A Government-commissioned report today called for a rise in the minimum wage, warning that work no longer provides an escape route from poverty for many British families.
After a decade of wages lagging behind inflation, some two-thirds of the country's poor children were now living in families where at least one parent is in employment and the Government was "in all likelihood" set to miss its 2020 target to eliminate child poverty by a large margin, said the report by social mobility tsar Alan Milburn.
In comments which put him at odds with Prime Minister David Cameron's oft-repeated mantra that "the best way out of poverty is work", Mr Milburn said that child poverty was now "overwhelmingly" an issue for the working poor, rather than the "workless or work-shy".
He called for action to raise the value of the £6.31-an-hour national minimum wage, but also said there was an onus on business to provide higher minimum levels of pay and better career prospects for the working poor, who he described as "the forgotten people of Britain".
The first annual report of the Social Mobility and Child Poverty Commission also called for pensioners to bear a greater share of the burden of austerity.
The Government's deficit reduction programme had resulted in an "intergenerational injustice" as better-off pensioners' benefits are protected while families with children bear two-thirds of spending cuts, it said.
"Today, child poverty is overwhelmingly a problem facing working families, not the workless or the work-shy," said Mr Milburn.
"Two-thirds of Britain's poor children are now in families where an adult works. In three-quarters of those households someone already works full-time. The principal problem seems to be that those working parents simply do not earn enough to escape poverty.
"These are the people that heed the urgings of politicians of all hues to do the right thing, to stand on their own two feet, to strive not shirk. Yet all too often the working poor are the forgotten people of Britain. They desperately need a new deal."
The report noted that the projected rise in state pension costs over this Parliament was £13 billion at today's prices - more than half the money being saved by benefit cuts.
"We do not believe that favouring pensioners over their children and grandchildren will be a sustainable position over the long term if a meaningful dent is to be made in the UK's high levels of child poverty and low levels of social mobility," it concluded.
Even before the report was officially published, Deputy Prime Minister Nick Clegg made clear that he did not support significant benefit cuts for older people, telling the Daily Telegraph: "Punishing pensioners isn't going to help a single child achieve more in life."
Aides later insisted Mr Clegg remained committed to stripping better-off pensioners of benefits like the winter fuel allowance and free TV licences, but opposed any bid to target the elderly more widely.
Meanwhile, Mr Cameron's official spokesman told reporters the PM believes he has chosen "the right priorities" in protecting older people's benefits and the state pension.
But Mr Milburn said that it was difficult to find a politician who did not privately accept the need to end some universal pensioner benefits.
He asked: "Is it right that at a time when working families are seeing their wages stagnating and their public services being cut that wealthy pensioners have their benefits protected?"
The report found that the Government's austerity programme has been "regressive", with the poorest 20% bearing more of a burden than any other sector of society other than the very rich.
And it warned that, because of declining earnings, university fees and youth unemployment, many middle-class parents now fear that their children will grow up to be worse off than them.
Mr Milburn warned: "Economic recovery is unlikely to halt the trend of the last decade, where the top part of society prospers and the bottom part stagnates. If that happens, social inequality will widen and the rungs of the social ladder will grow further apart.
"The promising reforms we see in schools and some aspects of welfare will not, on their own, offset the twin problems of high youth unemployment and falling living standards that are storing up trouble for the future. We see a danger that social mobility... could go into reverse in the first part of this century."
Saga, which campaigns for older people, accused Mr Milburn of "playing the politics of envy" and described his calls for pensioners to bear more of the burden as "a bit bonkers".
And National Pensioners Convention general secretary Dot Gibson said: "This idea that pensioners have done well at the expense of younger generations is dangerous, when the real division is between the rich with their generous bonuses and the rest of us who are struggling to get by."
Children's charities welcomed the Commission's call for money earmarked in this year's Budget to help better-off parents with childcare to be diverted to help those on benefits.
Gingerbread chief executive Fiona Weir said: "The Government has a real opportunity to transform the lives of many working single parents who are bringing their children up in poverty. Providing extra childcare support would ensure the Government delivers on its promise to make every extra hour of work pay."
And Alison Garnham, chief executive of Child Poverty Action Group, said: "The Commission's verdict is clear: the Coalition's current child poverty strategy is failing and child poverty is set to rise. The important thing now is to focus on the positive recommendations the Commission makes to turn this situation around."
TUC general secretary Frances O'Grady said: "Britain needs a pay rise to tackle child poverty and improve social mobility. Ministers must work with unions and employers to ensure that the benefits of our recovery are shared fairly throughout the workforce."