Back in 2013, we reported on our findings on how people felt about their financial situation, using data from the large-scale longitudinal surveys British Household Panel Survey (2000-2008) and its more extensive replacement Understanding Society (2009-2011), which ask the same people every year how well they are managing financially. New Understanding Society data has been released for the years 2012 and 2013, so we can now paint a better picture of the financial insecurity people have been experiencing in the last few years.
A closer analysis of the first four waves of Understanding Society, which gives data from 2009 to 2013, shows that a quarter (25%) of all adults have said that they were finding it difficult to cope financially at least once during the recession.
Altogether however,only 2% of all adults reported persistent financial difficulties in all four waves of Understanding Society. This suggests that there is little consistency throughout the years as to who experiences financial difficulties and who doesn’t.
Overall though, it seems that people are still feeling the strains of the recession, with the percentage of those reporting financial difficulties since 2009 remaining fairly stable at 11-13%.
Although we might expect working people to be most affected by the impacts of the recession, given the large fall in wages during the crisis and a historically slow recovery in household incomes, it seems clear that those in unemployment are feeling the economic changes the most. As a study by the Social Market Foundation suggested, working middle income households were able to cope successfully with the negative effects of wage stagnation and rising living costs. Yet for the unemployed, who are vulnerable to changes in welfare policies, our analysis suggests that there is considerable instability in how they feel they are managing financially year by year. The percentage of unemployed people who have experienced financial difficulties dropped from 2010 to 2012 (down from 43% to 35%), yet increased again in 2013 (up to 41%).
For pensioners and young people on the other hand, the evidence suggests that the recession is no longer being felt at all. The percentage of people in these groups experiencing financial difficulties has gone back to what it was in 2000, long before the current economic crisis (approximately 10% for 16-24 year olds and about 4% for pensioners).
This type of research on how people feel about their financial situation is important because it helps us to understand their economic decisions, such as their spending behaviour. Our analysis suggests that most people are still worrying about the impact of the recession, which can be seen in the slow recovery of household consumption.
With the election just around the corner, what is clear is that most of us are still a long way off complete financial recovery.
Kirby would like to thank Lis Cunha for her help with this blog.
Data for 2013 is partial and should be read with caution. Estimates might change slightly once data from Wave 5 of Understanding Society is released.