Stop ignoring those who bowed out of the economy and get them back into work
Good news or bad news first? Well, the good news is unemployment is at its lowest since the 1970s. The bad news is that this isn’t because more people are in work – employment is still 300,000 lower than pre-pandemic. Rather, large numbers of people aged over 50 and those with long-term health conditions have left the labour market altogether. There are now one million fewer people in the jobs market than if pre-pandemic trends had continued, making it harder for employers to find the workers they need.
Perhaps this is just an inevitable consequence of the pandemic, as people reassessed what they really wanted for their lives? But we don’t see the same pattern in many other countries. The UK has seen the largest fall in employment rates in the G7 since the pandemic and is the only G7 country to see an exodus of over 50s from the jobs market.
Many people who’ve left the labour market say they can’t be tempted back. But nearly six in ten of those in their 50s and one in three of those in their 60s said they would be interested in work, though they would want to work flexibly and in a job that suits their skills. And 900,000 disabled people who are out of work say they would like a job.
There’s a huge economic price from doing better – we estimate the economy would be £23bn bigger if the UK matched the Netherlands employment rate of 80 per cent, up from 75 per cent today. But achieving this requires focusing on the problem we have – people leaving the labour market altogether – rather than trying to sound ever tougher on unemployed benefit claimants. After all, there are twice as many people outside the labour market due to sickness and disability than there are unemployed people, and many want to work.
What would this mean in practice?
We should help those who are out of work – but not on benefits – to access support to find employment. Most government support from the Jobcentre is focused on unemployed benefit claimants. That means only one in ten out-of-work over 50s and disabled people get help to find work each year. The government could repurpose some of the £2bn that have likely not been spent from its 2020 Plan for Jobs to make over 50s and disabled people eligible for more support with their job search.
Employers also need to rethink how they recruit and structure work. Many have already done so through the pandemic. But can we go further, particularly to open up new opportunities for people with health problems and caring responsibilities?
We need to better join up health services and back-to-work support. One fifth of over 50s who’ve left the labour market during the pandemic are on NHS waiting lists. There are great examples of NHS trusts working with job centres and others. We need to roll these out more widely, including agreeing joint-up work and health plans with people. Health services could refer people to learning and help finding work, and provide more occupational health support for people to stay in work when they develop health problems.
Lastly, we need a laser-like focus on retraining. Most of us will need to update our skills multiple times during longer working lives. Yet the number of career switchers is lower than before the global financial crisis. How about providing more free training and better support with living costs for people in their 50s looking to switch careers?
Our employment rate is still high by international standards. But if the government’s looking for supply side reforms to boost growth, focusing on increasing employment would be a win-win.