Rich get richer during coronavirus lockdown
Falls in income have been fairly even across the working-age spectrum but when it comes to spending, the better off have slashed their outgoings, helping them add to their buffers, research from a leading think tank reveals.
Lower earners have been hardest hit by the coronavirus pandemic, with 37% of adults in the bottom 40% of working-age incomes seeing a fall in wages since the outbreak began.
While this is fairly even with 35% of adults earning the top 40% of incomes seeing their pay decline during this time, when it comes to assessing outgoings, the latter have all but stopped their discretionary spending.
As such, the Resolution Foundation revealed that 57% of adults in the top fifth of working-age earners have experienced falling outgoings, compared with 30% in the bottom quintile.
This ‘enforced saving’ has arisen as large sections of the economy have closed to business and the falling levels of outgoings reflect the reduced opportunities to spend on non-essentials.
When the spending data is considered alongside the income fall, the think tank said this showed a “particularly concerning distributional pattern”.
This is because 38% of those in the top earning bracket have experienced no income hit, in addition to a reduction in spending “implying a strengthening of the household budget”.
When it comes to the bottom earners, just 12% found themselves in this position as a greater proportion of their spending goes towards essentials.
The report authors noted: “This means that, despite income changes being distributed fairly evenly, the living standards implications of the early phase of this crisis remain much more serious for lower-income, working-age families than higher-income ones.
“This conclusion is reflected in survey respondents’ assessment of their financial situations. For example, respondents’ views of changes in their ability to manage financially show a much clearer gradient across income quintiles than do changes in income. Despite a deep recession being underway, respondents in the top quintile were as likely to say that their personal financial situation has improved as worsened (23% compared to 22%).”
As part of the Resolution Foundation’s survey of 6,000 working age adults, it also revealed that lower earners were more likely to have seen pay, hours or jobs cut, or been furloughed than their middle and higher earning equivalents.
Turning to the prospects for the future, the think tank found that workers across the income spectrum expect to see additional income falls over the next three months.