How did the duration of Spain’s furlough schemes affect their efficacy?

Abstract

This article assesses how effective Spain’s furlough schemes were from the start of the COVID-19 crisis in allowing the workers affected to return to work. On average between 2020 and 2021, the absolute probability of workers resuming their activity was high, although the shorter the furlough scheme, the higher the probability: almost 65% for workers who were furloughed for just one quarter, compared with slightly more than 26% for those who were furloughed for three quarters. When compared with workers of identical characteristics who were not furloughed but lost their jobs and became economically inactive or unemployed, the gap is positive, but it also narrows over time. In consequence, the results show that the furlough schemes – especially the shorter ones – were highly effective in the period analysed. However, the longer the furlough schemes lasted, the less effective they tended to be, especially for certain groups, such as younger workers, those with temporary contracts and workers in certain service activities.