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COVID-19 labour market shocks and their inequality implications for financial wellbeing

Author

Listed:
  • Ferdi Botha

    (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne; ARC Centre of Excellence for Children and Families over the Life Course)

  • John P. de New

    (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne; ARC Centre of Excellence for Children and Families over the Life Course)

  • Sonja C. de New

    (ARC Centre of Excellence for Children and Families over the Life Course Centre for Health Economics; Monash University RWI Research Network Institute of Labor Economics (IZA))

  • David C. Ribar

    (Department of Economics, Georgia State University; Institute of Labor Economics (IZA))

  • Nicolás Salamanca

    (Melbourne Institute: Applied Economic & Social Research, University of Melbourne; ARC Centre of Excellence for Children and Families over the Life Course, Institute of Labor Economics (IZA))

Abstract

Using an online survey of Australian residents, we elicit the potential impacts of COVID-19 related labour market shocks on a validated measure of financial wellbeing. Experiencing a reduction in hours and earnings, entering into unemployment or having to file for unemployment benefits during the pandemic are strongly and significantly associated with decreases in financial wellbeing of around 29% or 18 points on the financial wellbeing scale of 0-100, despite various government measures to reduce such effects. Unconditional quantile regression analyses indicate that the negative COVID-19 labour market effects are felt the most by people in the lowest percentiles of the financial wellbeing distribution. Counterfactual distributional analyses and distribution regression indicate a shifting of the financial wellbeing distribution leftwards brought on by those suffering any of the above-mentioned labour market shocks, indicating potential dramatic increases in financial wellbeing disadvantage and inequality.

Suggested Citation

  • Ferdi Botha & John P. de New & Sonja C. de New & David C. Ribar & Nicolás Salamanca, 2020. "COVID-19 labour market shocks and their inequality implications for financial wellbeing," Melbourne Institute Working Paper Series wp2020n15, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2020n15
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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