Wealth Disparity in Lockdown
"I'll book us a table !" Why removing lockdown restrictions will reveal the greatest COVID wealth disparity yet.
The pandemic shone a light on the wealth disparities and the privilege that many experienced; being able to work from home, access to private and public green spaces, flexible working arrangements and general employment stability. Whereas others experienced mass unemployment and redundancy, bills piling up, large families cramped in small spaces and often stricter lockdown restrictions for disadvantaged neighbourhoods. This article highlights the evident wealth disparities that loom with these new restrictions in place, how it may not be a united cry of glee for the glorious light at the end of the dark tunnel of COVID.
Disproportional financial burdens
On paper, the restrictions on eating out, holidaying abroad and other leisure activities pushed down spending in many households. However, this does not give us the whole picture. While economic sectors most reliant on social interaction took a steep financial decline, for the masses, leisure activities and celebratory events were replaced by purse-string friendly activities such as perfecting banana bread and attending zoom meetings in pyjamas. For those whose disposable income was usually funnelled straight into hospitality, retail and leisure sectors, their savings began to pile up in preparation for the inevitable splurge at the lifting of lockdown. For others, “disposable income” already felt like an alien concept and building up savings a far off dream.
On the whole, the Bank of England reported that lower income households responded to the crisis by spending any savings, while higher income households added to theirs (see graph below).
In an article written by the government-funded organisation Health Foundation, they highlight that “while the proportional drops in incomes across different households may be relatively even, the consequences of those reductions are being felt much more acutely by some.”
As an example, essentially, a £10 reduction in monthly income for one household would make very little difference to their lifestyle during and after lockdown; whereas that £10 for a low income household could represent being able to pay the electricity bill that month, or whether they would eat fresh food or food from a tin. In lower income households even tiny reductions to their finances can cascade into innumerable calculations regarding bills, food, paying taxes, which benefits it would impact, how many hours they would need to work to make up the lost income, the sacrifices of treats, borrowing money, their credit score, paying for petrol, paying for transport, money for kids schooling/ clothes/ school trips etc. and so much more. The concept of these constant, pressured calculations may be totally unfamiliar to someone who is financially comfortable and is focussing on when they can next access the bars and shops to spend their disposable income.
Labour Market
There are at least 3 ways the COVID-19 pandemic has increased inequality within the labour market. First, higher-paid workers were able to work from home while lower-paid blue-collar workers typically do not have this option. Second, a higher share of low-paid workers are in essential services such as nursing, policing, teaching, cleaning, refuse removal, and store attendants where they were more likely to come into contact with people who are infected. Third, lower paid workers are more represented in the sectors that have suspended activities such as hotels, restaurants and tourism services. Many office workers have been able to shift to homeworking, and for them, lockdown meant reduced spending on transport and leisure while their incomes remained relatively stable. The financial times reported up to 40 per cent of those in the top income bracket were able to work from home during the pandemic, more than double the proportion among the lowest earners. In the UK, as jobs in lower-skilled occupations were cut, the number of professional jobs increased.
On 23 March, the labour market statistics for November 2020-January 2021 were published in a parliamentary report. These statistics revealed the employment rate to be at its lowest since 2017, with the situation even worse for young earners. 227,000 more young people became economically inactive since the year before and young people who were economically inactive (not in or looking for work) increased by 231,000 from the previous year- overall the level of youth unemployment is at its highest since 2016. For single income and low income families they then may take this as an additional hit, as they may rely on the young people in the family to bring in supplementary income to assist with the financial pressures on the household.
A range of studies identified that younger workers, black and minority ethnic groups, lower earners and those on atypical contracts have been most likely to face reductions in hours and earnings, further widening the existing economic disparity amongst these groups. Specific statistics around gender inequality in the UK include the fact that women were about 1/3 more likely to be working in a sector that shut down. And when they could continue working, mothers were 1 and ½ times more likely to stop work than fathers. Their greater loss reflects the fact that women are more likely to work in the services such as catering and hospitality which were closed down. According to a parliamentary report, women faced an increase of 11% unemployment increase throughout the pandemic as a whole in the UK also.
Financial Support schemes
Government financial support schemes aiming to provide equitable relief had little impact in reducing the disparity. Furlough scheme checks fell into deep caverns of debt for those lower on the socioeconomic ladder and purely functioned as fuel for the online shopping addictions or additional takeaway money in middle class households. According to government guidance “it is for employers to decide whether to furlough an employee”. Of course the groups of individuals already identified as experiencing more financial hardship, less stable employment and additional systemic barriers were more significantly impacted by these decisions. For example, this caused problems for some zero-hours workers and agency workers whose employers reduced their work to zero without making a claim under the Scheme.
Furthermore, large corporations still had the choice to axe employees without consequence and no explanation of furlough rejections, with some corporations such as AmEx choosing a global restructure over the paperwork for their temporarily contracted employees. Overall in the UK around only 1/5 of eligible employees were put on furlough as of January 2021 and increased to just below half according to the parliamentary report in March 2021.
Universal Credit, once shrouded in class-based shame trickling down from Thatcherism, is now a grad’s best friend and a blanket check for anyone unable to get a job, or taking advantage of some well -earned holiday from working life. For those in the middle and upper classes, it appeared a simple solution for lower income households to apply for this type of financial support, however, when these households rely on multiple benefits streams already, various tax reductions and a number of other interlinking support schemes, this was not a simple task. Ignoring the nuances of this bureaucracy, to even grasp an understanding of the available support relied on a high level of literacy, education and tech literacy in navigating the government guidance.
Mental Health
In a study conducted by the University of East Anglia and the University of York, it was observed that those from lower socioeconomic backgrounds experienced greater distress throughout the pandemic and from the evidence it was predicted these individuals would have longer lasting stress and distress symptoms afterwards. Employment is one of the most strongly evidenced determinants of mental health. Lack of access to either employment or good quality employment can decrease quality of life, social status, self-esteem and achievement of life goals. Studies have found that unemployment has a range of negative effects, including relative poverty or a drop in standards of living for those who lose a job, stresses associated with financial insecurity, the shame of being unemployed and in receipt of social welfare and loss of vital social networks. All of these factors played a significant role throughout the pandemic and are more likely to have long lasting effects as lockdown lifts, both mentally and the economic fall-out.
Additionally, 1/4 of self-employed workers in the UK are in situations characterised by economic dependence (i.e. dependent on a single employer for their source of income), low levels of autonomy and financial vulnerability, and people in this category have reported lower levels of mental well-being than self-employed workers with more stable work. Furthermore, in an article by the Institute of Fiscal Studies they pointed out that : “Groups that are vulnerable to poor health are likely to be hit hardest even if the crisis hit all individuals equally, but evidence is already emerging that the economic repercussions of the crisis are falling disproportionately on young workers, low-income families and women (Joyce and Xu, 2020) Almost half of people surveyed who are unemployed (44.7%) say they were worried about having enough food to meet their basic needs in the past two weeks, compared to 29.32% of people in employment). Since early April, unemployed people are the only group for whom worry about this issue has not reduced.”
Across multiple investigations conducted by the Financial Times, both psychological and economic studies indicated that the government’s handling of the lockdown lifting would be significant for those coming from challenging financial backgrounds- even if only in their acknowledgement of the inequalities that would be faced post lockdown. Advance payments on Universal Credit, tackling the debt crisis, child poverty, extending safety policies for evictions and a government-wide mental health response all formed as part of the recommendations from the report by the Mental Health Foundation looking into the mental health inequalities based around employment during the pandemic.
Looking forward
Within the March 2021 Budget, the Chancellor announced Government support programmes such as the furlough scheme would continue while restrictions remain in place. So although the support schemes are a drop in the ocean for those in lower SE groups, the burden may be slightly lessened from the systems that would not be in place without the pandemic. Clearly for many from lower socioeconomic backgrounds it is not as simple as “I’ll book us a table”, they may have a number of factors to consider, particularly coming out of lockdown financially worse off than they went in. Perhaps when your mate from a poorer background says no to going to the pub for a third time that week you can cut them some slack.
Sources:
https://commonslibrary.parliament.uk/research-briefings/cbp-8866/
https://commonslibrary.parliament.uk/research-briefings/cbp-8898/
https://commonslibrary.parliament.uk/research-briefings/cbp-8880/
https://commonslibrary.parliament.uk/research-briefings/sn05871/
https://commonslibrary.parliament.uk/research-briefings/cbp-8879/
https://voxeu.org/article/covid-19-has-increased-and-broadened-inequality-psychological-distress-uk
Written by Scarlett Bliss
Scarlett Bliss is an expert in mental health and sexual health related issues. She often delivers training and educational talks on her Master's health research both locally and nationally. She currently consults for local Health Inclusion projects for the Leicestershire NHS Partnership Trust and works in both higher and special needs education. She is passionate about lots of political issues, but her dream career would be to dress up as silly characters for children's parties.
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