Economic insecurity: What is it? What can we do to lower it?

A new report has highlighted the huge – and growing – problem of economic insecurity in the UK. Wollit examines the results.

‘Economic insecurity’ is another of those short financial phrases – like ‘income volatility’ – that’s easy to skim over in a news story, but that represents a great deal of hardship among workers.

So, the team at Wollit were glad to see a new report released by the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA), who took a survey to try and understand how economic insecurity is actually experienced by workers in Britain. They gathered their findings in Economic Insecurity: The case for a 21st century safety net.

Key points:

• Economic insecurity has grown since 2017 
• Non-standard/untraditional working arrangements are often flexible for the employer but not the employee 
• Nearly a quarter of workers experience problems with income volatility

Economic insecurity

Economic security is defined in the report as:

“the degree of confidence that a person can have in maintaining a decent quality of life, now and in the future, given their economic and financial circumstances”. 

It’s a similar idea to financial wellbeing, which we’ve covered at length in this blog.

Economic insecurity, then, is the sense of financial anxiety and stress that comes with not knowing whether you can jump the next hurdle life throws at you.

The problems linked with economic insecurity appear to be getting worse. In fact, according to the survey results from 2017 and 2019, there is a significant increase in problems related to the respondents’ financial circumstances.

Income volatility

“. . . it is not just income levels that affect a person’s capacity to thrive in the economy but also the degree of certainty and control they enjoy over their hours, the stability of that income and their ability to keep up with the rising cost of living.” – Economic Insecurity: The case for a 21st century safety net

Income volatility is a key stress point in economic security. It means having a different wage coming in each month, which can leave workers unable to plan for the future – or even to be certain of covering next month’s rent and bills.

Notably, the RSA survey has shown 24% of workers experienced problems with income volatility (up from 19% in 2017).

Why are things getting worse?

Some key worker concerns identified by the RSA are:

• Inflation paired with slow/stagnant wage growth 
• Brexit’s impact on living standards 
• Automation leading to job loss 

Beneath these drivers is a much deeper issue: the way we work is changing faster than the workforce has been able to cope with. Due to the rapid rise of nontraditional working arrangements many workers were left on unsolid ground.

However, not all changes have been negative. Atypical working situations such as zero-hour contracts have, in theory, increased flexibility for both employer and employee. 

Zero-hours chart Data from the Office for National Statistics

However, many such arrangements turn out to be characterised by ‘one-sided flexibility’. In such an arrangement, the ‘freedom’ is weighted towards the employer.

The report noted that many employees were experiencing ‘similar problems relating to economic insecurity as the self-employed while lacking many of the benefits’.

Notably, 23% of non-standard workers have ‘erratic shift schedules’, which is directly tied to income volatility.

How can employers increase economic security for their workers?

Surveyed workers reported several areas of support that would help improve their economic security, including:

• Guaranteed hours each week 
• More opportunities for education and training 
• More childcare support 
• A pay system that helps workers put aside money for savings.

Income promise

One of the ideas skewed heavily towards non-standard worker interest:

‘A pay system where irregular earnings are evened out to provide a pay check that is a similar level each month’

This concept is the basis of the Wollit Income Promise, which looks at a worker’s monthly payslips and averages a minimum amount of money we can promise them each month.

On months they earn less than average, we top up their wage packet with a cash boost (no interest). On months they earn more, they pay us back (unless it would take them below their Income Promise amount).