Report asks why UK employment isn’t working

The UK has the third worst employment recovery in the developing world after the pandemic, according to a new report.


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The UK has had among the worst employment recoveries in the world, fuelled by a shrinking workforce and lack of access to effective employment support as well as a poor record on employment for disabled people and older people, according to a new report.

The report, Working for the Future, finds that the UK is almost unique in seeing employment still lower than pre-pandemic, with the third worst recovery in the developed world. Only Latvia and Switzerland have fared worse and both are improving fast, it says, predicting that by early next year the UK is likely to be the only country in the developed world with lower employment than in 2019.

Its analysis shows the reasons behind this – a shrinking workforce with high levels of economic inactivity, particularly since Covid. This is due to an increase of more than 200 thousand in those out of work for five years or more due to ill health; people leaving work in early 2020 due to illness – with the clearest evidence yet of ‘Long Covid’ impacts, leading to an estimated 30,000 more people out of work;  around 50,000 more people retiring early in the last two years, often after being furloughed or receiving other support rather than during the first lockdown; and the growth of more than a quarter of a million in the number of people who have never worked – with two thirds of this explained by more students, but one third because of people with ill health or disabilities.

Figures out from the Office for National Statistics, however, show the rise in long-term sickness started before the coronavirus pandemic, but say the number of people out of work because of long-term sickness has risen by 363,000 since 2020, accounting for 28% of people who are economically inactive compared to 25% before the pandemic.

Nevertheless, the ONS says Covid is unlikely to be a main contributor to the increases seen in recent years, with back pain [possibly linked to homeworking], mental health and other health issues being the principal reasons for the rise. Of working-age adults, more than half of those out of the workforce because of long-term sickness in early summer were aged 50 to 64 years, although young people – particularly young men – saw the fastest relative rise in long-term sickness, mainly for mental health issues.

What next?

The report says a smaller labour force is likely to be a lasting change due to demographic changes and lower migration and a big fall in access to Jobcentre Plus employment support and often low levels of satisfaction from those who do get it [only a third of users polled say they are satisfied with the support offered and the number of employers using it falling too]. It found that one in five jobseekers now use Jobcentre Plus, compared with well over half a decade ago and says virtually none of the ‘economically inactive’ are accessing support.

The report argues that good access to good quality employment support can play a key role in bringing more people into the labour force, helping employers fill their vacancies, supporting economic growth and helping meet future opportunities from technology and the transition to net zero.

The report comes at the launch of a major new Commission on the Future of Employment Support that will work over the next 18 months to gather evidence and develop proposals for far-reaching reform.The Commission is being hosted by the Institute for Employment Studies in partnership with the abrdn Financial Fairness Trust.

Tony Wilson, lead report author and Director at the Institute for Employment Studies, said: “There’s been a lot of focus on why so many people have left the labour force since the start of the pandemic, but the most important question now is how we help people get back. However, the challenges in doing this aren’t new at all and have often been building for decades, with not enough people able to access employment support, little help for employers and a complicated, fragmented and often under-funded system of programmes, schemes and services. We’ve got a real opportunity now to look again at our approach and build something for the future that can support higher growth, better living standards and local economies.”

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