NIESR Press Release: Covid-19’s ‘devastating’ impact on poorest parts of society

Published: 29th July 2020

National Institute of Economic and Social Research

NIESR Press Release:  Covid-19’s ‘devastating’ impact on poorest parts of society

New research by NIESR
 

The coronavirus crisis has hit already disadvantaged regions, sectors and households most severely, according to analysis of the “devastating” impact of the pandemic to be published next week by the National Institute of Economic and Social Research (NIESR).

 

Results of a detailed analysis show that across all regions and sectors, the UK is facing a 250.4 per cent increase in destitution levels in 2020 in comparison to those of 2017, and is 133.4 per cent higher than would have been the case if there had been no Covid-19 crisis.

 

Destitution is defined as income that is so low that a household is likely to lack essential provision of shelter, food, heating, lighting, clothing/footwear and basic toiletries in the immediate future.

 

Those from disadvantaged areas and backgrounds, such as those from poorer families, industrial sectors hit by lockdown, and low-paid employees, are suffering the highest levels of destitution, said Professor Arnab Bhattacharjee of Heriot-Watt University and a NIESR Fellow, and Elena Lisauskaite, a NIESR Economist.

 

Single adult households — about one third of the population — are more likely to face a higher increase in destitution levels. There is also a higher increase in poverty among those with children, where the impact increases with the number of children in the household. The most significant increase is among single adults with two or more children.

 

London and its closely economic and socially connected regions are the most affected. The highest increase is observed in the East and West Midlands with more than a 200 per cent difference in destitution levels from what they would have been had the crisis not happened.

 

This result closely relates to sectoral effects as the hardest hit sectors are construction and manufacturing, which are both major employers in the Midlands. Both sectors were heavily affected by the lockdown leading to construction suffering from a 567.8 per cent increase in destitution levels among workers if the virus had not occurred, with manufacturing 279.4 per cent worse off. By contrast, the impact upon the finance sector is negligible, and the effects on real estate, private traded and utilities are also moderate.

 

Another region that is highly impacted by the crisis is the South East of England, with 182.7 per cent higher destitution in comparison to the non-Covid situation. This region has a high employment rate in public sector, which is facing higher levels of destitution, and is also affected by its connections to London, the epicentre of the crisis.

 

The analysis was based on a microsimulation exercise using NIESR’s Lifetime INcome Distributional Analysis (LINDA) model. By applying changes in mortality rates, unemployment rates and declines in wage income for the year 2020, the model generated a “Covid” pseudo-population, which allowed the analysts to examine differences between what would have happened without the outbreak.

 

The authors argue that the Government must continue to provide support for affected households as long-term unemployment tends to lead to lower levels of human capital, lower earnings in the future, and increases in income inequality and poverty levels.

 

It is apparent that those from disadvantaged areas and background, such as those from poorer families, most affected industrial sectors and low-paid employees are suffering greatly,” said Prof Bhattacharjee. “Policies to mitigate against these adverse impacts are the order of the day.”

 

Dr Lisauskaite said: “Beyond the Furlough scheme and assistance to small businesses, and beyond the recent changes to Universal Credit, the government must also continue to provide enhanced welfare support to the vulnerable, both directly to households and also through charitable organisations, and channels into employment for the young.

 

 

ENDS

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Notes for editors:

 

The paper is part of the forthcoming National Institute Economic Review, issue no. 253, out on Wednesday 29th July.

 

To request an advanced full copy of the paper or to arrange interviews, please contact the NIESR Press Office: press [at] niesr.ac.uk / l.pieri [at] niesr.ac.ukp.thornton [at] niesr.ac.uk / 07930 544 631 / 07941 443 781

 

The National Institute Economic Review is a quarterly journal of NIESR. NIER is published by Cambridge University Press (CUP). Founded in 1534, CUP is the world's oldest publishing house and the second-largest university press in the world.

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