Low skills lead to low pay

A wage is set by demand and supply in the market for each kind of labour. Work that needs few skills can be done by many people, so supply is large and the wage is low. New technology and wider trade have raised the demand for high-skilled workers, while lower-skilled workers compete with a larger supply of similarly skilled workers around the world, which holds their wages down. A household whose earners have few skills can work full time and still have a low income.

Unemployment, ill health and disability cut the hours a household can work

Earnings are the wage multiplied by the hours worked. When nobody in a household works, because of unemployment, ill health, disability or caring for someone, the household lives on benefits. In the year to March 2025, 37 per cent of working-age adults in workless families were in relative low income, against 9 per cent in working families, before housing costs. Time out of work also costs experience and contacts, which makes working in the future less likely.