Evaluating the impact of the UK job retention scheme on mental health and wellbeing using matched difference-in-differences

Abstract

In March 2020, the UK implemented the Coronavirus Job Retention Scheme, otherwise known as furlough, to minimize the impact of job losses. The UK furlough protected jobs during the COVID-19 crisis, covering up to 80% of worker’s monthly wage for hours not worked. We evaluate the causal effects of furlough on mental health, life satisfaction and loneliness, considering different labour market transitions in the pandemic. We employ a difference-in-differences (DID) estimator with Propensity Score Matching (PSM) method using data from Understanding Society UK Household Longitudinal Study Mainstage and COVID-19 waves. We show furlough protected workers’ mental health and wellbeing, compared to non-furloughed workers, and unemployment. We also find no detrimental wellbeing effect to being furloughed compared to continuous employment. The wellbeing gains from furlough are particularly evident for those with pre-existing poor mental health and wellbeing conditions. Overall, policies that mitigated negative labour market transitions during the pandemic had positive wellbeing effects on the working population.

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https://strathprints.strath.ac.uk/94320/