Household incomes would have collapsed without financial support such as PUP: study

HOUSEHOLD incomes would have collapsed due to Covid-19 without the State stepping in with financial supports.

Without the PUP (Pandemic Unemployment Payment) and wage subsidies, the typical income of households would have fallen by around 20pc, according to the Central Statistics Office (CSO).

What the CSO calls median income would have seen its largest fall in the April-to-June period of last year when compared with the same quarter the previous year.

“Without Covid-19 income supports, median income would have fallen by an estimated 19.6pc and 5.7pc in the year to quarter two and quarter three of 2020, respectively, assuming no other replacement income such as pre-existing supports like Jobseekers’ Allowance and Benefit,” it said in a new study of the impact of the pandemic on household incomes and debts.

When the restrictions were tightest in the April-to-June period last year, the gross income of a typical household fell by 1.7pc when compared with the same period in 2019.

But median gross income rose by 3pc in the year to the July-to-September period, when restriction began to ease.

The hit to pay was more severe for lower-income households, which have been predominantly affected by the repeated lockdowns.

Without the Government supports, low-income households’ pay could have fallen by up to 30pc during the first lockdown, the CSO said.

Debt

There was also a slight increase in the cost of servicing debt for households that owe money on mortgages and other loans.

The debt relative to income would have risen to unmanageable levels for the most indebted households without the Covid-19 supports, according to Impact of Covid-19 on the Debt Sustainability of Irish Households Q3 2020.

A separate report from the Central Bank, put together in cooperation with the CSO, has reached similar conclusions.

Covid-19 Government supports have significantly mitigated the impact of Covid-19 on household incomes and debt sustainability, according to The Impact of Covid-19 on the Incomes and Debt Sustainability of Irish Households.

The study found many households would have been eligible for pre-existing supports, such as Jobseekers’ Allowance, but the basic level of these supports is lower than that of supports put in place for Covid-19.

The findings indicate wage supports are most beneficial for lower-income households in terms of the contribution to year-on-year income growth.

This does not imply higher-income households do not avail of these supports.

Instead, it means the relative contribution of the supports to the gross pay of higher-income households is smaller.

The two reports come after survey findings that the pandemic will leave serious financial scarring, with the economic fallout expected to last for up to two years, many households believe.

A KBC Bank survey found this week that more than half of consumers feel Covid-19 has had a negative impact on their financial circumstances.

This is compared with just 12pc who saw an improvement over recent months.

The results from the KBC Bank Consumer Confidence Index for February are an indication that Covid-19 will have a lasting financial legacy.

Many households are spending more on costs such as heating and electricity at a time when their incomes are down.