When Income Won't Hold Still

There are around four million people in the UK in insecure work. That is approximately one worker in every eight. Around a million are on zero-hours contracts. Around a million more are agency, casual or seasonal workers. Close to two million are low-paid self-employed, earning less per hour than most employees do.

The total has grown by about 800,000 since 2011. This is not a corner of the labour market. It is a category of work large enough to have its own predictable relationship with debt, and yet debt advice, financial products, and most budgeting guidance still assume a stable monthly wage.

What insecure work actually means

The particular problem with insecure work is not only that the pay is often low. It is that the pay will not stay still.

A shift gets cancelled the night before. A care contract goes quiet for a fortnight. A round of delivery work pays by the drop, however many drops there happen to be that day. A supply teacher is not called in over the holidays. The jobs vary; the pattern is the same.

The bills do not vary. The rent lands on the same day every month. So does the Council Tax, the energy direct debit, the broadband and the phone. If there is credit card debt, the minimum payment is also fixed. None of it moves to reflect what the work paid last week.

This is what insecure work means, precisely: an income that will not hold still, sitting underneath a set of costs that will not move.

The missing buffer

Most financial advice assumes the existence of a savings buffer, money set aside to absorb a short month or an unexpected cost. The advice is built around this assumption. So are most financial products. So is most of the language around financial wellbeing.

For many people in insecure work, that buffer is not there.

Across all UK adults, 9% say they could cover less than a week of essential costs if their main income stopped. Among people whose income fluctuates from month to month, the equivalent figure is 25%, one in four. The people most likely to experience an income drop are also the people least prepared to survive one.

The people whose income is most likely to fall are also the people with the least in reserve when it does. The instability and the empty savings account are not two separate problems. They are one problem, landing on the same people.

Financial fragility at this level is not limited to the lowest earners. Close to 13 million adults in the UK have what the financial regulator classifies as low financial resilience. More than one in eight people with a mortgage or rent said they would struggle to absorb a housing cost increase of less than £50 a month. The absence of slack is widespread and it runs across income levels.

How borrowing fills the gap

When income dips and there is no buffer underneath, the gap does not disappear. It still has to be covered by something.

Usually it is covered by credit. The overdraft first. Then a credit card. Sometimes high-cost credit, the kinds of borrowing available to people who have run out of lower-cost options. In a single year, around 3.5 million adults in the UK used some form of high-cost credit. That number has been rising, not falling.

The important detail is what the credit was used for. Among people carrying a balance on a credit card, the most common use was everyday essentials: food, transport, energy bills. Around three million people, using credit to cover the ordinary cost of living.

Then comes the mechanism that turns a short-term fix into a longer-term weight. The minimum payment on that card becomes a new fixed cost. It joins the rent and the Council Tax and the direct debits. The following month begins a little further back. With a little less space for the next cancelled shift. And the next one after that.

In a single six-month period, one in ten adults in the UK fell behind on a credit commitment or a household bill. The borrowing has slowly become the thing that absorbs the instability of the work, briefly at first, then regularly, then always there.

The working shape of debt

It is tempting to read this as a story about people who do not work, or who have made poor choices. The evidence points clearly in the other direction.

Of the people who contact StepChange, one of the UK's largest debt charities, around 60% are in some form of employment. Forty-four percent are in full-time work. The majority of people seeking debt advice in this country are working people. They are not in debt because they are not working. They are in debt because their work will not hold still.

The modern shape of problem debt is, very often, a working person whose income varies. Someone whose pay clears the bills in a good month and falls short in a bad one. Someone who has used borrowing to bridge the gap for long enough that the borrowing has become part of the fixed costs, another minimum payment, sitting in the column alongside the rent.

One realistic move

Most financial guidance aimed at people in insecure work is built around the assumption of a stable monthly income. Budget for the year. Save three months of expenses. Both pieces of advice depend on knowing what next month will pay.

MoneyHelper, a free government-backed service, offers specific guidance on budgeting around an irregular income. It starts from the real shape of the money, not the shape financial advice assumes it should be. It cannot change the structure of the work, or make the rota more predictable. But a plan built around the income that actually arrives is more durable than one built around the income that should.

If the debt has grown faster than an irregular income can close it, StepChange and Citizens Advice both offer free and confidential assessments, without judgement, and without requiring you to know exactly what you want to do next.