During the COVID-19 pandemic, 18 percent of the total population of low-income workers experienced an annual income drop of at least € 5,000. Over 2 percent of all low low-income workers were, besides having an income drop, also no longer able to pay all of their bills. Given that the total population of low-income workers consists of 5.5 million persons, this amounts to 990,000 and 130,000 workers respectively. As a consequence, the expected increase in the number of people with problematic debts falls between 3 and 20 percent. This translates into an expected rise in the number of requests for credit counseling of 3,000 at a minimum and 18,000 at a maximum. Before COVID-19, the annual number of requests for credit counseling was roughly 90,000. This estimation does not include persons whose financial situation worsened because credit counsellors could not reach them during the various lockdowns that were in place.

The increased risk of problematic debts due to income loss during COVID-19 is highly concentrated among entrepreneurs and employees on a flexible contract working in the hardest-hit sectors. This group of workers also made heavily use of the financial support measures and tax measures implemented by the government at the start of the pandemic. This makes this group even more susceptible to financial hardship in the near future, as this government support has ended as of the 1st of April 2022.

The research
These results follow from a study conducted by SEO Amsterdam Economics and that has been commissioned by NVVK, a trade association for credit counselors in the Netherlands. This research provides an answer to the question which part of the Dutch population has run into financial difficulties due to an income drop during COVID-19. So far, the number of people in credit counseling has not gone up since the beginning of the pandemic. Also, the number of annual bankruptcies is at a historical low. Of course, this is most likely due to the government support programs that were in place to moderate the adverse economic shock of COVID-19. Now that this government support has come to an end, the question arises to what extent credit counselors should expect a rise in the number of requests for credit counseling in the upcoming years.

The estimate of the increase in the number of people with problematic debts follows from a survey among 500 low-income workers – gross income not exceeding € 3,500 on a monthly basis for employees and not exceeding € 45,000 on an annual basis for entrepreneurs. The survey contains questions about the personal financial situation before and during COVID-19 and the expected financial situation after the pandemic. The survey outcomes are translated into population values by weighting the survey data using probability weights. The reason for using probability weights is that our sample is not random: certain types of workers, especially entrepreneurs working in hard-hit industries, are oversampled.

The results from the survey among workers are complemented by a survey that is held among 17 credit counsellors. This sample of respondents is asked various questions about their view on the effect of  COVID-19 on the current influx into credit counselling and their predictions about the increase of requests for credit counselling in the near future.