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Even as the country slides into a recession, Britain has too many job vacancies and too few workers willing or able to fill them. Unemployment is at record lows, but at least half a million more Britons are out of the workforce and not looking for work than before Covid-19, putting the UK on track to be the only advanced country next year with employment below pre-pandemic levels.
The questions puzzling economists and policy makers are why so many working-age people have dropped out — and how to reverse the trend. The stakes are high. Too much economic inactivity hampers the post-pandemic recovery, increases inflationary pressures (as Bank of England Chief Economist Huw Pill noted Wednesday) and threatens Britain’s future growth prospects at a time when the UK is already grappling with low growth and productivity.
Some increase in inactivity is normal following an economic slowdown. UK levels are now around what they were in 2018 and population effects account for some of it, so the jump isn’t massive. Around 85% of the increase in inactivity among younger people aged 18-24 had been due to schooling (slightly less on latest data), though poor mental health may also be taking a toll, as a newly published survey shows.
But there are two worrying aspects of the inactivity rates in Britain: the fact that the largest concentration comes from workers in their 50s and 60s, and the role of long-term sickness in driving or compounding that inactivity.
Until the pandemic, economic inactivity in Britain had been steadily falling since records began in 1971. Recently released government statistics showed that the three months to September saw the highest-ever level due to long-term sickness. Of 3.5 million older workers (those in their 50s and 60s) who were inactive in the second quarter of 2022, 1.6 million reported ill health as the main reason. Over 155,000 consistently report it as an added factor.
Most advanced countries saw large numbers leave the workforce during Covid, but for the most part, these workers went back into employment. That wasn’t the case in Britain. The Bank of England’s Jonathan Haskel, speaking in October, noted the stark difference between the UK and most of its peers: Levels of inactivity fell by 0.7 percentage points in the median OECD (advanced nation) economy between 2019 and the first quarter of this year, while the UK saw inactivity rise by the same amount. This would “hold UK growth back,” Haskel noted.
One common explanation is that Long Covid is to blame. The Office for National Statistics estimates almost 2 million people in the UK had Long Covid by May 2022, and nearly three-quarters reported being limited by the condition. But this likely only explains a small slice of the inactivity. The Institute for Fiscal Studies estimates that only about one in 10 people who develop Long Covid stop working — most go on sick leave rather than leaving their jobs entirely.
The gradual build-up of broader health problems, including mental health issues and the lack of timely access to care in the UK, probably explains more of the picture. The ONS found that 18% of older workers who became inactive during the pandemic are on an NHS waiting list; and people waiting for medical treatment tend to have lower employment rates than those receiving treatment.
Around 7 million patients are waiting for treatment and there are many who have not been able to get referrals. On top of that, the social care system is vastly underfunded, which means many older workers have to step in to care for elderly or infirm family members. Those pressures only increased over the past couple of years.
Many workers cite early retirement or other reasons for quitting (especially workers over 65), but with the exception of a brief period at the end of 2020, the overriding reason people out of the workforce give is poor health. David Finch, assistant director at the Health Foundation and co-author of a recent report on health and economic inactivity, notes that that it’s often difficult to unpick reasons for inactivity because of how surveys are worded and because some workers may have multiple reasons for inactivity.
The Bank of England was hopeful a year ago that the inactivity trend would prove temporary. So far, that hasn’t been the case, though with rising living costs, there are certainly more cost pressures on retirees. While older workers who retire are historically very unlikely to return to work, surveys suggest many would consider resuming employment under the right conditions. More efforts to recruit and retain older workers, whether with more flexible working or retraining, can help that process.
And yet, much depends on the government finding ways to improve public health. The population of those in their 50s and 60s is set to grow by 600,000 more people in the decade to 2030. Though cancer survival rates are improving, around half of those born after 1960 will receive a cancer diagnosis — only about six in 10 returns to work within a year of completing treatment and over half of cancer survivors experience unemployment. So improving conditions for those working through or recovering from illness will be crucial.
We should also be careful about glorifying employment too much. Many older workers who can afford it choose to be “inactive,” statistically speaking, but are highly involved in their communities, caring for family members or providing other crucial support roles. And with taxes at their highest level since WWII, the financial case for remaining at their desks is harder to make now.
Still, getting more older workers into employment — and preventing others from falling into inactivity — would both help Britain’s growth prospects and benefit an aging population generally. But if that’s to happen, the UK will need a health system that doesn’t leave sick people waiting.
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Therese Raphael is a columnist for Bloomberg Opinion covering health care and British politics. Previously, she was editorial page editor of the Wall Street Journal Europe.
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