An increase in the minimum wage is required to protect low-income workers from a "perfect storm" of benefit cuts, rising living standards and a lack of jobs, Oxfam warns.
The charity is calling for the rise ahead of today's publication of official figures, which it predicts will show an increase in the number of working people in poverty.
It says those in work may still face huge financial difficulties.
Already six in every 10 of the 7.9 million working-age adults in poverty are in employment, it says, adding austerity measures are "disproportionately impacting" the low-paid.
Thousands more than last year are turning to food banks and other charity facilities as average earnings have shrunk 4.4%, the report notes, while pay of FTSE 100 company directors rose 49%.
Oxfam says improving that rate requires action such as reversing cuts to working tax credits and reducing the amount of the new Universal Credit people lose when starting a job, from 65% to 55%.
Working isn't enough to escape poverty
Its director of UK poverty, Chris Johnes, says: "Despite the Government's rhetoric about making work pay, having a job is no longer necessarily enough to lift someone out of poverty.
"More working-age adults in poverty now live in working households than in workless ones.
"The Government is justifying huge cuts to welfare support for people on low incomes by saying this will incentivise work. But there simply aren't enough decent jobs available.
"We need to see income distributed more fairly if we are to make any impact on reducing levels of poverty.
"If we carry on down this path, the UK will return to levels of inequality not seen since Victorian times."