Low income families faced losing up to 30% of earnings without support – study

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Low income households would have lost between 18 per cent and 30 per cent of their earnings during the first lockdown in 2020 were it not for new financial supports, figures suggest.

Covid-19 income supports such as the pandemic unemployment payment (PUP) played a significant role in supporting households, new analysis from the Central Statistics Office (CSO) shows.

Low income and high debt households benefited the most from pandemic income supports last year, the research published on Tuesday has found.

The CSO study looked at the debt sustainability of Irish households in the first three quarters of 2020, which includes the first lockdown and the eventual reopening of society.

It found that Covid-19 income supports, such as PUP and other wage subsidy schemes, prevented significant falls in household income.

For lower income households, income would have plummeted by between 18 per cent and 30 per cent in the year to quarter two, but instead fell by between just 0.1 per cent and 4.2 per cent, it found.

That is compared to drops of between 7 per cent and 18 per cent for those in the top half of the income distribution bracket.

The median gross income fell by 1.7 per cent in the year to quarter two of 2020, when pandemic support schemes are taken into account.

Without the supports, the median household income would have fallen by an estimated 19.6 per cent in the second quarter of 2020, when the vast majority of the economy was shut down.

In the third quarter, as people began to return to work, the median income would have fallen by 5.7 per cent were it not for the income supports, the analysis found.

The pandemic supports also prevented a large rise in the debt-to-income ratios.

A slight increase in quarter two of 2020 brought the median debt-to-income ratio to 60.9 per cent of gross income.

But without pandemic supports the debt ratio would have increased to 73 per cent of household income, the report found.

The most indebted households, those in the 90th percentile, saw debt-to-income ratios increase from 342 per cent to 376.1 per cent in that period.

But without pandemic income supports, the report said the ratio would have ballooned to 552.3 per cent.

CSO statistician Brian Cahill said: “The Covid-19 labour market shock is concentrated amongst lower income households.

“Without Covid-19 income supports household incomes in the bottom half of the distribution would have fallen significantly in the year to Q2 and Q3 2020.

“Higher income households would have seen their income without supports fall to a lesser, but not insignificant, extent.”

He added: “While lower income households had the largest relative benefits from Covid-19 income supports, the households that benefited most in terms of their debt sustainability included households with high debt levels; owner-occupied households with mortgage debt; households with two or more adults with children under 18 years; and households with a reference person aged 30 to 65 years.”



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