Financial resilience of two‐worker households from a health perspective

• Published date: 01 July 2023
• Author: Rui Yao,Yilan Xu,Jie Zhang
• Date: 01 July 2023
• DOI: http://doi.org/10.1111/joca.12525

RESEARCH ARTICLE

Financial resilience of two-worker households

from a health perspective

Rui Yao

1

| Yilan Xu

2

| Jie Zhang

3

1

Division of Applied Social Sciences,

University of Missouri, 124 Mumford

Hall, Columbia, Missouri 65211, USA

2

Department of Agricultural & Consumer

Economics, University of Illinois at

Urbana-Champaign, 309 Mumford Hall,

1301 W Gregory Dr., Urbana, Illinois

61801, USA

3

Division of Applied Social Sciences,

University of Missouri, 315 Mumford

Hall, Columbia, Missouri 65211,

United States

Correspondence

Rui Yao, Division of Applied Social

Sciences, 124 Mumford Hall, University

of Missouri, Columbia, MO 65211, USA.

Email: yaor@missouri.edu

Funding information

National Institute of Food and

Agriculture, Grant/Award Number:

1020004,ILLU-470-367

Abstract

The COVID-19 pandemic highlighted the significant

impact of health conditions on household finance. Tra-

ditional measures of financial resilience ignored house-

holds' ability to adjust to labor income disruptions. We

proposed a more comprehensive two-tier measure of

financial resilience by accounting for nonlabor income

and spending adjustments in the face of income loss

associated with health situations. Using this measure,

we evaluated the financial resilience of two-worker

households with members having COVID-19 health

risk conditions and other mental and physical chronic

diseases. Our findings showed that households with

cancer patients were more financially resilient yet

those having obese members were less financially resil-

ient. Decomposition of the financial resilience measure

revealed differences in financial resources allocation—

households with cancer patients allocated more wealth

to noncash financial assets, whereas households with

obese members saved less and spent more. Our find-

ings shed light on financial planning practices and pub-

lic policies of emergency assistance.

KEYWORDS

cancer, COVID-19 pandemic, financial resilience, health

disparity, obesity

Received: 28 February 2022 Revised: 28 February 2023 Accepted: 20 March 2023

DOI: 10.1111/joca.12525

© 2023 American Council on Consumer Interests.

1258 J Consum Aff. 2023;57:1258–1280.

wileyonlinelibrary.com/journal/joca

1|INTRODUCTION

Since January 2020, 94.9 million COVID-19 infections have been confirmed in the

United States with over 1,043,921 deaths (Centers for Disease Control and Prevention, 2022b).

Individuals with certain health risks, such as cancer, heart conditions, lung conditions, diabe-

tes, and obesity, have elevated risks of suffering severe symptoms (Centers for Disease Control

and Prevention, 2022a). Workers with these health risks are, therefore, more likely than other-

wise healthier workers to experience employment interruptions in the pandemic and incur

extra COVID-related medical expenses. The employment interruptions in turn bring negative

income shocks to their household and make the additional medical expenses and the normal

living expenses more difficult to pay for. In this case, easily accessible financial resources are

the main resource that these households can use to meet spending needs. This study investi-

gates how households with members having various health conditions differ in their financial

resilience, i.e., their ability to pay for living expenses in the case of labor income interruption.

During a financial emergency such as the pandemic, it is critical that households are pre-

pared to stay financially resilient, especially those with members having inflated health risks.

Government efforts have been made to reduce the COVID-19 infection and financially help

households in need. For example, emergency uses of vaccines have been available since

December 2020 (Food and Drug Administration, 2021) and the US government made Economic

Impact Payments (a.k.a., stimulus payments) to over 160 million households. However, workers

with health risks still face multiple challenges. At the early stage of the pandemic, access to

effective treatments was limited, and there was no government sponsorship for the COVID-19

treatment. The stimulus payments were paid based on the pre-pandemic income and did not

reflect the health expenses risk nor the labor income risk for households with working mem-

bers at-risk of severe COVID symptoms. Analyzing how various health conditions especially

those that elevate the risk of severe COVID symptoms are associated with financial resilience

prior to this pandemic shed light on how to help these households survive a public health crisis.

In this study, we define “resilience”as the households' resilience with existing internal and

external resources without relying on additional future external resources such as gifts, loans,

and public assistance. One reason is that future supports are hard, if not impossible, to predict.

For example, supports from informal sources (e.g., gifts from friends) and transfers from formal

sources (e.g., government stimulus payments) are hard to count on with certainty. Besides,

those who suffer income interruptions may lose access to credit due to reduced repayment abili-

ties. Additionally, certain external supports take time to apply for and arrive; and those who are

unaware of those programs may not receive such assistance. Thus, the ability to cover

nondiscretionary expenses with easily accessible financial resources within the household and

existing external resources is an important perspective to evaluate the households' preparedness

for adverse income shocks.

Traditionally, one indicator of financial resilience is precautionary savings, an intertemporal

wealth allocation strategy to manage uncertainties in income and expenses that affect future

consumption. In the broad line of the empirical literature on precautionary savings, measures

of precautionary savings include wealth (Carroll & Samwick, 1998), financial wealth (Engen &

Gruber, 2001), national aggregate household savings rate (Hahm & Steigerwald, 1999), and

demand for risky assets. Since Griffith (1985), a separate strand of empirical literature has

focused on examining the households' ability to reserve critical precautionary savings amount

as the emergency fund. Some used three or six months of total income as the guideline

(Bhargava & Lown, 2006; DeVaney, 1995; Hong & Kao, 1997; Huston & Chang, 1997), and

YAO ET AL.1259