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Covid-19: How has financial wellbeing been affected?

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What has changed, and who it has changed for

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Implications for a wellbeing-based recovery

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Measures and resources you can use

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What has changed?


An estimated 12.5 million people say their households have been affected financially by the impacts of the coronavirus (Covid-19):

  • Those with less education and precarious employment face the biggest economic shocks. Household incomes have fallen particularly among the lowest earnersFor many low-income families, the crisis has been accompanied by falling savings rates and a growing use of high-cost consumer debt.Those with income in the bottom 20% of the UK were likely buffered from debt by furlough or benefit support. But for the 20% of earners in the next income bracket up, one in four adults reported increased consumer debt. 

  • Bangladeshi (43%), followed by Black African people (38%), were the most likely to report the loss of some income. This is compared with 21% of Black Caribbean groups and 22% of white British people. 14% of Black people and people from minority ethnicities used savings for day-to-day spending compared with 8% white British; and 7% had to start skipping meals compared with 2% white British group.

  • Disabled people were most likely to say that they will come out of the coronavirus outbreak in more debt. Disabled people employed before the Covid-19 pandemic have been four percentage points more likely to have experienced a negative labour market outcome than people without a disability. By April, 34% of disabled women said their household had already run out of money, compared to 24% of non-disabled women.

  • Carers spent more money than before lockdown: 72% were spending more on food and 50% were spending more on household bills. 38% of carers agreed or strongly agreed with the statement “I am worried about my financial situation”

  • People with mental health problems reported lower levels of financial resilience. This means they are likely to suffer the effects of income shocks more acutely. Among those with experience of mental health problems, nearly one in three have spent less on essentials like food or heating while one in ten have missed a debt repayment.

  • Parents were more than twice as likely to report reduced income. Less than half said they would be able to to cover a large necessary expense. Parents were more likely to have been furloughed than adults without children in the house, with over 20% finding childcare impacted their work.

  • There are marked differences between regions in the way in which the  coronavirus labour market shock is being felt.  This regional variation is largely explained by the sectoral nature of this crisis.  The reliance on tourism in some local areas adds to the generalised impact of the shutdown that has hit sectors like hospitality, arts and leisure, which are quite spread across the country, particularly hard.

  • The impacts of the Government’s coronavirus income support schemes varies for different agesThose in their early 20s are most likely to have been furloughed on the Job Retention Scheme, with a fifth of all employees on the scheme under the age of 25. The beneficiaries of the temporary boost to Universal Credit and Working Tax Credits, are most common among those in their early 30s, who are most likely to be working parents with young children. Older workers are the most likely to have received support via the self-employment income support scheme, with recipients most likely to be found among those aged 50 to 55

  • The number of adults who are food insecure is estimated to have quadrupled. Adults who were working in February 2020 but who reported being unemployed in May or July were about 2.5 times more likely to be experiencing food insecurity than those who remained in work. An equivalent rise was not observed for adults who had been working in February but who were furloughed in May or June, suggesting this scheme has protected this group from the dramatic rise in food insecurity observed for those who became unemployed.

Why this matters for wellbeing and wellbeing inequalities

Research on the drivers of wellbeing inequality shows that deprivation, median income and unemployment are all associated with higher wellbeing inequality.  While some people’s finances have been badly affected, 38% of adults in the top income quintile have experienced no loss of income alongside a reduction in spending. This implies a strengthening of the household budget. As the gap widens between people at the top and the bottom of the income distribution in the UK - as a result of this pandemic - the result could also be a widening gap in wellbeing

"The covid-crisis has triggered the biggest income shock in Britain since the oil crises of the mid-1970s. And while ‘enforced saving’ during lockdown has enabled some households to boost their balance sheets, our research has found that many lower-income households have had to run down savings, or run up debts, to get by.

 “The initial income shock has been cushioned by over £70 billion worth of much-needed income support from the Government. But with that support due to be withdrawn over the next six months, and unemployment already rising sharply, many households are likely to see their financial pressures get even tougher.”

Karl Handscomb, Senior Economist at the Resolution Foundation

How can this evidence shape a wellbeing-based recovery?

  • Accessible, targeted support to financially vulnerable people will be required for some time to come. This support needs to address income loss, reduction in spending, and debt.

For example, awareness of financial support measures such as changes to statutory sick pay and Universal Credit was particularly low among Bangladeshis, with three in ten (29%) reporting that they were not aware of any of the measures. 

Fewer than half of Black people, or people of minority ethnicity, knew that those out of work due to the crisis were able to claim Universal Credit (44%, vs 62% of white people). And only around a third of Black or minority people knew that Statutory Sick Pay (SSP) was available from the first day of self isolating (34%, vs 52% of white people).

  • Some unexpected improvements in wellbeing are likely linked to policies which support people in financial uncertainty. When these policies end the return to financial precarity could see a reduction in wellbeing for these groups.

For example, people who were unemployed or working fewer than eight hours a week showed a significantly higher wellbeing relative to other groups during lockdown. This can be explained by the expanded safety net afforded by the evictions ban; expansion of the Universal Credit Scheme; and hardship funds. 

Measures and resources 

Measures that matter

Measuring wellbeing inequalities focuses policy and recovery activity on improving lives, in the most effective way. Developed pre-Covid, Understanding local needs for wellbeing data offers ideal and ready-to-go measures for wellbeing. It includes unemployment rate; people living in households in material deprivation; and income deprivation affecting older people and children. There are also measures of job quality, for example: job security, good pay, overwork/underwork and work-life balance.

The OCSI Covid-19 Vulnerability Index and the British Red Cross Covid-19 Vulnerability Index include measures of financial and economic vulnerability.

Resources you can use

  • Including questions on financial wellbeing within a workplace wellbeing survey can help identify concerns relating to pay fairness, adequacy for living standards, financial resilience and ability to withstand shocks.  It can also build a case for financial wellbeing interventions in the workplace. 
  • The Financial Wellbeing Evidence Hub brings together evidence to help design interventions, funding programmes and policies to improve financial wellbeing and capability. It also includes an Evaluation Toolkit to help you measure your impact.
  • Money Advice Service provides information for individuals on money and financial management. This includes information and advice for people worried about their mental wellbeing and how it relates to their financial circumstances.

  • The Money and Pensions Service provides information for employers and policy makers on how they can support financial wellbeing in their organisations. This is part of the UK Strategy for Financial Wellbeing.

  • Talk Money Week is an annual campaign to get the nation talking about money and how to build financial wellbeing. Talk Money Week 2020 will take place on 9-13 November. Join the conversation on social media at the hashtag #TalkMoney.

Copyright © 2020 What Works Centre for Wellbeing, All rights reserved.

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