The UK has seen the biggest employment rate fall in the G7 since 2020 with nine million people of working age economically inactive, finds a report published by the Learning and Work Institute this month.
Read Report HereThe report finds that an ageing population with older workers moving out of the workforce could lead to more workforce shortages in the future with 1.4 million more older people retiring in the next 13 years than young people entering the workforce. The report argues that policy needs to address this by further widening access to work, helping more people currently outside the labour force to work. Otherwise, the report warns, there will be a decline in living standards and policy will need to decide how to share the pain.
The report reveals that over 1.7 million people outside the workforce want to work. Helping them do so requires more support for disabled people (as the prevalence of health conditions rises) and people with caring responsibilities (including those looking after both children and elderly parents) to work, and help for more older people to stay in the workforce and work flexibly.
The report shows that economic inactivity has risen by around 600,000 through the pandemic. This was driven by a large rise in people becoming economically inactive during 2020, particularly a rise in early retirement for older people. However, early retirement still accounted for just one in five labour market exits showing that there are many reasons people become economically inactive. One in five people who’ve left the labour market in the last two years say they would like to work. Whatever people’s reasons for leaving the labour market, the most common reason now for staying out of the labour market is long-term sickness. This is linked to rising ill health as the population ages, the impact of the pandemic, and NHS waiting lists.
The report also finds that the reasons for economic inactivity are varied. The data show the diversity of economic inactivity, with three broad groups beyond students:
- Those who are unable to work due to health or caring responsibilities
- Those who don’t need to work, with people in better paid roles more likely to have retired early
- Those who need help to work, with 1.7 million economically inactive people wanting to work but needing health, childcare, skills or employment support to do so.
The data also show a gender and class divide. Better paid and male dominated roles like managers and directors, IT professionals and other professional roles account for around one in three people who took early retirement. By contrast, people from lower paid, often female dominated roles were more likely to give up work for health reasons: roles including housekeeping; caring personal services; cleaning; and other elementary services occupations accounting for over one quarter of such moves.
Recommendations
The report makes the following recommendations to tackle the rise in economic inactivity and support more people into employment:
- We should aim for an 80% employment rate, the highest in the G7, over the next decade, increasing employment by 1.7 million people to boost the economy by £23 billion. Only one in ten out-of-work older people and disabled people get help to find work each year. We need to increase that, as well as investing in social infrastructure like health and social care, childcare, and transport.
- Policy must recognise the diversity of people who are out of work, avoiding one-size-fits-all solutions. Support needs to be tailored to individuals and engage them through trusted institutions like housing associations, councils and adult education services.
- To address recent rises in economic inactivity, the Government should expand access to Mid-life MOTs, widen eligibility to employment programmes like Restart and help employers understand how to tailor their recruitment and job design. This will help ensure more people know their options, can access support and
have local job opportunities that match their needs.
- The Government should improve support and incentives for people to work. This should include improving retraining support for those switching careers and ensuring work pays, including by addressing any disincentives created by pension rules.
- Employers should think about how they recruit, design jobs and help people stay in work. The Government should work with local employer groups to share best practice, promote its Access to Work scheme, and provide financial support for employers to provide or access occupational health support.
