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'I know a young couple, on benefits, with a big expensive pram...' How did they pay for it? Layabouts living it up on benefits? Benefit cheats? They can't be poor, living like that.

These questions were laid before me by a woman (call her Mary) concerned about poverty. I failed to give her the simplest answer: that they probably didn't pay for it.

Poverty is real, pram or no pram. Andrew Haldane, Chief Economist at the Bank of England, said last week:

"Annual real wage growth in the UK – average weekly earnings growth adjusted for consumer price inflation – is currently running at close to minus 1%. Growth in real wages has been negative for all bar three of the past 74 months. The cumulative fall in real wages since their pre-recession peak is around 10%. As best we can tell, the length and depth of this fall is unprecedented since at least the mid-1800s."

That's average (mean) growth. At the bottom, where people live on precarious part-time and/or temporary incomes at or near the minimum wage, the situation is worse. The Office for National Statistics (ONS) tells us that  in April 2013 median full-time earnings (517pw) was lower than the mean (£620) 'since the latter is boosted by the relatively few people at the top end of the distribution with extremely high earnings.' And the Child Poverty Action Group (CPAG) in its 'Cost of a Child in 2014' finds that 'Families in which all the adults work full time on the minimum wage also fall significantly short of meeting their needs.' The ONS tells us that a growing number are working part-time, and that part-timers' hourly rates of pay are falling.

Mary's young couple may have been in part-time work, and/or may be continually in and out of work. Either way, they could claim benefits. Probably most of our Citizens Advice Bureau debt clients are thus precariously employed, though others are in low-paid full-time work. Even in full-time work, they quite probably couldn't afford the pram. I talked with a young couple recently, one of them in full-time work, the other part-time because that was all she could find. They had to run a car because their village had no bus. They needed to move nearer to work to cut down on travel costs, but the rents in town were too high. Being under 25, they couldn't claim Working Tax Credit. We looked at their income and expenditure. Cut expenditure how you will, the income wasn't enough.

Mary's young couple had a child. Overall costs of bringing up a child are rising faster than inflation, according to CPAG. The Joseph Rowntree Foundation agrees about the problem: ' Despite some improvements in the conditions of low-paid work, many mothers can only access poorly paid part-time jobs because of their childcare responsibilities.' I've studied the income and expenditure statement of another young woman, a single mother with two small children. She was claiming all the benefits she could (income support, housing benefit, council tax subsidy, child tax credit, child benefit), and working very part-time. Cutting her expenditure to the bone (food for the three, £30pw), she ended up with about £3pw excess to offer her creditors. If she could get a few hours' more work, she could claim Working Tax Credit including 70% of her childcare costs, but so far those hours, at times covered by childcare provision, were elusive.

Perhaps Mary's young couple weren't working, but were solely on benefits, including Child Benefit and Child Tax Credit. CPAG tells us that 'Out-of-work benefits fall far short of what is needed for a minimum acceptable standard of living.... '

One of them would have to be chasing work on Job Seekers Allowance (JSA), being pushed hard to apply for and accept any 'reasonable' opening within 90 minutes' travel each way, with the probability of a 13-week 'sanction' of his (or her) JSA payment should he refuse. In our CAB experience, he could well be encouraged to go 'self-employed', however nugatory his saleable skills and understanding of self-employment. Should he be sanctioned, part of the joint JSA would be safeguarded but their housing benefit would stop until they sorted the problem out with the Local Authority. According to the Social Security Advisory Committee, a good proportion of claimants don't understand sanctions, so quite possibly our couple would only discover a problem when the money wasn't in the cash machine. And then they wouldn't know why.

The notorious 'bedroom tax', affecting social housing tenants with a 'spare room', is dwarfed in its impact by other changes, particularly cuts in tax credits and the cap on overall benefit uprating to 1% for three years to 2015. (Conservatives now promise a freeze for a further two years should they be elected.)  The Local Government Association and Centre for Economic & Social Exclusion's report on Local Impacts of Welfare Reform contains an excellent graphic showing the effect of various cuts.

The Institute for Fiscal Studies reports some 32 changes to benefits since 2010. All but five of these have benefited the Treasury and lowered entitlement. Of the five, three benefited pensioners (state retirement pension and pension guarantee credit rises plus increased entitlement to Working Tax Credit) and one benefited parents (increased child element of Child Tax Credit; though they lost through removal of the CTC 'baby element' and a three-year freeze of Child Benefit).

The fifth was the introduction of Universal Credit, which will benefit many low-earners, though it's bad news for those not earning, for second earners in a household and for people with savings. UC has been severely delayed, providing unplanned good news for DWP since its non-introduction across most of the country saves it money. According to the Commons Work & Pensions Select Committee, 'the delayed implementation would reduce projected spending by £0.2 billion in 2014-15 and £0.5 billion in 2015-16 “as households that would have been eligible to slightly more generous entitlements under the new benefit no longer move across”.'

In the teeth of falling wages, the Institute for Fiscal Studies finds that government has succeeded in increasing work incentives over the last four years by cutting benefits. To make work pay, out-of-work benefits have to pay worse. The living wage calculated by the Living Wage Foundation and Joseph Rowntree Foundation in consultation with members of the public is currently £7.65 outside London and £8.80 in London. The national minimum wage is £6.50ph for 21 and over, £5.13 for 18-20, £3.79 for under 18 and £2.73 for apprentices. Benefit income must be lower.

It's a trend set to continue. The Resolution Foundation, concerned for Low and Middle Income (LMI) households, forecasts a growth in inequality to 2020/21, with better-paid and skilled workers receiving a small increase in real income while wages and hours stagnate or fall in the middle and below. Meanwhile, the 'share of household income from the state for LMI households is expected to fall substantially. In 2008-2009, around 20 per cent of gross household income in this group came from the state. In 2020-2021 this is projected to fall to 16.4 per cent.'

How then did Mary's couple pay for their pram? The grandparents may have bought it. Our CAB is seeing a flow of young-middle aged clients being housed and/or bailed out financially by their elderly parents, and of elders being supported by their children. The Social Market Foundation agrees, finding that 52% of adults on low incomes have received parental support, with 23% of low-income households saying they couldn't survive without such support.

Or perhaps the pram was bought on credit: it hasn't been paid for, and quite likely never will be. My young woman with her two children had creditors to whom she couldn't even make token offers. She could write off the debts with a Debt Relief Order, but that only makes sense if she had a reasonable chance of keeping out of debt thereafter.

If Mary's couple went into debt to buy the pram, are they culpable? Living beyond their means is not a good thing. True, as a basic principle. Three thoughts, though.

First, that again and again researchers find that parents spend on their children at the cost of their own well-being. 'While different households manage their finances differently, parents (especially mothers) protect their children from poverty as much as possible at their own expense', say Jason Strelitz and Ruth Lister (Why Money Matters: Family income, poverty and children's lives, Save the Children, 2008, p6). Parents on benefits, like anyone else, are guilty of wanting the best for their kids. (Incidentally, in 2011 only 8% of families on means-tested benefits had more than three children, and there were just 130 ten-children families on income-based benefits.)

A second question rises: What is 'the best' for the child? A state-of-the-art pram isn't necessary for a child's well-being. Nor indeed is any smartphone Mary may see them using - though it's becoming more so, as benefits go on-line. This is a wider question, concerning the power of advertising and fashion within an economy based largely upon retail expenditure. In August, Reuters reported that 'Consumer spending has been a major driver of Britain's unexpectedly strong economic recovery over the past year....' If an economy based simultaneously on retail spending and on growing poverty in low and middle income households is incoherent, responsibility for the problem lies beyond our young couple. They are responsible for their individual choices, yes; but in making decisions they are pressed very hard by the culture around them.

Thirdly, if they did pay for their pram, was the price fair?  CPAG tells us that 'it can be difficult for someone on a low income to find the finance needed to buy an item when it is required. S/he may end up paying much more than the usual retail cost of the item if using high cost credit or catalogue buying.' That is certainly Citizens Advice experience. From those who have not, more shall be taken away. Maybe that means they should be even charier about buying the pram. Maybe it means we should explore questions of poverty and responsibility more deeply.

One final question raised by Mary. Could the young couple be benefit frauds, claiming money to which they weren't entitled?

It's statistically unlikely. In 2012/2013 according to Policy Exchange, 'estimates of fraud within total benefit expenditure accounted for around 0.7% (£1.2bn) of the total spend...' In 2011/12, the cost of fraud was the same, but the proportion was higher: 0.8% of the bill, also costing £1.2bn. The Guardian sets benefit fraud into the context of tax avoidance/evasion: £1.1bn against some £34bn, by their calculation. That doesn't make benefit fraud ok, but it has implications for our relative readiness to suspect poor people and rich people.

Part of that young couple's guilt in Mary's eyes may have been that they seemed happy. Is it suspect to be cheerful when you're out of work and benefit-dependent - a sign of irresponsibility? Not directly; government claims a moral mission to give hope to those trapped by dependence. It also denounces as 'wrong' any 'reward' to people 'who can work but do not'. That is a license to condemn through ignorance. A young couple out with a pram on a working day: easy to assume they 'can work but do not'.

That seems to be increasingly the assumption underlying the JobCentre Plus sanctions regime. 'Punitive' is a word it's hard to avoid. In the last three years there has been a rapid rise in sanctions and in the number of successful appeals against them. In January, the Commons Work & Pensions Select Committee noted that ' Under the new rules introduced in late 2012, the number of sanctions has increased to the extent that some 5% of all Jobseekers Allowance claimants are sanctioned every month... Our evidence suggests that many claimants have been referred for a sanction inappropriately or in circumstances in which common sense would suggest that discretion should have been applied by Jobcentre staff'.[Emphasis in original] The Committee recommended a review of the appropriate, fair and proportionate use of sanctions.

Should benefit claimants be punished, by tough regimes or our disapproval?  Since the 1980s governments have deliberately de-industrialised, basing our economy on largely short-term-oriented City profits and, outside the City, on a 'flexible', low-cost, low-skilled workforce. People like Mary's young couple, churning in and out of temporary, part-time, below-subsistence jobs necessarily involving benefit dependence for the sake of survival, are the sub-structure of this economy. It's not a temporary condition for them; the system encourages it. Forcing people, as JSA and Universal Credit do, to take this kind of job tends to trap them in a long-term 'churn', without prospect of training and advancement. They've got to survive this futureless insecurity.

We depend on them; we vilify them as dependent; we condemn them as irresponsible. Every day I look in wonder at the resilience of our CAB clients. I honour them for their struggle, and honour the family members they support and who support them.

And I am angry at what we are allowing to happen to them. It is not good enough to accept simplistic headlines or casual judgments. We need to dig below those headlines, realise what we are doing and work for a change of direction.

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