Insolvency inequality: can debt divide along age and gender lines?
Insolvency numbers keep rising steadily, but not evenly. Does personal insolvency inequality really exist? And are women more likely to enter insolvency procedures than men?
Personal insolvencies hit the highest levels in years
In 2018 there were 115,299 recorded personal insolvencies, reaching a six year high. This was on the back of a sharp 35% increase in the last quarter, taking the overall year-on-year rise to 16%. Most alarmingly, the insolvency rate among women rose further than male insolvency for the fourth consecutive year.
As this trend continues, it’s time to look for common factors, and solutions, to specifically female financial problems.
Hurdles of female financial resilience
Statistically the largest female financial impacts are connected to childbearing and the effect it has on careers and earnings. As often, in order to find more flexible working arrangements for their nuclear (or bigger) families, women are more likely than men to work on a part time in sectors and roles with lower pay. This problem is highlighted by ONS figures showing an average hourly rate for a temporary role is £9.36 compared with £14.31 for the same full-time position.
Add to this the rocketing cost of the childcare, many mothers find their return to work isn’t financially viable. With each year a mother is absent from the workplace her future wages fall by 4% (Fawcett Society).
Facing financial shocks and insolvency
Women in general face much poorer levels of pay progression than men and are much more likely to be employed on zero hours contracts. This makes women far more vulnerable to financial shocks such as a relationship breakdown, which, the insolvency trade body R3, finds is the most common cause of female insolvency. Whereas breakups are only the 8th most common cause for insolvencies for men.
Women are also more likely to be single parents, heading nine-out-of-ten single parent families in the UK. It’s understandable that these extra financial pressures can have a massive impact and often women are just one unexpected bill away from losing financial stability.
In a recent research conducted by ComRes as many as 32% of women stated that they would find it very difficult or impossible to immediately pay an unexpected bill of £100 without external assistance. And a relatively small bill or a missed payment can easily trigger a debt escalation that may soon become too difficult to juggle.
Differing personal insolvency procedures
Further differences in men’s and women’s finances are also reflected in the types insolvency procedures entered.
Individual Voluntary Arrangements (IVAs)
When it comes to consumer spending related procedures, Individual Voluntary Arrangements (IVAs) were relatively equally used by men 53% and women 47% in 2017.
On the other hand, bankruptcies, usually associated with business failure, higher debt and asset levels, were made up by men in 61% of cases. As men are still more likely to run their own businesses and make more money. Meaning men are more likely the prime candidate for the bankruptcy procedures.
Debt Relief Orders (DRO’s)
The most dramatic role in increasing the number of women’s insolvencies has been played by the introduction of Debt Relief Order (DROs) in 2009. Since DROs are designed as a low-cost alternative for people with lower income, struggling with debts, women accounted for three-quarters of all DROs in 2017.
Insolvency age-groups: who is at risk?
Personal insolvency rates remain low among young adults but are increasing for all age groups except for those aged 55 years and over. With insolvencies peaking for in the 35-44 age group.
25-34 age group opts for IVA’s
However, 25-34-year-olds saw the largest year-on-year increase of 5.7%, and insolvency is now affecting 35.6 per 10,000 adults. This age group most often opted for the IVAs procedures, potentially reflecting that the rising cost of living driven in part by increased rents and limited wage increases stretching already tight budgets.
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