The role played by families has been overlooked during the COVID crisis

Just as governments around the world bailed us out of the financial crisis in 2008-09, so they are bailing us out of the present crisis. More than a decade ago they spent hundreds of billions stopping the financial sector from collapsing and in so doing preventing economic Armageddon. This time round they have introduced furlough schemes, turned on the spending taps to support health and other public services, and spent billions keeping businesses afloat.

The effect has been astonishing. We have suffered the biggest recession in at least 100 years, perhaps 300 years, yet unemployment is not even at 5 per cent, roughly where it was in the boom years of the early 2000s and below where it was in 2015. The Bank of England doesn’t believe it will be any higher this time next year. After more than a year of monumental economic disruption we in the UK are not looking at either mass unemployment or a big increase in poverty.

There may be a price to pay further down the road in higher inflation, or lower growth, or financially constrained public services, but from where we stand right now these look like risks well worth running for the benefits so clearly gained.

Twice in little more than a decade big, active government has come to the rescue. It has insured us against calamity perhaps more effectively than we could have imagined. Of course, our government has made mistakes, some of them big. It hasn’t protected everyone, most notably some of the self-employed who have been left out of the support schemes. It has overcompensated a lot of people and businesses who have benefited from a rather scattergun approach and lack of normal checks. But thank goodness it was there and capable enough to help. We have not suffered the fate of the poorest countries where the resources, institutions and capacity for support don’t exist.

We will, though, need to begin readjusting to the old normal. The furlough scheme is gradually being removed. Last week employers had to start paying 10 per cent of the wages of employees they wanted to retain on furlough, on top of their pension and national insurance contributions. By the end of September the scheme will be gone altogether.

For those for whom there is no work this will be a rude shock. The difference between government support now and support in normal times is vast. If you are single and childless and lose your job when the furlough scheme finishes you could end up having to live on benefits payments of less than £80 a week.

It’s not just government that has come to the rescue though. Families have too. They at least will still be there when this is all over.

Young adults have done much worse than the rest of us over the past 15 months. They have seen rates of pay increases fall in a way that older groups have not. They are much more likely to have been furloughed and more likely to have lost their job altogether. The share of 19 to 24-year-olds who were not working any hours per week had risen by ten percentage points by the start of this year. Yet work published today by my colleagues at the Institute for Fiscal Studies shows that they were just one percentage point more likely to be living in a household where no one was in work. That’s because a lot of them live with their parents anyway. And a lot more have moved back in. The fraction of 19 to 24-year-olds living at home with their parents rose dramatically from just over 60 per cent to just over 70 per cent.

Largely as a result, young adults have not reported any increase in financial hardship. Obviously, none of this is ideal. Many will want to move out of the family home. They may well suffer a longer-term impact on their earnings. But for now, those who can rely on family have been relatively well protected.

There is a similar phenomenon across the working-age population as a whole. The fraction living in a household where nobody works rose a lot less than the fraction not working themselves.

Being in a two-earner couple doesn’t just provide extra income it provides support when one of you loses your job. There has been no increase at all in the number of couples with children where neither is working. The same is not true of lone parents. There has been a more than 5 per cent increase in the fraction of them living in a workless household.

Some ethnic minority groups have also been hit very hard for very similar reasons. For people from Pakistani and Bangladeshi backgrounds the share of individuals not working any hours increased by four percentage points over the pandemic, but the share living in households where nobody was working increased by more than twice that amount. That’s mainly because employment rates among Pakistani and Bangladeshi women are much lower than for other groups, and also because there are often single earners supporting multigenerational households. One person losing their job can mean the loss of the only breadwinner in a, sometimes extended, family.

This illustrates all too clearly that the world is a complicated place. Many of us won’t be able to rely on family for support. But for a majority, families provide vital support when times get tough. The welfare state could not begin to operate without the care we provide for elderly parents, for disabled spouses, for sick children, as well as the financial support we provide each other when things go wrong.

It is obvious how important state spending has been to protecting health and income over the past year. The role of family has also been crucial. We can see it not just in our own experience but also in the data, if only we care to look.

This article was first published in The Times and is reproduced here with kind permission.