The heterogeneous and regressive consequences of COVID-19: Evidence from high quality panel data

Abstract

Using new data from the first two waves of the Understanding Society COVID-19 Study collected in April and in May 2020 in the UK, we study the labour market shocks that individuals experienced in the first wave of the pandemic, and the steps they and their households took to cope with those shocks. Understanding Society is based on probability samples and the Covid-19 Study is constructed carefully to support valid population inferences. The Covid-19 Study collected novel data on the mitigation strategies that individuals and households employ. Further, prior observation of respondents in the panel allows us to characterize regressivity with respect to pre-pandemic economic positions. Our key findings are that those with precarious employment, aged under 30 and from minority ethnic groups faced the biggest labour market shocks. Almost 50% of individuals have experienced declines in household earnings of at least 10%, but declines are most severe in the bottom pre-pandemic income quintiles. Methods of mitigation vary substantially across groups: borrowing and transfers from family and friends are most prevalent among those most in need.

Keywords: COVID-19; Financial distress; Inequality; Job loss; Mitigation.

Fig. 1

Sources of Mitigation. Notes: The sample is individuals who experienced a household earnings loss of at least 10 percent between February and May. Respondents can report multiple methods of mitigation. Sample size: 2617. Pre-COVID-19 income quintiles are assigned on the basis of household income averaged across up to 3 previous waves of the main study.