Households with fewer savings are more vulnerable to the potential economic loss following Covid-19 confinement measures, according to a new JRC analysis.
Low-income workers, younger adults and those working in the construction, accommodation and food sectors in particular are disproportionately at risk of not being able to sustain their consumption level, pay their rent or reimburse their mortgage unless they receive financial assistance.
Following the COVID-19 crisis, policy makers in almost all member states have implemented confinement measures that limit economic and social activities.
While necessary to contain the spread of the virus, these measures directly translate into income or job loss for some households. The availability of liquid savings is an essential buffer to endure a lockdown and avoid falling into poverty.
This JRC study helps to identify vulnerable groups of households in need of financial support.
The analysis provides evidence of household financial resilience capabilities and economic loss exposure risks, based on an analysis of financial buffers. JRC experts considered:
- the share of households with less than 1000 euros (or equivalent) in liquid savings across countries;
- how this share is distributed across income and age groups;
- the size of the buffer stock of savings in terms of gross monthly income that households have at their disposal and its distribution across income and age;
- the sectors of the economy in which household heads are employed.
The authors found that in most EU countries, the fraction of households with relatively low savings is at least 20% of the population.
The fraction of households with zero or negative liquid assets is particularly sizeable in Italy, Cyprus and in Central and Eastern Europe.
They also found that the lower income groups and the younger age groups are particularly vulnerable to being left without any assets as they have smaller buffers of savings, if any.
Households working in construction, wholesale and retail trade and in the accommodation and food services sector are also amongst the most vulnerable as they tend to have accumulated smaller financial buffers and might suffer from a lockdown of these sectors.
The JRC study’s conclusions are preliminary at this stage. The assessment of the COVID-19 crisis across different countries is a complex endeavour.
It depends not only on the liquid resources available to the private sector, but also on the different provision of public services and on the generosity of pensions, on the degree of redistribution, on the presence of unemployment benefits and on other automatic stabilisers.
Finally, the effectiveness of financial buffers also depends on the extent of available in-kind benefits, for example, free health care and childcare or training opportunities that some EU countries offer.
The evidence for the analysis is provided by the recently published 3rd wave of the Household Finance and Consumption Survey, conducted by the national central banks of the Eurosystem and a number of statistical institutes.
The HFCS collects household-level data on households’ finances and consumption for all euro area countries and Croatia, Hungary and Poland. The fieldwork took place for most countries in 2017. Anonymised microdata from the third wave was made available to researchers in March 2020. The 2017 data for Spain are not published yet
Financial buffers of households in the wake of the COVID-19 crisis
- Publication date
- 17 June 2020