Housing, Incentives and Work

by Ken Gibb

This week, the Joseph Rowntree Foundation published our research on housing and work incentives [note]. This project was funded in 2013 and stretched over 2014 and all of 2015. It was a great team effort and I am very grateful to my collaborators – Mark Stephens, Darja Reuschke and Sharon Wright as well as the fantastic efforts of our researchers, Filip Sosenko and Kirstin Besemer.

The project involved an international evidence review, quantitative longitudinal analysis of the BHPS and Understanding Society and 5 qualitative case studies of different labour market and housing situations featuring in-depth interviews with more than 50 people at the margins of work.

The project was part of the funder’s housing and poverty programme and asked what we know about whether housing enables or acts as a barrier to both entering work and if in work to progressing within one’s job. Our approach considered the key distinguishing features of housing such as its heterogeneity, spatial fixity, financial incentives, tenure and neighbourhood, housing quality and an increasingly dynamic policy context. These features were set against alongside key channels by which we believed housing processes and outcomes might impact on the labour decisions of those at the margin: 

– Housing in relation to place

– Jobs, housing and mobility

– Tenure-based housing costs

– Housing as business collateral 

– Housing deprivation. 

Our reading of the existing evidence was that while economic evidence suggests particularly women respond positively in labour supply terms to higher earnings, the evidence is less clear and more nuanced concerning the impacts of welfare reform and other welfare to work programmes. We also found mixed evidence that deprived neighbourhoods negatively impacted on working and that mixed neighbourhoods have positive impacts on employment. However, the importance of support networks especially child care was confirmed (as well as the wider gendered nature of the labour market more broadly). The evidence also stressed the continuing long term effects of economic restructuring on job opportunities in specific places. Commuting issues were found to be critical as are the costs and feasibility of relocation to be closer to work. Self-employment has grown in recent years but is risky and often an involuntary response to the wider employment situation.The early evidence from welfare reform suggests that it may be unfavourable for  the labour market situation facing the sick and disabled.

We used panel data to examine the pathways in and out of poverty and found that it is for one thing a little misleading to adopt a standard three years continuous episode of poverty as ‘chronic’ poverty’ – our evidence is just too messy and varied to adopt such a measure. Rather we found all manner of poverty experiences – some short-lived, some enduring, others with periods in and out of poverty of different durations. Only 7% remained in poverty throughout 2000-2008. Moreover, we found important correlations with housing tenure, employment status, household or family type and the gender of individuals in/free of poverty. Examining exits from poverty it is clear that employment may not guarantee being free of poverty but few escape it without work. While social tenants had a high rate of poverty they also exited poverty frequently. Taking 2008 as a snapshot, 70% of those in poverty were actually owners with a mortgage. In our report further econometric work was undertaken to try to better understand the processes underlying these and other findings.

Our five case studies were located in the London Borough of Lewisham, Oldham, Merthyr Tydfil, Scottish Borders and Larne in Northern Ireland. There was considerable rich material gleaned from the interviews but they can perhaps be boiled down to the following key messages:

– Neighbourhoods can act as informal recruitment hubs as well as offering affordable child care. These advantages are lost to new comers and outsiders. 

– Poor quality housing and neighbourhoods may either dissuade or instead motivate individuals to progress and seek work.

– Many were unwilling to relocate because of insecure housing which compounded the part time and short hours working opportunities they often faced. On the other hand available social housing seems to encourage labour mobility.

– The quality and cost of transport is a key constraint and several noted the lack of public transport to support shift and part time working schedules.

– Especially in rural areas, there is much dependence on car transport. The cost of owning and running a private car is often a major barrier to work.

– The level of rents especially in the private rented sector is an important constraint on the reservation wage (but also possibly important to social renting in London) because of the tapered removal of HB as people enter work and their measured income rises.

– Those with low skilled are often most effected by housing constraints on labour market opportunities and this often compounded by age discrimination and the lack of opportunities for the sick and disabled. 

The research found a well entrenched and completely normal work ethic among people who could only command modest wages. It is just that for different reasons they are not competitive in their local labour market. We also found a consistent story of working age poverty closely intertwined with low wages, weak labour market positioning and housing insecurity and affordability risks. These are compounded by the other key constraints relating to commuting costs and availability and also for accessible and affordable child care. On this basis we suggested six key policy recommendations:

1. Invest in neighbourhoods – local 3rd sector organisations if supported can do much to develop skills, employability and create sustainable jobs. Our case studies found much evidence of such good practice. This may allow specific neighbourhoods to build on the positives they possess that were outlined above.

2. Support affordable transport policies and those better linked to the actual working practices of those currently under-provided for.

3. Go further to prioritise affordable child care targeted at those currently most at the critical margins of affordable work.

4. More not less tenure security would reduce the double insecurity presently identified above (this is in effect a restatement of the case for social rented housing).

5. Paradoxically, the qualitative evidence suggests that greater tenure security (including longer private tenancy lengths) would increase labour mobility.

6. The way HB and Universal Credit are administered should not be designed so that they discourage employment as seemed to be the case in some of our interviewees’ experience.

Much of this research project was exploratory and confirmed our thinking and expectations – we have to bring together work opportunities and decisions with housing/neighbourhood questions, transport and child care issues. But looking at the project in the round now it also suggests that while in work poverty is both important and a challenge for policy, passing the problem on to employers through a mandatory living wage, as proposed by the Chancellor, is not without risks. How will employers respond in terms of the contracts and hours they will ask those we are most interested in to work; and how will it plays out for this group in terms of classic economic concerns about the unemployment effects of minimum wages? These are empirical questions but should not be ignored.

Note: Report and findings available at:

https://www.jrf.org.uk/report/how-does-housing-affect-work-incentives-people-poverty/  

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