Beyond the tragic loss of life, coronavirus is changing the way we work and spend our money. And for many people that has meant losing their jobs, and living with the lower incomes that come with that. There are a wide range of forecasts for what the unemployment rate will be at the end of the year, but even the most optimistic scenarios have it doubling to around 8 per cent.
But unemployment is just one part of a wider conversation we should be having during this crisis. Some families will see their incomes fall because of reduced hours, or because they have been placed on furlough. In either case, our research shows that it is the lowest-income individuals who are most likely to have experienced this increase in job insecurity. However, as our social security system rightly provides more support for families on low incomes, this has partially offset some of these income losses. Overall this means that the combined effect on incomes has been similar for lower- and higher-income households.
Income is only one part of the picture though: the crisis has also seen average household spending fall significantly. From month to month, households will either have more income than spending (and so save some money), or will spend more than they have coming in – and so draw down some of their savings. From analysis of a survey conducted during the outbreak, we have found that lower-income families in particular are more likely to rely on their savings during this crisis – or, more worrying, take on often costly consumer debt. On the other hand, higher-income households are more likely to have seen their savings grow in the past few months. This should make us pause and think: during this time of crisis, do we need to do more to support those who are suffering the most?
These results only paint a snapshot of people’s lives, and as the crisis continues to develop (and as the lockdown conditions change), household finances will also continue to change. And as we have recently seen, the Government has made some big policy changes over the past few months – most noticeably increasing the amount paid under Universal Credit, but also around providing free school meals over the holiday. As our research has shown, though, it is likely this is not going to be enough to prevent further hardship – the longer the economic crisis continues, the more support will be needed.