The Rowleys are a hard-working married couple with two children. They do not earn enough to be in the 'squeezed middle' – the group that has attracted so much media coverage. They only just manage to put food on the table. In the first part of an occasional series, Yvonne Roberts takes Conservative MP Dan Poulter to Essex to see what life is like for this hidden demographic

Richard, 28, and Christine (Crisy) Rowley, aged 27, have been married for five years and together for nine. They are buying their own home in Braintree, Essex, and they have aspirations. Richard hopes to become a carpenter; Crisy, who has a foundation degree in animal management, would like to train as a veterinary assistant when Lucie, five, and four-year-old Rhys are older.

"We've been told we have two bright children," Crisy says with pride. "We want to make sure they have a decent future and that begins with them growing up in a home with two parents in paid work, putting money on the table, going somewhere."

I first met the Rowleys six weeks ago with the Conservative MP Dr Dan Poulter. Poulter, an obstetrician who was elected to a neighbouring constituency in 2010, has agreed to take part in a unique experiment, organised by the Observer. He will make several visits to a family experiencing the sharpest point of the current economic downturn to see how Westminster policy affects ordinary people.

The Rowleys belong to a section of society not much mentioned in ministerial and media dispatches. They are neither the very wealthy affected by the 50p tax nor the "squeezed middle" expressing anxiety about child benefit and this week's budget; nor are the Rowleys representative of the long-term unemployed or one of the 120,000 "troubled families" in which the government is investing £448m over the next three years.

Instead, Crisy and Richard are one among thousands of couples who, without attracting much attention, live daily on a precarious and crumbling financial cliff edge. They are the working poor, frequently self-employed, paying dearly and disproportionately simply because they want to stay in jobs, no matter how low the pay. For months now, the Rowleys have been hanging on to their home and their dreams of a better future by a hair's breadth. They have done so by drawing on their own reserves of resilience; Crisy's financial acumen – "If I can't afford it, I can't afford the interest on the credit card either," she says flatly – and significant support from their own, equally cash-strapped families.

"A year ago, Richard could have gone on jobseeker's allowance and the family would have had more money in their pocket," says Amanda Storie, outreach worker at the Seesaw children's centre in Braintree, run by the charity 4Children. She has known the family for five years. "But both Richard and Crisy want to work. They are trying to do the right thing – but they are paying a high price."

From next month, "doing the right thing" could become even more difficult for more than 200,000 of the poorest working families. Changes to working tax credit mean that the Rowleys could be facing the most difficult two years of their lives until universal credit – a single, simplified benefit system – comes into force.

"A lot of people don't realise that in three weeks' time they could be losing up to £75 a week from an already low income," says Sue Royston of Citizens Advice. "They want to stay in work in the hope that, should the economy improve, they are in a better position to increase their hours. These people have already taken quite a drop. Now they will be hit again. How much further can they fall?"

Every weekday, Richard Rowley leaves the family's three-bedroom house at 7am and drives their £650 Honda, which is 12 years old, to work. Richard would like a permanent job but five applicants for every vacancy in Braintree means that he has had to become technically self-employed, working through an agency as a construction labourer. He returns from work just before 5pm.

Twenty minutes later, Crisy leaves for her cleaning job. She works two hours every weekday evening at minimum wage for £60.80 a week, half of which goes on petrol money. She comes home and not long after Richard goes to bed. The job took months to find; longer hours require an unaffordable childminder. "Our attitude is we'll do whatever we have to do to put food in the children's tummies and clothes on their backs," Crisy says.

"We've got an eight-year-old cooker and the boiler is older than me – everything else we've been given. But that's how it is at present," she adds robustly.

The first time I talked to Crisy and Richard, in January, he had been given two days notice that his agency job would end and he was looking for work. Agency workers have no holiday or sick pay, redundancy or pension rights. Since they are technically self-employed, they can be and frequently are paid much less than the minimum wage of £6.08p an hour. They may be in work one day and out the next through no fault of their own. A TUC commission on vulnerable workers in 2008 estimated that more than two million were affected.

Recently, there has been a significant increase in the numbers of self-employed workers (101,000 in the last quarter). The Chartered Institute of Personnel and Development says that at least 20% of this increase can be attributed to "odd jobbers" – unskilled workers like Richard. The rise reveals "a generally weak market rather than a burst of entrepreneurial zeal", the institute points out drily.

Richard Rowley is a quietly spoken man, a lover of sports when he had the time and the money. He doesn't smoke or drink. He and Crisy met at college. He abandoned a degree in leisure management to follow his ambition of becoming a diver in the navy. An eardrum problem meant he had to switch skills.

Anything useful?

He smiles. "Mine warfare," he says. In six years, he travelled extensively, loved it, served in the Gulf and Bahrain and was about to be promoted when he suffered a breakdown. "I was told I had to do a second tour in the Gulf. I was lonely and I missed Crisy and the children. To get something out of a child you have to put something in. I'd come back from a tour when Rhys was 18 months old and he hadn't known who I was."

The couple say the navy provided excellent care . Once well, Richard left the service in 2010. "If I'd stayed in I'd be on £27,000 a year," he says.

Does he have regrets? "Big time." Richard has level one City & Guilds qualification in carpentry. Last month, his father took out a £700 loan to pay for Richard to take a two-week painting and decorating course. High unemployment is feeding a growing market in the expensive provision of instant skills.

"You see loads of ads asking a couple of grand for courses that last a few weeks," Richard says. "They say things like, 'I was a recruitment consultant and then I acquired a trade qualification. Now I'm earning £40,000 a year.' Well, it doesn't quite work like that," he adds ruefully. Richard would like a "proper" carpentry apprenticeship. "I've tried but nobody wants to take me on when they can have a 17-year-old for £2.60 an hour."

Last year, Richard took out an overdraft of £1,700 to buy the tools to set himself up as a painter and decorator. Now he relies on agency work. A week after we first spoke, in February, he began working again for £6.80 an hour. He brings home £170 a week net. In this job, he says, he likes the work and the people. "Rich was told it would only be for a couple of weeks but they are trying to keep him on," Crisy says. "People recognise he is a hard worker. He wants to provide for his family."

On Friday 2 March, prior to Poulter's next visit, Crisy tries to withdraw some of Richard's wage to pay for food for the weekend. An administrative error means that the money isn't in the couple's account. The overdraft is at £1, 691 – £9 short of the maximum and Crisy won't go over. Another problem is that Richard has received no jobseeker's allowance for the several weeks he was out of work. The Jobcentre Plus wants to see Rich but, if he takes time off work, he loses money.

"I know all the security questions but they won't talk to me," Crisy says. "Last time we went, they said, 'You go and sit over there, Mrs Rowley.' But it's me who's got all the figures in my head. I deal with the money. Why can't Jobcentre Plus treat us as a family?" She adds: "We have no Xboxes, no Sky, no catalogues, no credit cards. Until November, I could get the family's food for a week with £50. Now it's £70. It's the same chicken, pork and minced meat. The same frozen veg and cheap milk and bread. Our wages haven't gone up but everything else has – electricity, petrol, food. What do I do when I'm stuck? I call my mum."

Crisy's mother, a retired cook, provides food and clothes for the children from time to time. Crisy's father lent the couple £8,000 towards the deposit on the house, bought five years ago for £156,000. Now it is worth £140,000. Their interest-only mortgage payments are £416 a month. Richard's father also lent the couple £30,000 for the deposit and pays for Lucie's dancing lessons and Rhys's football club on a Saturday morning.

That first weekend in March, Crisy's mother brought food and clothes. "I hate to ask her for help because she's saved all her life for her own pension pot. Both families have been wonderful," Crisy says. The couple haven't missed a mortgage payment in five years. For the March payment, Crisy's mother lends them £300. Crisy can't think about April. "The bank said make a temporary token payment but I don't want to do that. Unless things get better, there is no 'temporary' for us."

That first March weekend is strained and difficult at home. The children, normally well behaved, pick up on their parents' stress. On Monday, Crisy and I go to see Rachel Scott, co-manager of Seesaw, and Amanda. The centre is three years old and has been rated "good" by Ofsted. It supports around 700 families, including 1,200 under-fives.

"I love this place," Crisy says. "It's been brilliant to me. That's why I volunteer to give something back." As Amanda, Rachel and Crisy talk, they explain how the Rowleys' current crisis has occurred three or four times over the past year because Richard has had 10 weeks without work.

"It's hard to see how to move Richard and Crisy forward," Amanda says gently. "It's not just the low levels of pay, it's sorting out benefits. We want children to see their parents doing better but it's a strain on marriages. The whole family support network is changing too," Amanda adds. "Grandparents who used to help out with childcare are working to top up their pensions or because they've secured loans against their houses that they now have to pay back.

"It needs someone at Jobcentre Plus to sit down for an hour and work out how best to help Crisy and Richard as a family," Amanda continues. "What courses could they go on, for instance, so they can improve their skills and qualifications?"

"I'd love to have gone for a job at Colchester zoo," Crisy adds. "But at £2.60 an hour? My heart says animals but my head says the children always come first."

In 1999, a Treasury report stated that, "the hypothesis that low-paid jobs act as a stepping stone to higher paid jobs is not supported by the data. Low paid jobs are more likely to act as a blind alley."

The Seesaw staff try to support parents to avoid those blind alleys. It offers numeracy and literacy skills, help with budgeting and job applications, and parents use the centre's phones to apply for jobs or to try to talk to Jobcentre Plus. "It's the little things that matter a lot on tight budgets," Rachel Scott says.

A core goal for the centre is to get parents moving up the ladder of opportunity rung by rung. The lack of economic growth, the absence of private sector jobs and the dearth of extra hours for part-timers means that the rungs are rapidly disintegrating, leaving an increasingly unbridgeable gap. The working poor are also expected to be exemplary and stay within the strict rules of austerity.

"I'm lucky," Crisy says. "My kids don't ask for a thing. They are happy if we take them to Frinton beach for the day. Nothing there except a green and a beach but they absolutely love it." However, Crisy has broken one of those rules. She has two dogs, acquired when Richard's work appeared permanent, rabbits and a guinea pig. Animal feed costs £15 a week. What is considered a normal part of family life is deemed an extravagance for those on the breadline. "I think they are entitled to one luxury," Amanda says stoutly. She turns to Crisy and adds, without irony: "Somehow we have to find a way so that both of you can afford to stay in work."

In a parents' group later in the week that Poulter and I attend, one mother talks of benefit cheats and "job snobs" who are "picky" about the work they will take. However, Anée, 17, helping her married sister with her child, bursts with ambition. She has 10 GCSEs and is desperate to find an apprenticeship in floristry or retail, so far without luck. She has just tried for a job as a cinema usher but was unsuccessful. Her boyfriend, a plumber, can't find work. Her father, an engineer, has recently been made redundant.

Anthony Everard has been a local Labour councillor for eight years and is working with Crisy to establish an allotment club. "Everywhere I go I see the sign 'Investors in People'," he says. "I wish that was true."

For many couples like the Rowleys, systems that on paper appear to be eminently reasonable – once you have little money – can prove obstructive, enormously time consuming and debilitating; a further tithe on the working poor. Poulter says he is shocked at the extent of financial exploitation.

The Rowleys, for instance, took out a loan with Creation Consumer Finance. Rhys had poor health as a baby; heating bills were high, so the couple borrowed to buy double-glazed windows. The repayment is £76 a month over five years. Crisy asks to negotiate a lower payment over a longer time. The response is rude and unhelpful. "I was told I had to pay or I would be fined with interest and fined again for a defaulting debit. That put the frighteners on me."

Creation Finance says it does all it can to help customers in difficulties. Indeed, it has a financial difficulties department. This reasonableness does not tally with the experience of the Consumer Credit Counselling Service, a charity. It has had "massive issues" for months with the company, says Uma Farrell of the service. "Creative Finance is aggressive and confrontational with its customers who are already stressed. It exacts excessive penalties and it won't work with us on constructive solutions."

The Rowleys also have trials dealing with Jobcentre Plus. According to the Department for Work and Pensions, a jobcentre will fund short vocational courses. Richard says he asked but was refused. It transpires that Richard is also entitled to "rapid reclaim", a benefit that eases family finances if a claimant dips in and out of work.

Last week, I met another Braintree resident, "Sue" (who doesn't want to be identified.) She is 32, married and, before she had her two children, she worked in insurance. Now , she too belongs to the working poor. She is a cleaner five nights a week. Her nightly hours have been cut by 30 minutes – the £15 is hugely missed. Sue's husband has a factory job. He brings home £1,100 a month.

"His money is gone in the first hour," Sue says. The couple have a loan, an overdraft and outstanding debts on nine credit cards. They are paying each card off at a £1 a month . They are also in arrears on their council tax, their mortgage and their energy bills. "I am not going to lose my home," Sue says, in tears. "I'm not."

In 2010, according to the housing charity Shelter, more than 36,000 homes were repossessed. The last three months of 2011 saw an 18% increase in homelessness over the same period in the previous year. Sue says: "I put my hand up. We spent when we didn't have it. Now we will pay for the rest of our lives – unless something changes."

Sue should be on antidepressants but can't afford the prescription. Her husband has toothache but can't pay the cost of the dentist. "If we were out of work, we'd get free school meals, dentistry, opticians, prescriptions, help with the council tax," Sue says in tears again. "We had so much going for us . Now, I sometimes can't even afford the petrol to get to work. It is so embarrassing."

According to the Consumer Credit Counselling Service, a "debt noose" is tightening around households with some families paying almost £200 a month in interest alone. The charity says UK households' determination to pay down their debts is slowing as disposable income is swallowed by high inflation, expensive petrol, utilities and housing costs and deteriorating employment conditions.

Last week the work and pensions secretary Iai n Duncan Smith launched the Social Justice Strategy paper. In it, he underlined the government's support of marriage and outlined the various ways he intends to tackle "the root causes of behaviour" that lead to intergenerational unemployment. However, many of the working poor are in a fraught situation, not because of their behaviour but because of the structural inadequacies of the system. The economy is not generating extra hours of work. In the six years to 2010, £150bn was spent on tax credits. They were essential for survival but they also provided a huge subsidy for employers, in many instances paying pitiful wages.

The cost of childcare, the low hourly rates and the anomalies in benefits are a vice squeezing the life out of the aspirations and hopes of people like Richard and Crisy. And worse is to come. Next month, the rules on working tax credit change. Now a couple need to work 16 hours between them to be eligible. From April a couple must work 24 hours. If Richard loses his job, then because Crisy is employed for 10 hours, the family will no longer be eligible for working tax credit. £3,870 will be cut from their annual income, already stretched tissue thin.

The shopworkers' union Usdaw reports that 78% of its members have already asked and been refused more hours of part-time work. Alison Garnham, chief executive of the Child Poverty Action Group says: "Six out of 10 children in poverty have a parent in work. The truth is that a child growing up in poverty is many times more likely to have a parent who's a cleaner or a care worker than one who's a gambler, an addict or workshy.

"From April, working couple families, the very families ministers say they want to help, face having the rug pulled from under their feet. We are testing families to destruction."

Ann Coffey, a Labour MP, has campaigned against the change. "It is bizarre that families who lose their entitlement in April will be given support again in two years' time when the excellent universal credit is introduced," she says. "In the meantime they face two years of hardship."

So what might make a difference to couples like Crisy and Richard?

The working poor merit greater consideration in the government's strategy for social justice. An agenda for them might include employment rights for agency workers; better vocational training and qualifications; eligibility for free school meals; free prescriptions, dentistry and opticians; more help with fuel bills, childcare and the council tax. And the changes to working tax credit in April should be cancelled.

"It is the only decent thing for the government to do," Sue Royston of Citizens Advice says.

"Rich and I are good together," says the remarkable Crisy. "What we need now is a little bit of luck."

THE ROWLEY BUDGET

Crisy works 10 hours a week as a cleaner, earning the minimum wage of £6.08p an hour or £243.20 a month, plus contracted extras that top it up to an annual total of £3,273.60.

Richard earns £6.80 an hour for a 42-hour week – £1,142.40 a month

If Richard is in work all year, the couple's combined salary is £16,627.20p. But in the last 12 months Richard has been out of work for a total of 10 weeks, costing them nearly £3,000 from an already strained budget.

MONTHLY OUTGOINGS

Interest-only mortgage: £416

Water: £32

Double-glazing loan: £76

Council tax: £129

Gas and electricity: £110

Car costs, excluding petrol: £45

Car insurance: £54

House insurance: £30

TV: £13

School meals: £38

Animal feed (vets' fees not included – paid from Crisy's Christmas present money from dad: £60

Phone: £56

Food: £280

Washing machine insurance: £10

Children's shoes and clothes/birthday Christmas presents: about £30

Petrol for Crisy's work: £120

Richard's accountant: £25

Interest on overdraft: £30

National Insurance: £10

Total: £1,564

COMING IN

Child benefit: £132

Richard's wage after tax: £680

Crisy's wage: £248.20

Working tax credit: £291

Child tax credit: £452

Richard's tax rebate: £75

Total: £1,878.20

No budget for emergencies, house repairs, car repair or clothes for Richard and Crisy. No credit card or catalogue debts. The couple last went out together two years ago. Richard is still owed some jobseeker's allowance payments for last year.

■ Some figures are approximate