Employment status and financial resilience during the COVID-19 pandemic

Abstract

PurposeThe purpose of this study is to examine the association between employment status and financial resilience during the COVID-19 pandemic.Design/methodology/approachThis study employed US nationally representative data. A financial resilience index was created based on households' ability to pay for basic living expenses and the resources used to meet such needs. Employment status was categorized into seven groups based on whether the respondent worked for pay in the last seven days, experience of income shock since the start of the pandemic for workers' household and reasons for not working for non-workers' household. A generalized linear model (GLM) model was used to examine the relationship between respondent employment status and household financial resilience. An ordinary least square (OLS) logistic regression with no proportional odds assumption was employed to investigate the association between the respondent's employment status and household ability to pay for basic living expenses. A logistic regression was utilized to explore the relationship between respondent employment status and resources used by the household to pay for basic living expenses.FindingsThe top three least financially resilient households include those in which the respondent's work was affected by the pandemic, the respondent did not work due to being sick with COVID or caring for someone with COVID and the respondent did not work due to fear of COVID.Research limitations/implicationsFuture research should distinguish the reasons for not working when examining the association between unemployment and household financial resilience as well as their overall financial wellbeing. Cross-sectional data cannot establish a causal relationship. Findings using US data may not be generalized to other countries.Practical implicationsWorkers with health and employment risks and financial professionals working with these clients should consider these risks when building household financial safety net. Policymakers should develop measures to allow normal business operations while effectively contain the spread of the COVID-19 virus.Originality/valueThis study created a financial resilience index that considers various household situations, allows both internal and external resources to be utilized to cover basic living expenses and reflects the diverse nature of financial resilience. This study is the first to look into voluntary and involuntary labor force separation for COVID-19 and non-COVID-19 related reasons.