Why has the UK seen such an increase in economic inactivity among the over 50s?

Read about National Older Workers Week

The UK is an international outlier when it comes to the rise in economic inactivity of older workers and has seen the biggest drops in over 50s in the workforce of 10 developed economies, according to a new report by the Learning and Work Institute.

The Participation Gap report says that, out of 10 countries studied, the UK is the only country analysed to see significant falls in economic activity rates for people aged 55-64. Rates are virtually back to prepandemic levels in Germany, Italy, the US and Canada, for instance, and have risen in Spain, the Netherlands, Japan and Australia.

The report adds that the UK has seen the largest employment rate drop in the G7 since the pandemic started and that an extra one million people would be in work if the UK matched the best performance in the G7.

So why has the UK got such an economic inactivity problem? Part of the reason is a health one, says the report. It outlines how the UK has seen an 11% increase in the number of people who are economically inactive due to long-term sickness or early retirement since December-February 2020. The number of people economically inactive due to sickness (2.6 million) is now double the number of unemployed people (1.3 million).

A range of factors may contribute to this, says the report, including rising prevalence or awareness of mental health conditions, NHS waiting lists and potentially long Covid.

Another big reason for the rise in economic inactivity is the number of people who say they do not want a job. However, the report says this could change, for example, due to cost of living crisis.

The report adds that a major part of the problem is the Government’s response. It has adopted the wrong policies, with a focus on unemployment instead of economic inactivity, says the report. There is an underspend of up to £2 billion in the Plan for Jobs, for instance, because the US planned for an unemployment crisis which it averted. The report states: “There is far less policy focus on how we might support economically inactive groups back into the labour market, even though 1.7 million economically inactive people say they want to work. This includes 63% of those in their 50s who’ve left work in the pandemic who also say they would like to work again if they could find a job that matches their skillsets and offers flexible working opportunities.”

The report calls on employers and the Government to find ways to support people back into the labour market. It says: “We need a renewed plan for jobs, skills and growth that works with employers to find new ways to engage and support people into the labour market.”

Meanwhile, a new report by the ILC-UK on Japan’s ‘super-ageing’ society says that, in countries that spend more on health, older people work more, spend more and volunteer more. It says increasing preventative health spending by just 0.1 percentage points is associated with a 9% increase in annual spending by people aged 60 and over and 10 more hours of volunteering for each person aged 65 or over.

Nearly half (47%) of Japan’s population is already aged 50 and over, and this is set to increase to 54% by 2035, says the report.

*WMPeople.co.uk, the umbrella group which includes workingwise.co.uk, is holding its second National Older Workers Week in November to look at issues around how to attract and retain older workers.

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