The impact of furlough on wellbeing: positive and negative effects of the UK’s Job Retention Scheme

Closed shops due to furlough

Deliberately or inadvertently, the COVID-19 furlough scheme has supported many people’s wellbeing in a number of positive ways. However, there have also been significant negative impacts to this sustained period of inactivity – so how do policymakers try to ensure these are not the lasting legacy of furlough?

Deborah Hardoon

Since March 2020, COVID-19 lockdown measures have shut down swathes of industry and activity, making it impossible for millions of people to do their jobs. The UK Government’s Job Retention (furlough) Scheme stepped in quickly to protect people’s employment status and most of their employment income, until lockdown measures eased and they could return to work.

A loss of income is almost always bad for wellbeing. By protecting most of people’s pay, the furlough scheme has effectively mitigated the hit to people’s financial wellbeing from being unable to work.

However, the impacts of furlough on wellbeing have gone well beyond income protection. Being employed is good for wellbeing. Conversely, the longer people are unemployed, the worse the effect on their mental health. This includes long-term scarring effects – particularly for younger people, who we know are more likely to work in sectors that have been shut down by COVID-19.

For some, furlough has been good for wellbeing

Longitudinal data analysis from the first months of lockdown found that furlough protected people’s mental health against the decline they would have experienced with unemployment, particularly for those in insecure jobs. Protecting employment status and identity during a time of uncertainty is likely to have been positive for people’s wellbeing now and in the future.

Furthermore, the furlough scheme – deliberately or inadvertently – may have supported different people’s wellbeing in many other ways, too. For example:

  • It has been helpful for some parents, particularly women trying to juggle work with homeschooling. On the other hand, a TUC survey found more than 70% of the people who requested furlough for childcare reasons were unsuccessful in getting it, suggesting this upside was not realised by many who would have benefited from it.
  • For people who chose to take up new learning, leisure, self-care and other wellbeing-enhancing activities, furlough has created the time and space for this without the associated insecurity of joblessness. However, it has still been estimated that, among full-time employees, 42% of those on furlough engaged in learning, compared with 54% of those who weren’t furloughed.
  • Preventing a spike in national unemployment rates is also good for people who remain in work, reducing their feelings of job insecurity.

For others, negative impacts have outweighed the positives

While more than half of all those furloughed during the pandemic report being happy with this outcome, there have been downsides for many people. The scheme was set up to cover 80% (or less) of employees’ monthly wages – meaning a drop in income of at least 20%. This has been particularly difficult for people on the lowest incomes without accumulated wealth, who have been found to be more likely to have spent more and taken on additional debt during the pandemic. Being furloughed has therefore been associated with financial stress for many people.

In addition, there are several other negative wellbeing impacts that people may have experienced while on furlough. For example:

  • Working delivers a lot more for people’s wellbeing than simply income and status. It is an important driver of our sense of purpose, and is where we foster relationships and self-esteem, and structure our day. Many people may have found themselves lacking these key psychological aspects of wellbeing without ‘real’ work to do.
  • The furlough scheme is temporary, and what happens next for workers is uncertain – which is also bad for wellbeing. Repeatedly extended and now planned to run until September 2021, the scheme should allow time for sectors to get up and running and restore employment as lockdown measures end. However there are no guarantees for employees that they will be able to return to their jobs. Many businesses will be unable to re-employ all their staff, creating a looming ‘cliff edge’ of job and financial insecurity for people who are unsure how to plan for the future – particularly those already in poverty.
  • Having a job with good career prospects can be an important driver of wellbeing. In contrast, being trapped in a shutdown sector with no prospects can be difficult to manage.
  • Some people have been furloughed for a full year now. This is likely to have affected the quality of their skills, relationships and self-esteem, all of which would usually be exercised in the work environment. These personal and social resources are important to invest in, and may take time to restore to pre-pandemic levels.
  • Many more women with childcare responsibilities opted for furlough than men, putting their careers on hold. Furlough has tended to last longer for women, who were also less likely to have their salaries topped up above the 80% offered by government. In addition, men were more likely than women to flout the rules and continue working while furloughed. Overall, the gendered experience of furlough has threatened to exacerbate gender inequalities both in the home and the workplace.

After furlough: how do we protect against further wellbeing harms?

The furlough scheme is a new and expensive emergency measure put in place by the UK Government during a time of crisis to support people’s livelihoods. It cannot and should not seek to replicate all the positive wellbeing impacts that people get from working in a good-quality job. Nor can it protect us all from the uncertainty of what lies ahead – whether due to the epidemiology of the virus, changes to lockdown policies, or what will happen in the labour market and broader economy in future.

However, by preventing some of the worst wellbeing impacts from job losses in the short term, it has bought us time to put in place wellbeing-enhancing policies that cut across our health, working lives and communities in the wake of the pandemic.

Looking ahead, unemployment is likely to rise as the furlough scheme ends, with sectors such as retail struggling to recover fully. The pandemic has also accelerated many trends associated with increased use of automation technologies, such as fewer jobs in manufacturing and increased demand for digital skills.

Policymakers should therefore be thinking about how a response to the current and future labour market conditions can best support people’s wellbeing. Measures could include:

  • Ongoing protection against the worst effects of unemployment, particularly for young people entering the labour market. This should include apprenticeship and retraining schemes as well as financial support.
  • Creating more ‘good’ jobs that support all aspects of wellbeing, from financial security to sense of purpose. Opportunities for this include capitalising on some of the positive changes that many people have experienced in the past year – such as working with greater autonomy, flexibility and less time spent commuting. It might also mean (for example) reducing the length of the working week, creating more time for learning and leisure, and distributing available employment between more people.
  • Reducing labour market and economic inequalities that make some people much more vulnerable to employment shocks than others. Within firms and industries, this could include looking at pay and contractual terms, and addressing discimination, unfair practices, and the appropriate representation and voice of employees. At a policy level, this would require redistribution policies to look at wealth and spending, as well as income and social policies to address what makes employment shocks more difficult for people to respond to – including for those with, for example, care responsibilities and disabilities.

Deborah Hardoon is Head of Evidence at the What Works Centre for Wellbeing

  • Further reading: How can we help young people recover after the loneliness and losses of lockdown?