Insights from our roundtable on employment
By Asiya Uddin, Research and Insight Officer
Last month (April 2024), StepChange Debt Charity launched a new report — In work. But still in debt. — which is the latest edition in our client insights report series. The report focuses on the rise in clients in full-time employment seeking debt advice.
Many people across the UK in full-time employment face problem debt and their employment hasn’t been able to shield them from this. YouGov polling from January 2024 shows that 35% of full-time employed UK adults are showing at least one sign of financial difficulty[1] and around 9% are in problem debt. Generally, among those experiencing problem debt in the UK, around 52% of this group are in full-time employment.
In work. But still in debt. highlighted a similar story among clients that StepChange has helped. The proportion of StepChange clients in full-time employment has been steadily increasing, from 38% in 2021 to 42% in 2023. Early indications from the first quarter of 2024 suggests a continued increase to 43%.
While debt problems among those in full-time employment is not new, our recent analysis indicates an increasing risk of problem debt among this group. Due to this increase, we wanted to explore what is driving this by delving into demographic profiles and key issues affecting those in full-time employment. Some of the findings from the report include:
· Compared to previous years we see more clients in full-time employment who are women, aged 35–49, have children, and are homeowners.
· A ‘cost of living increase’ (26%) is cited as the primary reason for debt. Rising costs, particularly housing and utilities, pose significant challenges.
- Clients in full-time employment had higher average arrear amounts on council tax and rent compared to working age clients.
· The current incomes of many clients in full-time employment does not stretch as far as it needs to, with around one in five (21%) clients in a negative budget[2].
· One in ten (9%) clients in full-time employment are in receipt of Universal Credit, with this proportion higher among women (14%) than men (5%).
· Despite 21% of clients in full-time employment having a negative budget, around four in five (79%) have a positive budget after debt advice, meaning that they can cover their essential expenses after receiving debt advice.
- Clients were able cover the cost of their essentials after budgeting advice, which includes rescheduling previously unaffordable credit payments and arrears repayments.
· One in ten (10%) clients in full-time employment mentioned ‘need credit to cover living costs’ as their main reason for debt.
· Clients in full-time employment were more likely than working age clients to have the most common types of unsecured debt, such as credit cards, personal loans, and overdrafts, and they also held higher average debt amounts for these.
The roundtable was held on 1 May 2024 and included a presentation of the report findings, followed by a discussion of the results and policy challenges. Attendees from StepChange, including our small business debt advice team, welcomed representatives from the debt advice sector, civil service, charities, think tanks and unions, who all contributed towards a thought-provoking discussion on those in full-time employment grappling with problem debt.
During the roundtable we covered many topical themes and discussed the research itself, alongside some of the policy challenges. Here are a few of my standout discussion points:
· Cost of living pressures: The discussion highlighted that rising costs posed a significant challenge for many including full-time employees, particularly housing and energy being sources of financial strain. Concerns were also raised around the impact of the Coronavirus Pandemic and how it exacerbated these pressures, with reduced incomes and increased reliance on credit during lockdown — and also more generally during unstable or shock periods to ‘plug gaps’.
· Coping mechanisms: Attendees discussed the various coping mechanisms used during periods of financial difficulty, which can vary depending on resources available. The reliance on credit to cover essentials and manage shocks were mentioned prominently, as was Buy Now Pay Later among younger adults in debt particularly. Interestingly there were mentions of people cancelling or stopping payments for insurance/protection products when experiencing financial difficulty as it’s deemed ‘non-essential’. This raised concerns around the long-term sustainability of ‘coping mechanisms’ and their potential to exacerbate debt. Polling results[3] published by StepChange demonstrated how consumer credit can result in poor outcomes for people struggling with living costs and can lead to a vicious cycle.
· Broader challenges: The roundtable strongly emphasised the importance of addressing the underlying structural issues which have contributed towards in-work indebtedness among full-time employees. These issues include stagnant wage growth, precarious employment conditions and inadequate safety nets. The need for further policy interventions aimed at promoting ‘liveable’ wages, stable employment opportunities, and equitable access to essential services were highlighted, given that around one in five (21%) StepChange clients in full-time employment could not make ends meet. Additionally, there were discussions on the need for broader systemic changes to address inequalities in housing, healthcare, and employment rights, to ensure that full-time employment provides a pathway out of debt and poverty rather than perpetuating financial vulnerability.
Hearing how our In work. But still in debt. report resonated with attendees really honed in on the very complex interplay between economic, social, and policy factors contributing towards debt problems among full-time employees.
The report only scratched the surface and from a research perspective there’s a plethora of different areas which we can delve into. This includes (but is not limited to) conducting further research on how debt problems relate to different job types and skill levels, transitions into and out of work, in-work conditionality, protection gaps particularly among lower income individuals, the effectiveness of minimum wage increases, support for working parents, and so on.
[1] Signs of financial difficulty include making just the minimum repayments on debts; using overdraft in each of the last three months, using credit, loans or an overdraft to make it through to payday; falling behind on essential household bills (e.g. rent, mortgage, energy bills, council tax etc.); using credit to keep up with existing credit commitments; getting hit by late payment or default charges; missing a regular monthly payment on at least one debt; and using credit to pay essential household bills (e.g. rent, mortgage, energy bills, council tax etc). ‘Problem debt’ means selecting three or more of these options
[2] A negative budget describes a situation where a client’s monthly expenditure exceeds their monthly income after proceeding through StepChange’s advice and budgeting process
[3] https://www.stepchange.org/policy-and-research/preventing-harm-consumer-credit.aspx
