Does the UK furlough scheme mitigate psychological distress during the pandemic?

The UK Coronavirus Job Retention scheme (CJRS) was a temporary scheme designed to protect the economy supporting jobs and avoiding the social fallout of the COVID 19 crisis. It supported the incomes of workers, mitigated workers’ financial hardship, and presumably affected workers’ psychological distress. The aim of this paper is to explore the association between labour market status and individuals’ psychological distress. In particular, we investigate whether the CJRS is able to mitigate individuals’ psychological distress, especially for individual perceiving neighbourhood social cohesion deprivation. Using April-July 2020 data from the UK Understanding Society COVID-19 survey, we find that (i) a continuous employment status is associated with better mental health outcomes; (ii) the Coronavirus Job Retention Scheme is able to mitigate psychological distress; (iii) individuals experiencing neighbourhood social cohesion deprivation appear to benefit more (in terms of distress reduction) from the CJRS than individuals living in more cohesive neighbourhoods.