From education to employment

Share of young people receiving benefits increased by two-thirds during the crisis- sector reaction

Karl Handscomb, Senior Economist at the Resolution Foundation

The proportion of young adults claiming income-related benefits increased from 9 to 15 per cent during the Covid crisis – a larger increase than any other age group – helping to reverse a decades-long fall in the share of people receiving benefits and highlighting the vital role Universal Credit (UC) has played during the pandemic, according to new Resolution Foundation research published today (Friday).

The report Age-old or new-age – funded by the Nuffield Foundation – examines the stark shifts in the number of people receiving benefits during the crisis, and how this varied for different age-groups.

The report notes that the benefit system saw a staggering surge in UC claims at the start of the crisis, with 1.3 million more families receiving UC in the first three months of the crisis. A further 600,000 families have onto the benefit since then, though the number of people receiving legacy benefits (such as tax credits) has fallen over this period.

As a result, the total number of families receiving a working-age income-related benefit (such as UC, or the legacy Jobseekers Allowance or Working Tax Credit) rose by 1.4 million in the space of 12 months to 7.5 million in February 2021, and reversed a long decline in benefit receipt.

Back in 2005, 72 per cent of people lived in households that received at least one benefit, a figure that had fallen to 62 per cent by the eve of the crisis. This fall was driven by the removal of Child Benefit from higher earners, the increase in the State Pension Age, and rising employment and earnings causing some families to no longer be entitled to welfare support.

Thanks to the surge of new claims during the crisis, the Resolution Foundation estimates this has been partly reversed, with 64 per cent of people now receiving benefit income in their household.

Focusing on which groups have been the main recipients of the pandemic benefit surge, the report notes that young adults (16-24 year olds) – the age group least likely to receive benefits – have seen the sharpest increases in support, up from 9 to 15 per cent claiming an income-related benefit.

The proportion of 25-29 has also increased sharply – from 17 to 24 per cent – while the share of 30-59 year olds claiming benefits has increased more slowly, from 22 to 27 per cent.

The increase in benefit claims among young adults reflects the fact that they have been hit hardest by the Covid-19 crisis, says the Foundation. It would have been far more stark were it not for the furlough scheme, which has been by far the biggest working-age social security scheme during the crisis, even though it is not classed as a benefit.

The Foundation adds that while the number of families receiving benefits has fallen in recent months – down at least 130,000 between February and May of this year – the OBR expects the number of families receiving benefits to remain higher this year and next, compared to pre-crisis levels.

There has also been a potentially worrying rise in the number of older claimants claiming UC recently, with 34,000 more people aged over 50 on the benefit since February.

The Foundation notes that with record numbers of people now receiving UC, including half of all children in families receiving an income-related benefit (3.4 million children in total), future decisions on UC – such as the future of the £20 a week uplift – will have a bigger impact on family living standards across the country than ever before.

Karl Handscomb, Senior Economist at the Resolution Foundation, said:

“After a decades-long decline in the share of families receiving benefits, the Covid-19 crisis has led to a surge in claims, with 1.4 million more families now claiming support.

“The pandemic benefit surge has been driven by young people – a group who have traditionally been the least likely to claim benefits – and reflects that fact that they have been by far the hardest hit by the Covid economic crisis.

“One legacy of the pandemic is likely to be more families receiving benefits, and particularly more families receiving Universal Credit. That will mean that future decisions on UC, such as whether to keep the welcome £20 a week uplift, will have a bigger impact on family living standards than ever before.”

Alex Beer, Welfare Programme Head at the Nuffield Foundation said:

“This research highlights the relevance of the benefits system to people of all ages, as well as the vital role it has played in supporting people and families through the economic crisis caused by the pandemic.

“However, it also shows that the level of support varies significantly across different age groups, and those differences should be taken into account by government when considering any changes to benefit rates.”

Sam Windett, Deputy Director, Learning & Work Institute said:

“Young people account for 39% of the fall in employment throughout the pandemic, despite making up just 12% of total employment. In our latest labour market analysis, we saw employment recovering for young people, but 16,000 more 16-24 year olds are unemployed since the last pre-pandemic figure and the number of 18-24 year olds claiming unemployment-related benefits has risen 75% on pre-crisis levels.

“As the UK transitions from pandemic support to jobs recovery, over 200,000 young people face the final unfurlough and another 500,000 young people leave education over summer. The Chancellor must address these challenges in his Spending Review and deliver the ‘Opportunity Guarantee’ on jobs and skills that young people deserve.”

Related Articles