Furlough and Household Financial Distress during the COVID‐19 Pandemic

Christoph Görtz, Danny McGowan and Mallory Yeromonahos

Oxford Bulletin of Economics and Statistics, 2023, vol. 85, issue 6, 1157-1184

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.

Date: 2023
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https://doi.org/10.1111/obes.12556

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Working Paper: Furlough and Household Financial Distress during the COVID-19 Pandemic (2021)
Working Paper: Furlough and Household Financial Distress during the Covid-19 Pandemic (2021)
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