Like any major event, we knew coronavirus would hit different demographics with unequal force.
While the huge and rapid emergency measures introduced by the government will undoubtedly have helped stave off financial ruin for many, at least for now, a new study by the renowned think tank the Institute for Fiscal Studies shows those who were already dealing with low incomes, high relative costs and low savings levels on the eve of the lockdown will bear the brunt of its economic impact.
Before social distancing measures were introduced, around one in seven UK employees worked in a sector that is now largely or entirely shut down, including non-food retail, restaurants and hotels, passenger transport, the arts and leisure services.
With such industries often attracting new entrants to the workplace, employees under the age of 25 are more than twice as likely to be active in these fields than older staff.
Separate data from TransUnion tracking the financial impact of the Covid-19 pandemic suggests 78 per cent of the under 25s had already seen their money take a hit.
Even excluding students with part-time jobs, these sectors employ nearly a third of all workers under 25, rising to 36 per cent of young women.
In fact, one in six of all female employees have or at least had careers in these industries.
“With the existing gender pay and savings imbalances, it is an inescapable fact that women are entering the current period of financial uncertainty in a less financially robust state than their male co-workers,” says Jeanette Makings, the head of financial education at Close Brothers, whose own study found a quarter of women already struggled to make their money last until payday before the outbreak. Only 13 per cent of men had the same experience.
“The gender pay gap is not a result of lack of parity of pay. There are more women in lower-paid roles or in part-time roles to work around childcare or having taken career gaps to raise a family, so they are paid less and have lower savings, all to the detriment of their financial wellbeing.
“Women’s financial health may well be different to that of their male counterparts. However, Covid-19 will inevitably cause more employees, both male and female, to worry about money, so it’s important to tackle this head-on.”
But by far the greatest disparity between those affected and those who so far have not been is earnings level. The IFS study found that those with the lowest earnings are about seven times as likely to work in shut-down sectors as those with the highest earnings. A third of employees earning the lowest tenth of UK incomes are or have been employed in sectors directly affected by the lockdown, compared with just 5 per cent of those in the top tenth.
Even before the crisis, financial fragility was already a widespread problem. The StepChange debt charity was contacted by those facing severe financial stress once every 49 seconds in 2019.
Three in every four said a life event or income shock was the main reason for their problems.
“Financial resilience is already critically low, despite the fact that most of our clients come from in-work households,” warns StepChange CEO Phil Andrew.
“This should show policymakers during the current economic crisis how radical they will need to be to shore up UK families. We know that 3 million people across the country are already in problem debt and 9.8 million are showing signs of financial distress. Unless people are well-supported through any upcoming period of financial difficulty, we can only expect the demand for debt advice to rise.
“We would urge government, creditors and employers to take all necessary steps to protect financially vulnerable people from falling further into difficulty and we stand ready to do all we can to continue to provide our services to people who need them.
“Looking further ahead, it is all very well trying to triage and fix people’s problems when a debt crisis happens – but it would be even better to provide adequate support frameworks and affordable opportunities to build resilience so that more people can weather life shocks when they do happen.”
StepChange has set up a hub for those worried about the effect of the coronavirus pandemic on their finances and is urging anyone concerned they may be in difficulty to seek advice as soon as possible.
National Debtline has also published a coronavirus factsheet for people whose finances have been impacted.
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