Winners and Losers

The financial shock of the coronavirus pandemic and resulting lockdown is still being assessed by experts across the nation, and the true impact will not be known for some time yet.

But already there are some useful indicators available.  And today’s publication of the “Return to Spender” report by the Resolution Foundation provides an early view on where the pain will be felt most.  To borrow directly from the report:

“the crisis to date has had very different effects on living standards – considered broadly – of lower-income working-age families than it has on those of higher-income families.  In short, it has been much worse for poorer families.”

These findings are perhaps not that unexpected.  After all (and almost by definition) the poorest in society are usually much more exposed to potential financial hardship than those with greater income levels.  Yet the Resolution Foundations survey is some way more informed than others I have seen so far.

Income drops during the crisis

The report includes recent evidence gathered from a survey of more than 6,000 adults (excluding those over age 65).  This focus on the “working-age” population makes the report findings much more relevant to employers looking to support their workers in these difficult times.

Unsurprisingly the report identifies that many people have faced reductions in earnings since the start of the crisis.  And indeed the fall in income was fairly evenly shared across the income groups surveyed.  Around 37% of adults in the lowest range of working-age incomes reported falls since the start of the outbreak, compared to 35% in the higher range of incomes.  So the reduced income pain seems to be fairly uniform regardless of salary level.

A big difference

But what does separate the groupings appears to be their spending during the lockdown period.

It is generally accepted that those on higher incomes typically have a greater amount of spending power available for discretionary purchases, whereas those at the lower end of the scale spend a larger percentage of their income on essentials items.

This difference is reflected clearly in the report’s findings.  More than half (57%) of adults in the top quartile of working age family incomes have experienced falling outgoings during the crisis, compared with only 30% in the bottom quartile.

The fall in spending in both groups is of course largely due to the lockdown of the British economy.  The shutdown of most hospitality, non-food retail, leisure, and holiday sectors mean that many people have struggled to find somewhere to spend their money in the last few months.  And the cost-savings of not travelling to and from the place of work – together with many other associated costs of the usual daily routine – would have contributed further to these savings in many cases.  The report highlights that this period has been one of “enforced saving” for many.

When taken together

The report also goes on to look at the two sets of data together, to provide a more incisive view of the true financial impact for working households.  And, as I quoted in the opening of this article, it is clear that poorer households have already suffered more than their richer counterparts.

Yet it is not all bad news, across all the income ranges there were not insignificant numbers who were better-off financially throughout the crisis.  43% of highest income earners had seen their income outstrip spending, and even in the lowest income band some 18% had also seen an improvement too.

So where does this leave employers?

All of which paints a somewhat confusing picture for employers and their Human Resources (HR) departments to consider and respond to.

Most employers are very aware that they will need a fully engaged and motivated workforce to help return their organisation to full productivity as quickly as possible.  So it follows that many HR professionals are now looking to offer some cost-effective and targeted support to their workers to assist in this goal. 

But where to start when the financial outcomes of the crisis vary so dramatically, even amongst employees on similar income levels?

Financial Wellbeing may well be the solution

One option would be to introduce or enhance the employer’s Financial Wellbeing services.

A robust offering in this space will signpost workers towards some appropriate options, and provide potential solutions and support for groupings at either end of the income scale to consider.

Those struggling financially can be signposted towards ways of controlling household expenditure and reducing debt to manageable and affordable levels.  And whilst that same information is also useful for those with a new and unexpected excess of money, other options like increasing savings (perhaps taking advantage of the very generous (and still available) system of pension tax reliefs) can be better understood and utilised too.

The reality is that a strong Financial Wellbeing package will provide some useful support and assistance to employees at either end of the income spectrum in these challenging times.  And the cost to employers of providing such support services (which can be provided either face-to-face or via webinars) represents only a relatively modest spend too.

 

For more information on any of the above topics, please speak to your usual Howden Consultant in the first instance, or visit our website for other contact options. For the latest details on COVID-19 & Employee Benefits provision please visit Howden’s coronavirus hub.

(Published 22/06/20)

Steve Herbert

Steve is Head of Benefits Strategy, Howden Employee Benefits & Wellbeing, and is an award-winning thought leader on Pensions, Employee Benefits, and Human Resources issues. He is occasionally accused of making Employee Benefits interesting.

Steve Herbert

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