Government supports have provided a vital safety net for workers impacted by the pandemic, new research shows.
A study by the Central Bank and the Central Statistics Office (CSO) suggests the income of households here would have fallen by almost 20 per cent in the second quarter of last year, when health restrictions were at their most stringent, without Covid-19 income supports and assuming no other replacement income.
In reality, they fell by just 1.7 per cent relative to the second quarter of 2019, and rose by 3 per cent year on year in the following quarter.
Finances
The study, which examined the impact of Covid-19 on household finances, said Government supports had “significantly mitigated the impact of Covid-19 on household incomes and debt sustainability”.
It found that household income in lower-income households would have fallen by 18-30 per cent in the second quarter without supports. However, with the supports, it fell by just 0.1-4.2 per cent .
Income supports were most beneficial for lower-income households in terms of the contribution to year-on-year income growth, the report found.
“This does not imply higher-income households do not avail of these supports; rather, it means that the relative contribution of the supports to the gross income of higher-income households is smaller,” it said.
Debt
The study also looked at debt sustainability, finding that households with debt, such as mortgages and/or consumer loans, saw their the debt-to-income ratios increase slightly in the second quarter of 2020 to 60.9 per cent of gross income.
If Covid-19 income supports are excluded, the rise would have been greater, to 73 per cent of household income.
Debt-to-income ratios for the most indebted households increased from 342 per cent to 376 per cent of income, the study indicated, but would have increased to 552 per cent without supports.
“The impact of Covid-19 on household incomes was most severe during Q2 2020, before recovering in Q3 2020 as restrictions eased,” the report concluded.
“One of the stand-out observations from this analysis is the extent to which Covid-19 payments – wage subsidies and pandemic unemployment payments – supported household incomes during 2020,” it said. “These supports helped households lower down the income distribution the most, but higher income households also benefited.”
