New research suggests the United Kingdom’s Coronavirus Job Retention Scheme protected the health and wellbeing of around 11 million people on furlough.

Using panel data from Understanding Society, the UK longitudinal household survey funded by the Economic and Social Research Council, researchers at the University of Strathclyde estimated the mental health effects of being furloughed during the pandemic.

Mental health distress was measured using the General Health Questionnaire (GHQ), a screening instrument for common mental disorders, and a general measure of psychiatric wellbeing.

Mental health

The results, published in the Fiscal Studies journal, show that being furloughed significantly improved mental health by 1.2 GHQ points compared to employed individuals who lost their job during the crisis. The difference in their mental health outcomes was equivalent to the difference in average GHQ scores between top and bottom earners in the UK.

The estimates also showed no significant difference in the health and wellbeing of being furloughed versus remaining in employment during the pandemic.

The research revealed wellbeing gains in the transition from furlough back to work. Individuals who exited furlough and returned to work had significantly better mental health and they were significantly less likely to be lonely. More importantly, the furlough scheme benefited those with pre-existing health conditions the most.

Retain staff

The scheme enabled employers to retain staff and claim up to 80% of their wages in the period from 1 March 2020 to 30 September 2021. In the absence of the government’s furlough policy, it is estimated that 4.4 million jobs could have been lost.

Principal Investigator Dr Chris Deeming from the Department of Social Work & Social Policy at Strathclyde, said:

Unemployment causes stress and other psychological and physiological health effects and can have negative consequences on mental health, including depression, anxiety and lower self-esteem.

"The overall cost of the UK’s job retention scheme was £70 billion and while the success of this economic intervention is currently being considered by the UK Covid-19 inquiry, we show that without furlough there would have been a major mental health crisis among the working-age population in Britain.”