COVID-19 labour market shocks and their inequality implications for financial wellbeing

Melbourne Institute Working Paper No. 15/20

Date: August 2020


Ferdi Botha
John P. de New
Sonja C. de New
David C. Ribar
Nicolás Salamanca


Using an online survey of Australian residents, we elicit the potential impacts of COVID-19 related labour market shocks on a validated measure of financial wellbeing. Experiencing a reduction in hours and earnings, entering into unemployment or having to file for unemployment benefits during the pandemic are strongly and significantly associated with decreases in financial wellbeing of around 29% or 18 points on the financial wellbeing scale of 0-100, despite various government measures to reduce such effects. Unconditional quantile regression analyses indicate that the negative COVID-19 labour market effects are felt the most by people in the lowest percentiles of the financial wellbeing distribution. Counterfactual distributional analyses and distribution regression indicate a shifting of the financial wellbeing distribution leftwards brought on by those suffering any of the above-mentioned labour market shocks, indicating potential dramatic increases in financial wellbeing disadvantage and inequality.

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