This paper analyses the link between job insecurity, furlough and mental health during the Pandemic in the UK. Using panel data from Understanding Society Covid-19 Survey, we analyse the effect of job insecurity, an objective measure of job insecurity derived by exploiting the variation in furlough take-up rates across industries and exposure to lockdowns, on mental health of workers who experienced unexpected and uncertain labour market shocks, relative to control workers represented by those who have always been employed and never lost their jobs.
Results show that objective job insecurity statistically significantly increases mental distress only for workers who have experienced furloughed but have not lost their jobs. There is no statistically significant effect on those who have lost jobs (furloughed or employed). The effects are mitigated by subjective job insecurity, and are robust to the use of fixed effects and balanced panel models. Additionally, heterogeneous analysis reveals that, in contrast with existing literature, objective job insecurity has a statistically significant detrimental effect mainly on male workers, and on older workers. In this case the effect is also statistically significant for employees who have suddenly lost their jobs. Findings point out to the indirect effects and mechanisms behind the impact of the government policies (i.e. furlough) on mental health.