Ukrainian Households in Crisis: Who Needs Help the Most?

Survey data clearly show that the economic crisis caused by the global coronavirus pandemic, which is exacerbated by forced quarantine measures, is gaining momentum. Already in late March and early April, from 5 to 10% of respondents to various opinion polls confirmed that they had lost their jobs, and a large proportion noted a decrease in their income. Ukrainian companies have also announced their plans to reduce employment.

Many countries affected by the pandemic and economic crisis have already announced measures to support business and households. Ukraine is still in the process of developing a package of assistance: several laws and amendments to the State Budget have been adopted, but there is currently no systemic support, as there are no funds for it without a program with the IMF. In addition, there is reason to believe that Ukraine is at the very beginning of the unfolding economic crisis, and therefore, perhaps in 2020, measures to support people and business will need to be strengthened. Developing effective support measures requires a clear understanding of who needs it most.

In this article, we analyze Ukrainian households and consider which of them will be most affected by quarantine and the ongoing crisis. Based on the data of a sample survey of living conditions of households in Ukraine (SSSU), it is possible to get an idea of ​​which groups of households are most vulnerable in the current situation.

Composition of households and their income

We considered the distribution of households according to the following criteria:

1. availability of stable sources of income. First of all, it is a pension. We believe that households with retirees have a lower risk of total loss of income * than households consisting exclusively of workers and possibly children. Although it is clear that the income of retirees is often quite low.
2.  income level and availability of savings. To do this, we used the variable “household self-assessment of the level of their income during the year.” The household could place itself in one of four categories: (1) there was a lack of income even for food; (2) constantly denied themselves anything other than food; (3) was sufficient but no savings were made or (4) was sufficient and savings were made.**

First of all, let’s look at the distribution of households in terms of structure and income (Fig. 1).

50% of Ukrainian households have at least one pensioner (including working pensioners): 32% of households include one pensioner, and 18% – two or more pensioners. The financial situation of these households’ changes as a result of quarantine to a lesser extent than for other households if one of their members loses their job. Households with seniors are not completely left without any means of subsistence while state support measures are being developed and implemented. In addition, in terms of providing targeted financial assistance from the state, pensioners are the ones who are the fastest and easiest to support from an operational point of view (yes, pensioners with pensions of no more than UAH 5,000 already receive additional payments of UAH 1,000).

Risk of loss of income

The riskiest item of household income is income from entrepreneurial activity and self-employment, as well as income from the sale of agricultural products, which together account for 9% on average in all households in the country and 12% in rural areas. In 8% of households (approximately 1.2 million), income from entrepreneurship and self-employment accounts for more than half of total cash income. In these circumstances, the exemption of individual entrepreneurs from paying SSC in March and April (one of the first measures announced by the government) is in line with the general logic of helping households affected by declining incomes. However, such households will need further assistance — at least an exemption from SSC in May, as well as the possibility of obtaining a soft loan to restart the business.

The greatest risk of losing all means of subsistence through quarantine is in households where there is only one worker and no pensioners. Such households account for 19% of the total. Almost a quarter of them are households where the worker supports only himself. In the rest of the households, the worker supports one or more people (Table 1).

Such households need help in the first place — especially households with children (Table 2).

After all, in the event of losing a job as a breadwinner, such families may find themselves in the most difficult situation. Therefore, when developing support measures, special attention should be paid to them (various countries that have already announced assistance packages to the population, among a separate category of recipients allocated households with children).

In the group of households where two people work, the probability of a negative scenario of total loss of income is lower. However, this does not mean that they do not need support — it is possible that both individuals work in industries affected by quarantine.

Another vulnerable group of households are those that do not have workers or retirees (i.e. they do not have a more or less stable source of income). There are more than 800 thousand of them or 5.6% of all households (Fig. 2).

Income level and savings

It should be remembered that in general in Ukraine the share of the population with average per capita total income per month below the actual subsistence level is about 26%. Accordingly, more than a quarter of the population is in a rather difficult situation under normal economic conditions.

As shown in Fig. 3, only 8% of households could save, and among households with pensioners and no employees, this share is even smaller. The poorest are households consisting of pensioners and children. However, there are relatively few of them — about 90 thousand.

According to the same survey, 51% of households cannot afford unexpected necessary expenses at their own expense. This figure is quite consistent with the rather low level of savings that we see. In addition, these data resonate with statistics on how many households have sufficient financial resources to purchase non-food items: for example, 40% of respondents believe that they do not have enough funds to change furniture in case of wear or damage. This also indicates a low level of savings.

Additional evidence of insufficient savings is the results of recent opinion polls (Table 3). People who said their savings would last longer than the end of April were in the minority. However, it is interesting that in some surveys this share increases over time. There may be several explanations for this: perhaps people downplay their savings when talking to the interviewer, or significantly reduce consumption to “stretch” them for a longer period, or “adapt” to quarantine and find some temporary income (most likely, in the informal sector).

Summarizing the above, the most urgently needed help is for those households whose incomes were low even before the crisis, as well as for those who lost their jobs (or the opportunity to work) and have no other source of income than wages. First of all, these are households with one employed person, as well as unemployed persons or children

Poverty in the long-term perspective?

Finally, let’s consider the longer-term consequences of quarantine. Namely, its impact on children’s education — because not everyone could study online. At the same time, it is clear that children from the poorest families have much fewer opportunities for distance studying — those who do not have the appropriate equipment (computers, smartphones), as well as those who do not have access to the Internet (because not in all settlements, especially in rural areas available network access or 3G coverage).

Table 4 shows that almost 30% of households with children did not have access to the Internet at home, and 22% did not use the Internet at all. 15% of households with children (over 800,000) do not have a computer, laptop or tablet. Note that even the availability of appropriate equipment in the household does not mean that it is quite easy to organize online study for children — because this technique may be needed by parents for remote work.

Table 4. Availability of computers and the Internet in households with children

Two more circumstances should be noted here. Distance learning in Ukraine is organized, including one on television. On the one hand, this is an opportunity for those who do not have the Internet: according to table 4, 95% of households with children have a TV. However, it is clear that TV lessons are not a complete replacement for online learning, as they do not provide feedback between teacher and student.

On the other hand, there is a general problem not related to the availability of technical capabilities: often the fact of full participation of a child in distance learning depends on the extent to which parents are involved in this process, especially for young children. For elementary school students, parents must actually replace the teacher. Obviously, not all families have parents ready and able to take on these additional responsibilities.

In the long run, several months of lack of access to education can lead to the “conservation” of poverty and negatively affect the future lives of children from low-income families.

Conclusions and recommendations

Based on the above, we offer the following recommendations for supporting people during quarantine:

• Assistance primarily to households whose members have lost their jobs or incomes and who do not have other sources of income (eg pensions or social assistance). This is partly due to the Cabinet of Minister’s provision of child benefits to individual entrepreneurs belonging to the first and second groups of single tax payers, as well as additional payments to those who lost their jobs and registered with the State Employment Service as unemployed.
• Provide simplified social assistance to households with one working person and children in the event that a representative of such a household applies to social protection bodies. After all, it is quite possible that even if a person has not been formally laid off, he or she has lost the opportunity to work and is forced to take unpaid leave because he or she has to take care of children.
• Start opening schools and kindergartens. If schools will not reopen, special attention should be paid to households that do not have the opportunity to provide distance learning for children. The next school year could start with an accelerated study of the material that fellt on quarantine this year, so that those who have not been able to study fully now would have the opportunity to catch up at least in part. Therefore, the Ministry of Education and Science should allow schools to adjust curricula from September 2020