Headlines: June 16th, 2006

People who take on cash-in-hand low paid jobs while they are claiming benefit do so as a last resort according to a new study based on six years of work by Community Links, an innovative charity running community-based projects in east London. The study, funded by the Joseph Rowntree Foundation, says not declaring work is a response to acute poverty or crises.The report, “People in low-paid informal work: ‘Need not greed'”, looks at those who work informally to pay for food and heating or who face mounting debt. The Foundation says it shows how informal work is often a response to poverty and to times of crisis such as family breakdown. It adds that low benefit rates, low wages and rules limiting the hours some groups can work are the factors driving the search for informal work by those who took part in the study. The research also highlights how childcare or health problems act as barriers to formal work.

Community Links says those taking part in the study want to work and have a range of under-used skills and abilities, but they felt there were more informal than formal opportunities for people like them. Many felt taking up informal work increased their confidence as well as skills and experience in addition to giving them financial support and potential pathways into formal work.

The participants also highlighted a complicated and inefficient tax and benefit system as a main reasons for taking on low-paid work. Even with the introduction of measures such as tax credits they felt the system trapped them in a cycle of poverty with few financial incentives to work formally.

The report makes a range of recommendations, including support, training and development for people who want to move into formal work, tax and benefit reform based on an understanding of why people work informally and flexibility in employment to meet needs arising from childcare or health issues.

The author of the report, Aaron Barbour, who is Community Links’ Research and Policy Development Manager said, “People in deprived areas are resorting to informal paid work because they are trying to support, feed and clothe their families. They are hard-working, ordinary people trying to survive day by day. The Government needs to understand and include the informal economy in all its strategies if it is to reach its employment, anti-poverty and regeneration targets.”