Living with Reduced Income: An Analysis of Household Financial Vulnerability Under COVID-19

Abstract

The COVID-19 crisis has led to substantial reductions in earnings. We propose a new measure of financial vulnerability, computable through survey data, to determine whether households can withstand a certain income shock for a defined period of time. Using data from the ECB Household Finance and Consumption Survey (HFCS) we analyse financial vulnerability in seven EU countries. We find that, out of the 243 million individuals considered, 47 million are vulnerable to a three month long income shock (the average length of the first wave COVID-19 lockdown), i.e., they cannot afford food and housing expenses for three months without privately earned income. Differences across countries are stark. Individuals born outside the EU are especially likely to be vulnerable. Being younger, a single parent, and a woman are also statistically significant risk factors. Through a tax-benefit microsimulation exercise, we look into the COVID-19 employment protection benefits, the largest income support measure in the countries considered. Considering as our sample individuals in households where someone receives a salary, we derive household net income when employees are laid-off and awarded the COVID-19 employment protection benefits enacted. Our findings suggest that the employment protection schemes are extremely effective in reducing the number of vulnerable individuals. The relative importance of rent and mortgage suspensions, (likewise, widespread COVID-19 policies), in alleviating vulnerability, is highly country dependent.

The Impact of the COVID-19 Pandemic on Food Consumption Behavior: Based on the Perspective of Accounting Data of Chinese Food Enterprises and Economic Theory

“…Since 2020, the COVID-19 pandemic has affected consumers’ consumption habits and food purchasing behavior [ 24 , 25 , 26 , 51 , 73 , 74 , 75 , 76 ]. Lockdowns, social distancing, business closures, and people’s insecurity have led to a sharp decline in economic activity [ 4 , 5 ], affecting household income and expenditures [ 20 , 21 ]. During the pandemic, restaurants in many countries and regions were forced to close, and people were spending considerably more time at home.…”

“…In the early stages of the epidemic, people’s food consumption may have declined due to factors such as being unable to work or reduced incomes [ 20 , 21 ], using more savings for medical care [ 22 ], and being impacted by fear [ 23 ]. These changes are not only reflected in the quantity but also in the quality and type of food consumed—consuming cheaper alternatives [ 24 ], reducing the consumption of fruits [ 25 , 26 ], reducing animal-derived foods such as meat and poultry [ 26 ], and using more shelf-stable packaged foods [ 27 ].…”

Covid-19 Pandemic and Its Impact on Household Financial Behavior in Indonesia

“…Investor behaviour in the capital market is the most prevalent issue which was assessed in this pandemic (Budiarso et al, 2020;Linardi, 2020;Priem, 2020;Putri, Xu and Akwetteh, 2020;Wu, Yang and Zhao, 2020;Zhang, Hu and Ji, 2020;Talwar et al, 2021). The other topic is the examination of household spending response during the pandemic (Baker et al, 2020), the household liquidity constraint (Li et al, 2020), the impact on income and poverty (Han, Meyer and Sullivan, 2020), the impact on household financial vulnerability (Midões and Seré, 2020), and financial planning (Fox and Bartholomae, 2020). The first contribution of the present research is to comprehensively examine several household financial decisions, such as budgeting, saving, investment, and insurance decisions.…”

“…The US consumer spending behaviour has substantially changed due to the pandemic (Baker et al, 2020). In microeconomics, several researchers assessed the impact of covid-19 on financial behaviour: investment behaviour on the stock market decisions (Budiarso et al, 2020;Priem, 2020;Wu, Yang, and Zhao, 2020;Talwar et al, 2021) and the impact on people's financial vulnerability (Midões and Seré, 2020). Indonesia is the fourth most populated country.…”

Lockdown, Earnings Losses and Household Asset Buffers in Europe1

“…To our knowledge Almeida et al (2021) and Christl et al (2021) are the only two papers studying the impact of COVID-19 on market and disposable incomes in a European-wide context. Only a few studies have considered the potential cushioning role of savings and assets, either assessing whether households can cover basic expenses by relying on those assets (Demertzis et al, 2020;Midões and Seré, 2022) or three weeks of disposable income (OECD WISE, 2021) or by calculating joint income-wealth poverty measures (Kuypers and Marx, 2020). Furthermore, those studies simply assess vulnerability in those terms at the onset of the crisis, without relating that to which households are actually most likely to be affected by earnings losses in the pandemic.…”