Implications of COVID-19 labour market shocks for inequality in financial wellbeing

Australia’s economy abruptly entered into a recession due to the COVID-19 pandemic of 2020. Related labour market shocks on Australian residents have been substantial due to business closures and social distancing restrictions. Government measures are in place to reduce flow-on effects to people’s financial situations, but the extent to which Australian residents suffering these shocks experience lower levels of financial wellbeing, including associated implications for inequality, is unknown. Using novel data we collected from 2078 Australian residents during April to July 2020, we show that experiencing a labour market shock during the pandemic is associated with a 29% lower level of perceived financial wellbeing, on average. Unconditional quantile regressions indicate that lower levels of financial wellbeing are present across the entire distribution, except at the very top. Distribution analyses indicate that the labour market shocks are also associated with higher levels of inequality in financial wellbeing. Financial counselling and support targeted at people who experience labour market shocks could help them to manage financial commitments and regain financial control during periods of economic uncertainty.