Financial Consequences of COVID-19 in Germany: Living Standards of Older People During the First Year of the Pandemic

Abstract

ABSTRACT Despite major restrictions on economic activity due to the first lockdown starting in March 2020, public financial support helped to limit the financial consequences of the COVID-19 pandemic in Germany. However, certain groups were more affected than others. Most significantly, people in the lowest income quintile were more affected than those who had higher levels of income prior to the pandemic. Although this aspect has also been analyzed in other studies, less is known about how income shocks affected living standards. In the present manuscript we combine descriptive and multivariate analysis in order to analyze changes in household income for people over the age of 45 years and changes in living standards for those who report negative changes in income. Results indicate that people over the age of 45 years with lower levels of income prior to the pandemic have been hit harder in terms of both lost income and the impact on their living standards. Furthermore, wealth seems to be relevant as a means of avoiding a drop in living standards in the event of a negative income shock. Results also indicate that by the end of 2020 and beginning of 2021 there is a recovery in living standards to pre-COVID levels. These results show the relevance of focusing on the needs of the most vulnerable groups when defining public financial support in times of crisis.