How the cost-of-living crisis is shifting UK socioeconomics

While the cost-of-living crisis is undoubtedly affecting mental health, it is also prompting behavioural changes – in both positive and negative ways. This article explores how this is influencing socio-economic statuses, as the choices between higher education and apprenticeships become based on our resource needs.

Objective socioeconomic status is traditionally defined by our access to material and social dimensions: income, education and occupation. Education has long been linked to beneficial economic outcomes, as it often has a direct impact on a person’s occupation and income levels.

Our income establishes our access to desired services, including material goods or pleasant experiences, for example. It has also been linked with a broad array of psychological variables, including social trust, personality and prosocial tendencies. There is increasing evidence to support the view that our perceptions of our positioning in the socioeconomic hierarchy, as a result of our income, have a strong impact on our personal health and wellbeing.

All three factors affecting our socioeconomic positioning – income, education and occupation – were heavily impacted by the pandemic. People lost their jobs, others were placed on furlough, education faced immense disruption, and many were struggling with adverse health effects from contracting Covid. Then came the current cost-of-living crisis, which resulted in further strain on our finances, our standard of living and our mental health.

With all three factors affected by the pandemic, our society and our standard of living have altered. What is important to us has shifted, the nation’s happiness has taken a hit, and the long-term impact of inflation has undoubtedly impacted consumer behaviour and decisions for the future.

The psychological impact of financial strain

The psychological influence of a financial crisis on consumers is significant. For example, the 2008 financial crash led consumers to question their beliefs and attitudes towards purchasing, which resulted in a direct impact on consumer spending, declining savings and increased risk aversion.

With tough economic climates often most heavily impacting low-income individuals, due to the cost of basic necessities, such as healthcare, housing and education rising disproportionately to wages, income equality becomes stronger. This means there emerges a wider wealth gap between the rich and the poor, which sees a greater divide between socioeconomic classes.

These income inequalities and socioeconomic disparities bring significant psychological effects, as people in lower socioeconomic positions are much more likely to experience increased mental health issues. To tackle this, the government has introduced measures to increase the minimum wage and improve social safety nets, with affordable housing initiatives and support with energy bills.

While the cost-of-living crisis has had a big impact on consumer behaviour and mental health, it also has the potential to fundamentally alter the way our socioeconomic systems operate due to widening opportunities.

The part education plays

We know that during financial crises, people tend to become more cautious with their spending. In the past, economic uncertainty, job losses and declining incomes led to a decrease in discretionary spending, as individuals prioritised essential needs and focused on saving money. This often means that those who may want to progress into higher education, may choose not to, as they would prefer to earn than spend money on education.

But given the nature of our society and how integrated technology is, there are now new options available. People can now work while studying remotely online, as they don’t need to travel to university. We are also seeing some educational institutions offering mature students payment plans to ensure that they can manage course payments. Some places offer bitesize courses or apprenticeship degrees, so people can earn while studying. Technology also allows for flexibility, so people can learn after work or on the weekends instead of being hindered due to courses being taught solely during working hours. All in all, the advances in technology have opened doors when it comes to education accessibility. This means that, for some people, they may be able to progress in higher education while earning money; in the long run, this helps those from disadvantaged backgrounds to shift their socioeconomic status.

On top of this, however, we are also entering an era where transferable skills are important. When there is economic uncertainty, people will want to ensure they are in a job role that is secure – or at least if there is instability within the sector they are working in, that they have the skills to switch industries. This means transferable skills are much more in demand – not just with workers but also within the jobs market. Such strong core skills are vital. As the jobs market is now demanding more cognitive, self-efficacy and interpersonal skills, practical experience is taking precedence over simply solely having just a degree; essentially, workplaces want both – someone with the qualification and the interpersonal skills.

To react to this, some universities are now shifting away from using traditional academic teachings and moving closer toward offering students the opportunity to practice such skills. For instance, at Arden University, we often assess our students on practical tasks that they will be likely to have to conduct themselves throughout their future careers. This gives them the confidence they can perform this outside of education and proves to their employer they have the necessary skillset.

As more universities and workplaces offer the chance to upskill and develop such skills, we will see more movement in the jobs market – some may move to sectors that are in more demand or be able to work in industries they previously didn’t consider. This movement will allow for a healthier economy, with economists and policymakers arguing that upgrading skills can workers from being crowded out. With an active jobs market and people upskilling, we will hopefully see more opportunities for those looking toward higher education to enhance their careers.

By Professor Gail Steptoe-Warren, Head of the School of Psychology at Arden University.

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