Covid-19 decimates household income, especially among millennials
The Covid-19 pandemic is causing significant financial hardship the world over, with the biggest impact felt among millennials and Generation X.
The latest weekly TransUnion global report, which compares the impact of the pandemic on household finances of 9 215 respondents in seven regions on five continents, found that household incomes of 84% South African millennials have been hurt by the pandemic, compared with the global average of 76%, while 79% of all other generations in South Africa are affected and 64% are globally.
Millennials make up a third of the world’s labour force, and their consumption habits contribute significantly to economic demand. Typically, they would have entered the job market during the last global recession and, compared with other generations, they entered the Covid-19 crisis with less income, assets and wealth - as well as more debt. The pandemic has hit this generation during their peak-earning years, when they were already on track to be the first generation in history to earn less than their parents, TransUnion says.
In South Africa, the financial choke-hold is tightening, as nearly a third of workers say their work hours have been reduced and 88% of consumers say they are concerned about their ability to service their debt. On average, respondents will be short about R7 000 in the near future and they expect to experience a shortfall in less than four weeks.
The survey, comparing South Africa, Canada, Colombia, Hong Kong, India, the UK and the US, tracks how consumers are affected differently by the economic fallout of the pandemic based on employer size, generational differences, government interventions and income dynamics.
The research has shown that while many consumers are worried about their finances, millennials (ages 26 to 40) globally are under the most pressure: 22% of millennials’ household incomes have been affected due to job losses compared with 16% for all other generations, while 45% have seen their work hours reduced compared to 35% of other generations. In South Africa, 11% of millennials have lost their jobs, and 34% have had their work hours reduced.
Dependent children add to the pressure on millennials. Globally, 61% of millennials have dependent children living at home (compared with 39% for other generations), while 66% of South African millennials have dependent children at home, compared with 48% for other generations.
Millennials are also experiencing bigger problems with some of their debt obligations: 63% say they will not be able to make their rent or mortgage bond payments, compared to 54% for other generations. In South Africa, 47% of affected millennials are unable to pay for shelter compared with 43% for other generations.
Despite their financial struggles, consumers are coping relatively well. The study showed that five in six (85%) global respondents indicated they plan to deal with their financial gap (regardless of generation), while in South Africa 75% said they have a plan.
Those employed by small businesses across the globe are feeling the most pain, because small and medium-sized enterprises supply and anchor economies around the world. The researchers noted that when income grinds to a halt, “debt, rent and other obligations continue”. Compared with large enterprises, small businesses have less access to resources to absorb the pandemic’s shock, leaving them with far greater risk of shuttering for good.
The TransUnion survey’s results are born out by a local survey conducted by personal finance website, JustMoney.
Its survey, conducted last month, asked respondents about the pandemic’s effect on their finances.
Of the 1986 participants, more than 11% work in retail, nearly 9% in government, and 8% in construction. The rest (43%) selected “other”, with many specifying they worked in manufacturing, communications and the informal sector or were unemployed.
Just under half of the respondents (43%) earned under R10 000 a month and about 10% earned more than R40 000 each month.
Almost three-quarters of the respondents say the pandemic has “significantly or very significantly” affected their family earnings and most of them can afford an emergency payment of less than R5 000, while fewer than 10% can afford an emergency payment of R10 000.
JustMoney says considering these income brackets, just over 68% of participants said they would not be able to survive for more than a month on their savings. And many would struggle to survive a week.