Government told to do more to tackle economic inactivity

Experts are calling for the Government to do much more to tackle economic inactivity and to help people back into work instead of threatening to cut their benefits as new figures show it continues to rise.

Figures from the Office for National Statistics show that employment was down by 0.3% in June to August on the previous quarter, although the number of self-employed workers increased and unemployment fell to 3.5%. Nevertheless, the number on payroll in September was up.

Economic inactivity rate continued to rise and now stands at 21.7%, largely driven by those aged 50 to 64 years and those aged 16 to 24 years either due to long-term sickness or being a student. The number of economically inactive people who were classified as long-term sick increased to a record high.

Meanwhile, job vacancies were still high, but are falling. In July to September 2022, the estimated number of vacancies fell by 46,000 on the quarter to 1,246,000, the largest fall on the quarter since June to August 2020, but vacancies remain at a high level.  A survey by the Confederation of British Industry shows that three-quarters of businesses have experienced difficulties filling vacancies, meaning nearly half have been unable to meet output demands as a result.

Growth in average total pay (including bonuses) was 6% and growth in regular pay (excluding bonuses) was 5.4% among employees in June to August 2022, although the average rise in the public sector was just 2.2%, compared to 6.2% in the private sector. The ONS says the gap between public and private sector pay is larger than it has ever been. Due to inflation, the ONS says total pay fell by 2.4% and regular pay fell by 2.9%.

Tony Wilson, Director at the Institute for Employment Studies said: “The last time unemployment was this low was Christmas 1973 and Slade had just reached Number 1.  But despite this record low unemployment, there are still more than a million unfilled jobs and over than half a million more people out of work than before the pandemic began.  This is being driven in particular by an alarming growth in economic inactivity due to long-term ill health, which is up by 170 thousand in the last three months alone and has reached its highest figure in at least three decades (2.49 million).

“The Chancellor now has three months to come up with a plan to address this.  Virtually none of those who have left the labour market are on unemployment benefits and most aren’t even on benefit at all.  So the focus  needs to be on how we can do much more to help people back into work instead of threatening to cut their benefits.   A good place to start would be by extending access to the Restart Scheme, where government now expects to spend £1.2 billion less than it forecast a year ago.  This investment will likely more than pay for itself in the longer run and not using it would be a complete false economy, reducing access to services for people out of work in order to fund tax cuts for those better off in work.”

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