income groups as they do not pay tax and have their rent met by benefits.
• Tackling low income through the tax and benefit system seems most efficient – allowing people to choose how to spend their money and without benefitting those who do not need help.
• However, for a number of reasons, some historic, a number of policy measures aim to reduce the cost of certain goods and services.
• Jersey has a benefit system which, combined with the high tax thresholds, achieves a substantial redistribution of income from better-off people to lower-income people.
• Only 2% of workers are on the minimum wage but increases in the minimum wage but can have a significant effect further up the income scale.
• The benefit system can never be fully comprehensive and the more that attempts are made to close any gaps the more complicated and expensive the system becomes.
• The Island would benefit from considering the issue of low income as a whole rather than in silos, with a view to developing a suite of joined-up policies in respect of taxation, income support and subsidies on specific goods and services that most effectively achieves the objective of helping those in relatively low income.

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