Findings that 2.2m children live in households on economic cliff-edge challenge coalition claim people are better off in work.
Almost 7 million working-age adults are living in extreme financial stress, one small push from penury, despite being in employment and largely independent of state support, according to the most comprehensive study of the finances of employed households, commissioned by the Guardian.
Unlike the "squeezed middle", these 3.6m British households have little or no savings, nor equity in their homes, and struggle at the end of each month to feed themselves and their children adequately. They say they are unable to cope on their current incomes and have no assets to fall back on, leaving them vulnerable to something as simple as an unexpectedly large fuel bill.
The findings challenge the argument made by the work and pensions secretary, Iain Duncan Smith, who last week said parents should get a job to ensure their children are not brought up in poverty.
"These figures are a mega-indictment on the mantra of both political parties, that work is the route out of poverty," said Frank Field, the Labour MP for Birkenhead and former welfare minister who is now the coalition's poverty tsar. "What's shocking about this is that these are people who want to work and are working but who, despite putting their faith in the politicians' mantra, find themselves in another cul de sac. Recent welfare cuts and policy changes make it difficult to advise these people where they should turn to get out of it: it really is genuinely shocking."
This group are "traditionally proud, self-reliant, working people", said Bruno Rost, head of Experian Public Sector, who used more than 400 variables from their database and the government's own research to identify the face of At-Risk Britain.
After removing households who fall into the most deprived categories from the research, Rost's team focused on those who are working but suffering high levels of financial stress. He also looked at respondents' attitudes, behaviour and outlook.
"These are the new working class - except the work they do no longer pays," Rost added. "These people say that being forced to claim benefits or move into a council property would be the worst kind of social ignominy and self-failure."
Challenging the government's claim that people are better off in work than on benefits, the exclusive research found that 2.2 million children live in families teetering on an economic cliff-edge - despite one or both adults earning a low to middle income. The households in trouble include couples without children who earn a gross annual income of between £12,000 and £29,000, or couples with two children on between £17,000 and £41,000.
Revealing that having a job is no protection against homelessness and destitution in modern-day Britain, the findings cast doubt on David Cameron's claim to be committed to "a fair society in which effort is rewarded [and] work pays".
The findings echo a report by Oxfam last week that found more people in poverty were working than were unemployed and the number of those in work but claiming housing benefit had more than doubled since 2005, to nearly 900,000. People in work were increasingly turning to charities for help, Oxfam said, with thousands more accessing food banks this year than last.
The findings come on the first day of an exclusive series by the Guardian on the reality of poverty in austerity Britain.
The research into 26m households across the UK, carried out by Experian, identified eight types of employed adults most likely to be suffering in-work poverty, including:
- Self-employed trades people living in small communities.
- Ethnically mixed communities and single people living in small town centres.
- Young owners and private renters in inner-city terraces.
The findings redraw the perceived map of acute financial stress, finding it is not an exclusively northern or inner city problem. Working households across large parts of south-west England, outer London and East Anglia struggle to avoid slipping into official poverty.
Top of the "at-risk" list are the English Riviera towns of Torquay, Paignton and Brixham.
The groups experiencing poverty vary from region to region. In Torbay, the most "at-risk" are indebted families living in low-rise estates; mixed communities with many single people in the centres of small towns; and self-employed trades people living in smaller communities.
By contrast, the Lancashire borough of Hyndburn - which includes Accrington and is second in the list with 30% of households at risk - has a higher number of south Asian communities experiencing social deprivation and low-income families occupying poor quality older terrace houses.
In Brent, north London - Britain's most mixed borough - it is predominantly upwardly mobile South Asian families living in interwar suburbs who suffer.
The local government districts of Fenland in Cambridgeshire and South Holland in the East Midlands also have just under a third of households at risk of poverty.
Further research, also commissioned by the Guardian, reveals the average salary for each UK region - and how this has changed over the past five years.
People working in the Blackpool South parliamentary constituency have the lowest average wages in the UK - £320 a week, compared with £1,305 a week in the London borough of Kensington, according to a deprivation index commissioned from the Resolution Foundation, an independent thinktank aiming to help those on low to middle incomes. The four constituencies with the lowest average wage are in north-west England; those working in Blackley and Broughton, Preston and Middlesbrough earn an average salary of between £323 to £330 per week.
Gavin Kelly, chief executive of the Resolution Foundation, said: "Many households move in and out of the low to middle income group from one year to the next, but around a third remain 'stuck' over the longer term, finding themselves in the group over a 15-year period." He warned that the stagnating economy, increasing unemployment, rising prices, falling incomes and cuts to public services - 88% of which lie ahead over the next four years - meant things would get worse for those on low incomes.
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