Labour market data, the economically inactive, long-term ill-health and Long Covid.
05 June 2023
Around 20% of the working age population are currently economically inactive, and this is a particular problem during a time of labour shortages. What can recent labour market data tell us about the reasons why many potential workers remain out of the job market?
The Telegraph recently reported May 2023 Office for National Statistics (ONS) figures showing that the so-called “Great Retirement”, an apparent feature of the pandemic which saw many elect to leave the workforce early to enjoy life away from the treadmill of work, had become the “Great Return” – or, as the Telegraph described it, the Great Unretirement. But is it right that the labour market was badly hit by people voluntarily stopping work and that this trend is now in reverse?
With the ONS Labour Market review for May 2023 reporting employment at historically high levels and unemployment and job vacancies at historically low levels, finding workers in an era of skills shortages is a challenge facing employers and policy-makers alike.
As the economic downturn has eventually had an impact on job vacancies, numbers of vacancies have begun to decrease. The latest ONS data shows 1.08 million vacancies. This is down from a peak of 1.30 million 12 months previously, but numbers remain high.
The economically inactive
For every vacancy there is just over one unemployed adult, but there are also over eight economically inactive adults (those not in work and not seeking work).
The economically inactive comprise those of “working age” (between 16 and 64) and include those who have retired, who have caring responsibilities, are studying full-time or are unable to work due to long-term ill-health.
Latest ONS numbers show that 21% of 16 to 64 year olds are in the category of the economically inactive. This amounts to 8.73 million people.
No wonder attention has been drawn to this group in seeking to address the labour market shortages. Back in March 2023, Jeremy Hunt, the Chancellor of the Exchequer, addressed this group with a set of budget proposals to reduce their number.
Economically inactive numbers have begun to come down slightly from a peak in early summer of 2022 (May to July) when they represented 21.7% of the working age population (just over nine million people). Today’s numbers are, however, still higher than they were immediately prior to the pandemic (20.2%) but not especially high compared to the past 50 years. Indeed, the numbers have been gradually declining over the last 50 years having peaked at 25.9% in 1983. This gradual decline has been fuelled by the increase in working women, resulting in a material decline in the number of economically inactive women with caring responsibilities – see these ONS statistics.
Closer analysis of the reasons for economic activity paints a more complex picture. Notwithstanding the Telegraph headlines referred to above, the numbers of early retired have not varied much. Student numbers have fluctuated up and down. The long-term trend of fewer not working due to caring responsibilities was reversed somewhat in the middle of the pandemic (presumably as a result of the need to home school) before reverting to trend again.
The real feature of the economically inactive population in the UK is that, over time, those not working because of caring responsibilities are being replaced by those off work due to long term ill-health.
The long-term sick is now the largest category of those of “working age” who are neither in work nor looking for work, and this accounts for nearly 30% of the economically inactive. Data from last November reinforces the increase in those off work due to long-term sickness absence.
The numbers off work due to long-term ill health had begun to rise in early 2019, a year before Covid hit these shores, and in numerical terms amounts to around half a million more since the beginning of 2019. Looking at the reasons for long-term sickness absence in more detail, the largest number are those classed as having “other health problems or disabilities” followed by: mental illness and nervous disorders; depression, bad nerves or anxiety; problems connected with back or neck; and progressive illnesses (eg cancer). In the three years from Spring 2019, it was other health problems (+41%), mental illness (+22%) and back and neck problems (+31%) which increased significantly. The numbers with long-term ill-health on account of depression or progressive illness remained little changed.
The ONS commentary identifies the possible causes and, in particular, notes the possibility that working from home had contributed to neck/back problems and that increased NHS waiting times may be contributing to increased long-term sickness in the labour market generally. Of particular note, they comment that Long Covid is “likely to be an important factor in increased long-term sickness.”
As we explore in our recent article on this topic, a growing number of older people at work could mean more employees experiencing health issues. Employers will need to become increasingly adept at managing health-related issues and make their workplaces more appealing to older workers to avoid losing valuable members of the workforce.
Post-Covid syndrome (or “Long Covid” as it is commonly called) undoubtedly continues to be a problem. According to ONS data from March, 1.88 million people report ongoing symptoms after contracting Covid-19, a gradual reduction from 2.29 million in September 2022. These high levels are likely to be a material contributor to the increase in long-term ill health and so to economic inactivity rates, and one which perhaps receives less attention than it deserves.
Although we do not have data setting out the numbers not working due to Long Covid, of those currently experiencing symptoms, 1.5 million say it is affecting their day to day activities and 381,000 say it is limiting these activities “a lot”.
With the lengthy list of Long Covid symptoms including fatigue, muscle aches and problems with memory and concentration, it seems fair to conclude that this condition is contributing several hundreds of thousands to the increase in economic inactivity numbers.
Although most of society has returned to pre-pandemic behaviour, the effects of Covid are far from over. Covid is still haunting the jobs market and may well continue to do so for some time.