Robert Joyce

This report examines how living standards – most commonly measured by households’ incomes – were changing in the UK up to approximately the eve of the current COVID-19 crisis, using the latest official household income data covering years up to 2018–19.

Much of the debate about the impacts of the COVID-19 pandemic, our responses to it, and the longer-term legacy that it will leave has quickly become a discussion about various forms of inequality.

Journal article | Covid Economics: Vetted and Real-Time Papers

At this event, IFS researchers discussed some of the ways in which policy should rise to the challenge of getting people back to work safely and productively.

The COVID-19 pandemic has led to unprecedented social distancing measures around the world to contain the spread of the virus. The UK has, like many countries, effectively closed down entire sectors of its economy and severely limited activity in many other sectors. This curtailing of activity is likely to lead to a sharp recession.

On the eve of the economic crisis caused by the public health response to coronavirus, around 76,000 working-age families were subject to the benefit cap. The cap means that most of these families, and some of those who have since lost employment during the crisis won’t benefit at all from the temporary increases in benefits announced by the Chancellor. The cap provides a strong financial incentive for families to move into paid work or to move to cheaper housing; but this is less important, and in many cases undesirable, at the present time. Raising or removing the cap so that all working age benefit recipients can benefit from the temporary increase in support would make sense, at least while the current social distancing requirements are in place.

The lockdown in response to the Covid-19 pandemic has effectively shut down a number of sectors. We find that young people, women and low-earners are the most affected.

There is a clear need to temporarily reallocate some workers but this should be balanced with the need to have the economy ready to quickly resume ‘business as usual’ once the COVID-19 crisis is over.