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Furlough and Household Financial Distress during the COVID‐19 Pandemic*

Year: 2023

Type: article

Abstract: We study how being furloughed affects household financial distress during the COVID‐19 pandemic in the United Kingdom. Furlough increases the probability of late housing and bill payments by 30% and 19%, respectively. At the aggregate level, furlough increases the incidence of financial distress by 3.38 percentage points. To offset furlough‐induced income reductions, individuals significantly reduce consumption and spend savings. Relative to unemployment, the potential alternative in the absence of a furlough scheme, furlough reduces the incidence of financial distress by 95%. Estimates show an 80% government contribution to furloughed workers' wages minimizes the incidence of financial distress at the lowest cost to taxpayers.

Source: Oxford Bulletin of Economics and Statistics

DOI: 10.1111/obes.12556

Authors: Christoph Görtz, Danny McGowan, Mallory Yeromonahos

Institutions: University of Birmingham, University of Sheffield

Language: English

Topic: COVID-19 Pandemic Impacts

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, No poverty, Reduced inequalities

Open Access status: hybrid

Estimated APC paid: $3,550