Who’s hit hardest by the COVID-19 economic shutdown?

Monday, May 25, 2020, 07:29 PM | Source: Pursuit

By Roger Wilkins

Who's hit hardest by the COVID-19 economic shutdown?

All Australians have, to some extent, been negatively impacted by the COVID-19 pandemic but the economic effects haven't been uniform, and some have been hit much worse than others.

People directly reliant on incomes from industries that have been prohibited from operating, or at least severely constrained, will of course be among hardest hit. This is despite the Government's fiscal stimulus measures like the broadened JobSeeker Payment, the Coronavirus Supplement and the JobKeeper Payment.

Hospitality has been one of the hardest hit industries which means young workers are particularly exposed. Picture: AAP

So what are the circumstances and characteristics of those of us most vulnerable to the economic fallout from COVID-19 and what should we do about it?

To understand this, my new research, published by the Melbourne Institute, used the latest Household, Income and Labour Dynamics in Australia (HILDA) Survey data to examine the characteristics and circumstances of individuals and households likely to have been worst affected based on their industry of employment.

Compiled by the Melbourne Institute, HILDA is an annual longitudinal survey of the economic and social wellbeing of Australian households going back to 2001.

The research breaks down the hardest hit industries into two categories – those directly affected industries and secondarily affected industries.

Directly hit industries are those which were largely forced to cease operations as a result of public health measures. These include sectors like hospitality, air travel and tourism, creative arts and entertainment, and sports and recreation.

Secondarily hit industries are those which, while still able to continue operating, experienced precipitous declines in business. These include store-based retail, tertiary education, mechanics and motor vehicle retailing, and accommodation.

CHARACTERISTICS OF WORST-AFFECTED WORKERS

In total, approximately 3.5 million Australian workers, or 28 per cent of all workers, are in these hard hit industries. Additionally, 17 per cent of people aged 15 to 66 live in a household in which the main earner is employed in one of these industries.

Women are more exposed to vulnerable industries than men. Picture: Getty Images

The data shows that women are more exposed than men to these industries. They represent 53 per cent of people employed in directly affected industries and 65 per cent of workers in secondarily affected industries.

Younger workers are also more vulnerable. Half of the workers in directly affected industries are young people aged 15 to 24. They also tend to be slightly over-represented in secondarily affected industries.

In part, reflecting this young age demographic, lots of the Australians impacted tend to have low educational attainment.

Nearly 60 per cent of workers in directly affected industries have no post-school qualifications, compared with 34 per cent of workers in secondarily affected industries, and 28 per cent of workers in the less affected industries.

It is also clear through the survey data that single people and single parents are much more vulnerable economically to the fallout from the coronavirus restrictions than other family types.

We also see that workers in the directly and secondarily affected industries have lower average wages than workers in the other less affected industries. Workers in directly hit industries have particularly low average wages.

Mapping the impact

Significantly, there is considerable regional variation in people's exposure to the directly and secondarily affected industries.

Single parents are much more exposed to hard hit industries. Picture: Getty Images

Workers in directly affected industries are slightly more likely to live in major urban areas, and slightly less likely to live in non-urban regions.

The Australian Capital Territory, Northern Territory and urban Western Australia outside of Perth stand out as having relatively small proportions of employed people working in these industries. These areas also have very low proportions of people aged 15 to 66 living in households that are vulnerable to hard hit industries.

Urban South Australia, inclusive of Adelaide, also has relatively low exposure.

At the other end of the spectrum, urban Queensland outside of Brisbane, urban Tasmania and urban New South Wales outside of Sydney all have relatively high proportions of their workforces employed in hard hit industries, and also have relatively high proportions of people aged 15 to 66 living in vulnerable households.

Most Vulnerable are already disadvantaged

The defining trait of people in households vulnerable to these hard hit industries is that they tend to be in more socio-economically disadvantaged circumstances.

They live in lower socioeconomic status regions, and are more likely to be renting their home – in particular, they are more likely to be renting social housing.

Some 47 per cent of people in households vulnerable to directly affected industries rent their home, compared with 29 per cent of people in households that aren't exposed to directly and secondarily affected industries.

Australian Prime Minister Scott Morrison should be planning to extend the government's support measures, and ensure they are targeted to the worst affected. Picture: Getty Images

People in vulnerable households also have lower average incomes ($A43,176 for those in directly vulnerable households versus $A58,502 for those in non-vulnerable households), lower average wealth ($A291,767 versus $A619,334) and relatively little cash in the bank ($A10,026 versus $A17,646).

Further, they are considerably more likely to be in poverty, experience financial stress, and have difficulty raising $A3,000 at short notice, which is a measure of financial security.

It is also evident is that people in households vulnerable to hard hit industries have much higher rates of poor general health and poor mental health, and higher rates of disability.

In short, those most exposed to the economic shutdown are also those least able to cope with it.

Targeted support is needed

It remains to be seen how long restrictions on economic and social activity will remain in place and, therefore, how long-term their effects will be.

Nevertheless, it seems inevitable that additional government income and other support measures will be needed well beyond September or October of this year, when many of the current supports are scheduled to expire.

The evidence presented here is a reminder that support needs to be particularly focused on socio-economically disadvantaged members of our community.

Moreover, as has been noted by others, a major challenge will be improving the labour market prospects of young people, whose employment has been disproportionately affected by the economic shutdown.

Banner: Getty Images