The UK's Job Retention Scheme, commonly known as furlough, played a crucial role in safeguarding the mental health and well-being of millions of workers during the COVID-19 pandemic, according to a new report from the Institute for Fiscal Studies (IFS). The study found that individuals placed on furlough experienced a significant reduction in symptoms of anxiety and depression compared to a matched group of workers who were not furloughed.
Introduced in March 2020, the furlough scheme allowed employers to retain staff by paying 80% of their wages, up to a monthly cap of £2,500, with the government covering the majority of the cost. Over its lifespan, the scheme supported nearly 12 million jobs across the UK, at a total cost of approximately £70 billion. The IFS research employed a 'matched difference-in-differences' approach, comparing the mental health trajectories of furloughed workers with a carefully selected group of similar individuals who remained in full employment.
The findings indicate that the mental health benefits of the scheme were substantial and widespread. Furloughed individuals reported a notable decrease in feelings of worry, nervousness, and low mood. This positive impact was particularly pronounced for certain demographic groups, with women and those who had reported pre-existing mental health issues prior to the pandemic experiencing the greatest improvements in their well-being.
Crucially, the study also revealed that these mental health benefits were not merely temporary. The improvements in well-being were sustained for at least six months after individuals either returned to their original jobs or transitioned into new employment. This suggests that the scheme provided not just immediate relief from financial insecurity and job loss stress, but also contributed to longer-term resilience for many workers.
The report underscores the broader societal value of such economic interventions during periods of crisis. Beyond its primary goal of preventing mass unemployment, the furlough scheme appears to have delivered significant public health dividends by mitigating the psychological toll of the pandemic and associated economic uncertainty. This insight could inform future policy responses to large-scale economic disruptions.
While the financial cost of the furlough scheme was considerable, the IFS study suggests that its benefits extended beyond purely economic measures, encompassing vital improvements in national mental health. The research provides valuable evidence for policymakers considering how best to support populations through future economic shocks, highlighting the interconnectedness of financial stability and psychological well-being.
Source: Institute for Fiscal Studies