Why isn’t Britain working? UK on track to be only country in developed world with lower employment in 2023 than pre-pandemic

10 November 2022

New analysis shows this is being driven by a combination of people out of work for five years or more with long-term illnesses, lower migration and more students – but with new evidence showing how early retirement and Long Covid are contributing

Lack of access to employment support is a key factor – with analysis finding that just one fifth of jobseekers use Jobcentre Plus, and fewer than a fifth of employers

The UK performs poorly on employment for disabled people and older workers – if we could close just half of the gap to the best performing nations, there would be over a million more people in work and an employment rate above 80%

Report is launching a new Commission on the Future of Employment Support – bringing together experts from business, public services and civil society to develop a blueprint for future reform

New analysis published on Thursday (10 November) will show that 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.  The report – Working for the Future – will launch a major new Commission on the Future of Employment Support that will work over the next eighteen months to gather evidence and develop proposals for far-reaching reform.

Coming the week after the Bank of England forecast that unemployment could rise by half a million next year, and a week before the government announces its new spending plans, the case for reforms to how we help people and employers to fill jobs has never been stronger.

The Commission is being hosted by the Institute for Employment Studies in partnership with the abrdn Financial Fairness Trust.

The report sets out extensive new analysis of the UK labour market and the challenges that we are facing. Key new findings include 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. By early next year the UK is likely to be the only country in the developed world with lower employment than in 2019.

This is being driven by a shrinking workforce – with 600 thousand more people ‘economically inactive’ than in 2019. New analysis shows that it is being driven by:

An increase of more than 200 thousand in those out of work for five years or more due to ill health – as people who might have got back to work sooner become more and more disadvantaged

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 thousand more people retiring early in the last two years – so likely after leaving furlough or other support (rather than during the first lockdown)

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 (again not being able to get into work rather than leaving it).

The smaller labour force is likely to be a lasting change – as Baby Boomers continue to retire through the 2020s, and due to lower migration – with half a million fewer non-UK born workers than there would have been on the pre-2016 trend.

Recent years have seen a huge fall in access to Jobcentre Plus employment support, and often low levels of satisfaction from those who do get it:

One in five jobseekers now use Jobcentre Plus, compared with well over half a decade ago – and virtually none of the ‘economically inactive’ are accessing support

New polling finds that just one third of those who have used Jobcentre Plus are satisfied with the help to find work

Polling of employers finds that just one in six have recently used Jobcentre Plus – with the large majority who don’t use it stating that they do not feel that it would meet their needs.

Finally, the UK lags behind many other nations on employment for disabled people and older people.  Even just closing half of the gap to the best in the world would lead to over a million more people in work and an employment rate above 80%.

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.

It is also launching a Call for Evidence to hear from employers, services and others with an interest in these issues and gather evidence on what needs to change. This will be followed next year by a series of hearings, events and further research and development.

Commenting on the report and launch, Mubin Haq, Commissioner and Chief Executive of abrdn Financial Fairness Trust, said:

“Record low levels of unemployment have been masking serious problems with employment support on offer. It is failing to meet the needs of millions out of work and the UK continues to lag behind others in supporting disabled people and older people into jobs.  With unemployment forecast to nearly double over the next three years, rising by an extra million, there is an even greater urgency to make long overdue improvements.”

Kate Bell, Commissioner and Head of Rights, International, Social and Economics at the Trades Union Congress, said:

“This vital report shows just how far we have to go before everyone can get the decent work they want and deserve. Compared to workers in other European countries, Disabled people and older people are much less likely to be in work in the UK. That’s a huge waste of potential. If we closed only half the gap with the best in Europe that would mean a million more people in work. A plan to achieve that should be a national priority.”

Neil Carberry, Commissioner and Chief Executive of the Recruitment and Employment Confederation, said:

“We have record low unemployment, yet hours worked are still below the levels of February 2020. That makes economic inactivity a huge challenge to our future ability to deliver growth and prosperity. I look forward to working with the Commission on how we can support more people back into the labour market effectively, supporting their incomes and also the income of the whole nation.”

Tony Wilson, lead report author and Director at the Institute for Employment Studies, added:

“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.”

Download the report.