Covid-19, low incomes and poverty

Introduction

This summary provides an overview of recent evidence relating to:

Covid 19, low incomes and poverty.

About the evidence presented below

We searched for academic research and grey literature using a wide range of search terms including: Covid-19, poverty, low incomes, deprivation, unemployment, health inequalities, housing, school closures, food poverty, fuel poverty, benefits system.

As Covid-19 is a new phenomenon the quality of evidence in the available literature is relatively low, but does contain valuable observations for professionals working in social care.

Accessing resources

We have provided links to the materials referenced in the summary. Some materials are paywalled, which means they are published in academic journals and are only available with a subscription. Some of these are available through the The Knowledge Network with an NHS Scotland OpenAthens username. The Knowledge Network offers accounts to everyone who helps provide health and social care in Scotland in conjunction with the NHS and Scottish Local Authorities, including many in the third and independent sectors. You can register here. Where resources are identified as ‘available through document delivery’, these have been provided to the original enquirer and may be requested through NHS Scotland’s fetch item service (subject to eligibility).

Where possible we identify where evidence is published open access, which means the author has chosen to publish their work in a way that makes it freely available to the public. Some are identified as author repository copies, manuscripts, or other copies, which means the author has made a version of the otherwise paywalled publication available to the public. Other referenced sources are pdfs and websites that are available publicly.

Background

In recent years the United Kingdom has arguably seen a shift away from the state to the individual when it comes to social and economic risk. Cuts to benefits, insecure employment, reduced entitlements, have seen government support around illness, unemployment, and raising children eroded.

Before the Covid-19 outbreak around one in five people in Scotland were living in poverty. About 20% of people (and 25% of children) are living in relative poverty after housing costs in Scotland (Scottish Government, 2020a). Real incomes for the poorest were higher in 2004-05 than in 2018-19 (Resolution Foundation, 2020; Scottish Government, 2020a).

Three million people in the UK are behind with at least one key household bill - gas, electricity, water, rent, mortgage or council tax (University of Birmingham, 2020).

The Marmot review in England highlighted the loss of physical and community assets, cuts to resources and funding, and reduced community, voluntary and public services. These combined have damaged health and widened inequalities (Health Foundation, 2020).

So going in to this crisis, many people were already vulnerable to shock and without the means to cope with a change in circumstances (Mental Health Foundation, 2020; Power, 2020).

Covid-19, low incomes and poverty

The pandemic is having as profound an impact on the economy and society, as it is on health. Unemployment has increased, key sectors of the economy are at risk, and the social security system can’t provide the support needed by many people (Joseph Rowntree Foundation, 2020). And while we hear that the virus does not discriminate, that we are all in this together, there are groups of people the virus will have a much greater impact on.

Research from flu epidemics shows poverty and inequality can exacerbate rates of transmission and mortality (Improvement Service, 2020a).

Early indications in Scotland suggest that Covid-19 and the measures to combat it - school closures, social distancing and isolation, home working - while understandable and necessary, will disproportionately affect people living on low incomes, with low wealth, in deprived areas, and in material deprivation (Childrens Society, 2020; Health Foundation, 2020; Poverty Alliance, 2020).

The largest economic shocks have fallen on those least able to mitigate - BAME individuals, single parents, the lowest paid (Health Foundation, 2020; Nuffield Foundation, 2020). Given inequalities already exist for these groups in the UK, they are likely to widen during and after lockdown (Improvement Service, 2020b), alongside a significant rise in poverty and household debt (University of Birmingham, 2020).

Those living with socio-economic disadvantages and inequalities are more likely to experience poorer health, housing and education, lower income, and lack of access to quality outdoor space (Improvement Service, 2020a), all things most immediately affected by the Covid-19 pandemic.

People in poverty face more difficulties in the face of rising costs and income loss that will come as a result of Covid-19. They are unlikely to have savings to cover unplanned costs or gaps in income, and more likely to have insecure jobs, with fewer rights and employee benefits.

What is clear from the evidence is the way poverty, low income and inequalities cut across all aspects of society when it comes to Covid-19. So while this evidence outline broadly breaks down affected groups and areas, it’s important to recognise how interconnected they all are.

Who is most affected?

Poorer households and communities start from a worse position when it comes to resilience and mobilising support than those with higher incomes, and in more affluent communities. Poorer groups also have additional barriers as those who traditionally support them - friends and family, care groups and charities - are also in crisis, limited or unavailable (Improvement Service, 2020a).

Families and children

The closure of schools places an additional strain on families who rely on the social and financial support schools provide (Nuffield Foundation, 2020).

Parents will have to deal with an unexpected need to balance childcare responsibilities, education, and if still working they are less likely to be able to work from home allowing a degree of flexibility around childcare.

Low income families already struggling will be hit by additional costs of children being at home, while potentially experiencing reduced income, unemployment, or being unable to work due to these childcare responsibilities (Childrens Society, 2020; CPAG, 2020a).

Combined with a lack of understanding around furlough provision for employees with caring responsibilities, there is a real danger that those already struggling will be further impacted (Close The Gap, 2020; Douglas, 2020).

The vast majority of lone parents are women, and are more likely to be living in poverty, which is particularly concerning as a third of lone parents work in shutdown sectors (Close The Gap, 2020; Improvement Service, 2020a).

All of this is likely to be worsened by the loss of support from immediate and extended family due to isolation and lockdown.

Previous economic recessions have increased levels of child poverty, which has long-lasting consequences for children's health, wellbeing, and learning outcomes (Van Lancker, 2020). And in Scotland key policy drivers designed to reduce levels of child poverty - such as free early learning and childcare, and the Scottish Child Payment - have been significantly impacted by Covid-19 (Van Lancker, 2020).

Carers are often already living on lower incomes so anything that stretches, reduces or removes it altogether will cause additional hardship for them and those they care for. Again, these are people further hit by reduced or unavailable support services such as day centres (Improvement Service, 2020a).

Women

Poverty in Scotland already has a gendered aspect to it, with women more likely than men to be in poverty, to experience in-work poverty, and to experience persistent poverty. The Covid-19 pandemic and the measures to deal with it are also disproportionately affecting women. Women are more likely to be hit by the current disruptions to the labour market, by unemployment, reduced working hours and furlough.

Two thirds of those earning less than the living wage are women. Despite support from the job retention scheme, a 20% salary reduction could easily push many into poverty (Close The Gap, 2020).

Women are also more likely to work in areas at a higher risk of exposure to and contracting Covid-19 - such as health, social care, and cleaning (Poverty Alliance, 2020).

Social isolation policies, and thus the current lockdown, increases a women’s vulnerability to domestic abuse, with financial dependence and poverty as primary risk factors (Improvement Service, 2020a).

Considering the likelihood it will exacerbate and entrench existing gender inequalities there is a need to maintain focus on the gendered impact of the crisis (Poverty Alliance, 2020).

Black and ethnic minority groups

Structural inequalities put Black and Ethnic Minority (BAME) groups at much higher risk of illness from Covid-19, and facing harsher economic impacts from government measures to deal with the virus.

They are among the poorest socio-economically, with households twice as likely to live in poverty and twice as likely to be unemployed than their white counterparts.

When employed it is more likely to be in roles most affected by the pandemic, the low skilled and low paying occupations, including those with zero hour contracts (Improvement Service, 2020a). These roles, likely to be classed as key workers, are often in areas where there is higher risk of exposure, such as cleaning, public transport, health and social care (Social Metrics Commission, 2020).

New research also suggests that BAME individuals are 40% less likely to benefit from employee protection such as furloughing (Hu, 2020).

BAME families tend to be larger on average, which places additional stresses on space within the home, particularly if living in poor standard or cramped housing, and on bills and finances as a result.

How it affects the poorest

Those already living with socio-economic disadvantages and inequalities, made worse by Covid-19 and the necessary government responses, are those least able to cope with it.

While this review broadly breaks down those most likely to be at risk, and the key ways in which it affects the poorest, it’s essential to look at all aspects as intersecting, rather than separate.

Employment

The growth of informal employment and the gig economy has created a large group of people who are especially vulnerable - usually without sick pay, on zero hours contracts, or self-employed, and often lacking the safety net of savings (CPAG, 2020b; Douglas, 2020; Patel, 2020).

Many in-work households were already struggling and in poverty, and this will be made worse by job losses, and people having to take time off sick or to self-isolate. An estimated 18% of the total workforce have seen their hours cut, been laid off, or made redundant due to Covid-19 (Standard Life Foundation, 2020; University of Birmingham, 2020).

Job losses have risen, and in August when employers will have to contribute more to the cost of furlough, a further significant wave of redundancies from struggling businesses is expected (Close The Gap, 2020).

The low-paid are seven times more likely than high earners to work in a sector that has shut down. One in three of the bottom 10% of earners worked in the worst-hit sectors, against one in twenty of those in the top 10%. These closures disproportionately affect those under 25 and women, who make up the majority of retail and hospitality workers (IFS, 2020).

Research by the Fraser of Allander Institute (Improvement Service, 2020b) shows those employed in the tourism and hospitality sector - those hardest hit by Covid-19 - already face precarious employment, the lowest hourly pay of any sector, the lowest hours worked per week, and are more likely to be in poverty. The poverty rate for households with a worker in these sectors is 28%, compared to the Scottish average of 19%, with child poverty at 41% amongst these households, compared to 24% across Scotland.

Four in ten of those working in retail and wholesale are paid less than the real Living Wage, and 80% of people working in hospitality reported that they were already struggling with their finances before going into lockdown. Typical pay for workers in shutdown sectors is less than half that of workers in jobs that are able to be done from home (IFS, 2020).

Home working

Less than one in ten of the lower half of earners say they have the option to work from home during the lockdown, compared with half of the highest earners (Understanding Society, 2020). Many low earners have also been classified as key workers, particularly in food and retail, with option to furlough or work from home.

Combined with the need to travel on public transport, the risk of exposure is increased, and with some low earners also living in cramped housing conditions as is the risk to spreading the disease to others in their household (Understanding Society, 2020).

In addition to this Poverty Alliance member organisations have reported people being asked to go into their workplace despite not being an essential or key worker (Poverty Alliance, 2020).

Finances

Many of the 60% of adults living in poverty in Scotland who are in working households have seen a cut in income and hours (Poverty Alliance, 2020).

In the first three weeks after lockdown it was estimated a quarter of all households in the UK lost either a substantial part, or all of their earned income due to Covid-19.

Key findings from the Standard Life Foundation (2020) report show:

3.1 million households in serious financial difficulty
4.8 million households struggling to make ends meet
7 million losing a significant part of their earnings
7.7 million households anticipating some fall in income in the next 3 months
10.4 million households potentially exposed financially

Many would already have financial problems prior to the pandemic, putting those already experiencing poverty, and those who work in lower-paying and vulnerable sectors, at greater risk.

Benefits and support

There are gaps which many low-paid workers can fall through.

If employers are not topping up the remaining 20% of furloughed workers’ wages it can mean a sizable cut in income (Poverty Alliance, 2020), particularly with no freeze on other payments.

Those sick or self-isolating may lose pay. Many workers (the self-employed and part-time for example) do not qualify for sick pay, and even when they do rates are among the lowest in Europe (Improvement Service, 2020a).

Covid-19 has had a significant impact on the delivery of social security across the UK, with delays to processing, appeals, tribunal work, and new policy. Support services are running at lower capacity while demand has increased significantly. The closure of libraries and community centres further removes access to online support for those without internet access at home (Improvement Service, 2020a).

Housing

One of the biggest contrasts in lockdown is between those with affordable, secure, good-quality homes and gardens, and those with high rents, insecure tenancies and limited or no access to outdoor space (Health Foundation, 2020).

Economically disadvantaged people are more likely to live in poor quality, overcrowded accommodation, often sharing bedrooms and with limited access to outdoor space (Patel, 2020). Cuts to housing allowance and the bedroom tax have forced more people to live in cramped accommodation (The Guardian, 2020).

Aside from the effects of lack of space and security on both mental and physical wellbeing, it has implications for home working and schooling, and also allows the disease to spread more easily.

Renters

Renters have been worst hit.

Four in five social housing tenants are working in sectors directly affected by the lockdown, unable to work from home, or with school-age child care responsibilities. This compares to only half for homeowners (University of Birmingham, 2020).

The average renter spends around 30% of their income on housing - compared with 17% of homeowners – so are more likely to be struggling to meet payments, increasing their risk of eviction when current measures which suspend evictions are lifted. The only other government protection offered around housing has been payment holidays to mortgage holders, but not to tenants. There are still reports of illegal evictions and threats of eviction from private landlords (Poverty Alliance, 2020).

Fuel poverty

Many low income households were already struggling to power their homes (Improvement Service, 2020a) and social isolation and lockdown during Covid-19 has worsened fuel poverty.

Alongside the regular cost of being at home all day (including heating, lighting and appliances) there are additional costs from home working. The average UK energy bill is expected to increase by £32 a month during the lockdown. Prepayment customers, prevalent among the lower paid, and mostly single parents with dependent children, the unemployed, younger people, and renters will be hit hardest (Citizens Advice Scotland, 2020).

There are serious health implications of not being able to eat, power or heat a home properly, with or without a Covid-19 infection.

Health

The link between income, poverty and health is well established - more money generally means better housing, diet, less stress, access to wellbeing and care resources (Douglas, 2020). So there is not only correlation between poverty and exposure to the virus, but also to health outcomes (Patel, 2020).

Infection

People facing the greatest deprivation experience a higher risk of exposure to Covid-19 (Science Media Centre, 2020; Understanding Society, 2020) because they are more likely to:

be key workers and unable to work from home
use public transport
need to go out to shop
live in deprived, densely populated areas

People with underlying health conditions are more at risk of severe outcomes if they contract the virus. Deprived communities have higher rates of (and death from) heart and lung disease, asthma and diabetes. There is also emerging evidence that hypertension and diabetes are risk factors for death from Covid-19, and again poverty is a risk factor for these conditions (Improvement Service, 2020a; Patel, 2020).

Deprivation has a huge impact on Covid-19 mortality. People living in the most deprived areas of Scotland are 2.3 times more likely to die with Covid-19 than those living in the least deprived areas. Men from the poorest areas have been even worse affected, with a death rate of 109.2 per 100,000 compared with 43.2 in the richest areas. There are similar figures from England and Wales (Global Citizen, 2020b; Understanding Society, 2020)

As more people are pushed into poverty, or deeper into poverty, inequalities are likely to rise.

Food

Those at higher risk of poverty - people with children, disabled people, BAME households, larger families - are at risk of food insecurity.

Early research suggests the number of food insecure adults in the UK quadrupled after the lockdown. This is more than likely a result of furlough and unemployment, combined with the effects of isolation, closures and distancing in accessing shops and support (Poverty Alliance, 2020; Poverty and Inequality Commission, 2020; Understanding Society, 2020).

A recent survey from Citizens Advice Scotland suggests worries about having enough food are extensive, and new for a lot of people (Poverty and Inequality Commission, 2020).

Foodbanks

Demand for food banks has risen over the last five years, and pressures due to Covid-19 have further highlighted food inequalities.

Research from the Food Foundation in April indicates 1.5 million people in Britain are frequently going a day without food due to lack of money and access (Global Citizen, 2020a). The last two weeks in March saw an 81% increase in demand for emergency food parcels from the Trussell Trust compared to the previous year. The Independent Food Aid Network reported a 60% increase in food bank use between February and March (Improvement Service, 2020b).

Some food banks serving low-income communities have already closed due to food shortages (Global Citizen, 2020a; University of Birmingham, 2020).

School meals

School closures will make food insecurity worse. For many poorer students it means missing out on a daily, healthy meal (Global Citizen, 2020a).

The Trussell Trust reported a 122% rise in emergency food parcels for children during the second half of March 2020, compared to the same period in 2019 (Understanding Society, 2020).

Research shows that food insecurity (including irregular or unhealthy diets) is associated with lower educational achievements and detrimental to the physical and mental wellbeing of children (Van Lancker, 2020).

There have been responses from governments across the UK to continue supporting children on free school meals, but not all of the approaches have worked properly, or been welcomed.

In England the food voucher scheme has had problems with delays and distribution (Global Citizen, 2020a). In Scotland, the preferred cash-based response isn’t standard, with some local authorities requiring families to pick meals up from schools, and others providing vouchers that limit choices to particular shops, or can’t be used online. All of which create difficulties for those in receipt (Improvement Service, 2020a; Poverty Alliance, 2020).

Education

School closures adversely affect low income households, and single parent families (more often women) particularly, with consequences for both children and adults.

The gap in mathematical and literacy skills between children from lower and higher socioeconomic backgrounds often widens during school holiday periods (Douglas, 2020; Van Lancker, 2020).

Home schooling is much more difficult for low income households. Parents are more likely to be poorly educated themselves, so may struggle to assist their children with learning (Improvement Service, 2020a). Other housing conditions create problems for low-income households, such as lack of indoor or quiet space for studying (Van Lancker, 2020).

Digital exclusion remains an issue for poorer families without access to the internet or computers (Childrens Society, 2020; Iriss, 2020) which is an issue for both learning and communication.

Targeted support for children from low-income households could help close the learning gap that is likely to occur (Van Lancker, 2020), including adapting lessons for those without digital capabilities, or providing the access and devices needed for home schooling.

Transport

People on low incomes are less likely to own a car, so are more reliant on public transport, with women more likely to use public transport generally.

The reductions and closures of public transport services creates problems for those who still have to travel to work, take children to school or childcare, shop, or access services such as medical appointments and food banks (Improvement Service, 2020a).

With a reliance on public transport also comes an increased risk of exposure to and contracting the virus.

Digital exclusion

Covid-19 has highlighted a clear digital divide between those who have internet access and digital technologies and those who don’t. This presents clear inequalities across most aspects of society such as work, education, shopping, communication, all areas which are of increased importance during the pandemic.

The socially isolated tend to have more limited access to, and use of, the internet, devices and online services. The economically disadvantaged also have limited access but are more likely to try and seek out access in places like libraries. Those who fall under both categories suffer most disadvantage and have little or no use at all. Studies show that overall non-users are increasingly older, less educated, more likely to be unemployed, disabled, and socially isolated (Iriss, 2020).

Long-term

The governments across the UK have introduced extensive (but temporary) measures like the job retention scheme, and changes to benefits, to help those in need. The Scottish Government has made money available to local authorities, charities, businesses and community groups to enable them to support those who are most vulnerable (Improvement Service, 2020b).

But the pandemic has highlighted stark inequalities across society, and will likely widen them, particularly for those most economically vulnerable.

In the longer term, UK policymakers should expand their definition of vulnerable to include social factors as risks for Covid-19, and legislate to improve social welfare (Patel, 2020).

Those made unemployed or with reduced income will likely continue to suffer, particularly if the labour market continues to struggle, and evidence suggests job vacancies have already reduced by around 60% (Improvement Service, 2020b).

For those less financially resilient, choices made now will potentially have far reaching consequences, if for example they’re taking on high cost debt, borrowing money from loan sharks, gambling, and selling assets to raise money (Improvement Service, 2020a).

Solutions

The solutions generally start by recognising the economic disadvantage and greater risk faced by some groups and communities (Health Foundation, 2020). Millions of households were in poverty before the pandemic, and millions more will be without policy changes (Joseph Rowntree Foundation, 2020; Power, 2020).

Recommendations for improved or ongoing support focus on a number of areas, particularly the benefits system and government support.

The benefits system

Living in poverty can have long-lasting negative implications for people’s health. The Covid-19 crisis has highlighted the need for a strong social security system to protect people from deprivation, and safeguard health and wellbeing in the short and long term (Health Foundation, 2020; Poverty Alliance, 2020).

For children and families the Government should ensure free school meal vouchers continue, and are easily and quickly available and accessible to use, regardless of a family’s immigration status (Childrens Society, 2020).

There have been arguments for ending or suspending benefit caps and limits, or setting benefits rates (particularly child benefit) at a level that provides an adequate standard of living.

According to the Child Poverty Action Group, a £10 child benefit uplift would reduce child poverty by around five percent, and household poverty by one to two percent. This would achieve a bigger reduction than the £20 increase in universal credit and working tax credit the Chancellor has already introduced (Health Foundation, 2020; University of Birmingham, 2020).

Ending the five week wait for Universal Credit and making advance payments cash grants, not loans, would help prevent those most vulnerable accumulating further unsustainable debt (Childrens Society, 2020; Power, 2020).

Citizens Advice (2020) argue for legislating provision of Statutory Sick Pay (SSP) at 80% of wages for people earning less than the Lower Earnings Limit, and temporarily increasing SSP to support people facing sustained drops in income.

Local authorities

Some see local authorities having a greater role to play, for example using central government funds to offer crisis grants, and rent and council tax payment holidays to those who need it (University of Birmingham, 2020).

The Scottish Government is making £30m in funding available to local authorities to work with community groups and businesses helping families struggling to access food during the coronavirus pandemic (Improvement Service, 2020a).

Housing

As renters are most at risk during the pandemic there is a need to support tenants beyond the current protections (Poverty Alliance, 2020; University of Birmingham, 2020), for example:

increasing Local Housing Allowance to mitigate against rises in rent arrears
providing central government funds to local authorities, housing associations and landlords for rent payment holidays
legislating to suspend no-fault evictions for private renters

The wider aspects of employment

Aside from dealing with an increase in the unemployment rate and the knock on effects of that, there is also a need to look at the wider aspects of employment, with the pandemic raising questions around the people and jobs the economy rewards and protects (Health Foundation, 2020). Greater consideration could be given to job security, job design, management practices, and the working environment, alongside pay.

The short term fix for those falling behind with bills or repayments is for the government, regulators and creditors to work together and ensure people are protected.

Longer-term there are suggestions for more fundamental changes. The concept of a universal basic income is seen by some as a way to build both a more financially stable economy and resilient system of social security (University of Birmingham, 2020).