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Demos - New statistics confirm that the pandemic has had a sustained negative impact on employment in the UK – here’s how policy makers should respond

This week the ONS published new statistics about employment and jobs in the UK – the first time for a number of months due to problems with survey response rates. With the appropriate caveats that the figures are estimates based on survey data – and therefore, as always, they come with a margin of error – here’s what we learnt from the new statistics, and some of the implications for policy makers.

THE PANDEMIC HAS HAD A SUSTAINED NEGATIVE IMPACT ON EMPLOYMENT IN THE UK

One positive aspect in the performance of the UK’s economy after the global financial crisis was the long-run trend in growing employment. After the employment rate had fallen to 70% in 2011, it steadily increased to a high of 76.2% just before the pandemic – an additional 2.5 million people in work.

However, almost exactly four years since the start of the pandemic, the employment rate remains below its previous level at 75.0%. Given the long-term trend over the previous decade of increasing employment, this is a major change in the UK economy.

We’ve seen the impact of this as it has caused serious problems with recruitment, with employers in some sectors facing severe shortages. Based on the latest available data there are around 150,000 vacancies in adult social care in England, 120,000 vacancies in the NHS in England, and 100,000 vacancies in hospitality in the UK.

More generally, the weak economic growth which the UK did achieve in the 2010s relied heavily on the growth in employment. The trend since the pandemic, combined with the UK’s changing demographics, suggests that policy makers in the 2020s cannot rely on increasing labour supply in the same way (as highlighted by Resolution Foundation).

LONG-TERM HEALTH CONDITIONS AND DISABILITIES ARE AN EVEN MORE SERIOUS PROBLEM THAN WE PREVIOUSLY THOUGHT

Among people who are ‘economically inactive’ – that is, people not working and not currently looking for work – the largest group by a significant margin are people with long-term health conditions or disabilities. The latest estimate is that there are around 2.8 million people of working-age who give long-term ill health as their main reason for not working – a record high figure.

Of course, many people in this group are not able to work, nor should we expect them to. However, one in five (23%) say they would like a job, at least in principle – around 650,000 people.

The government has announced a number of schemes designed to support people in this group who would like a job under the headline title of ‘Universal Support’ (which, contrary to its name, is in fact a targeted employment support programme primarily for people with health conditions or disabilities). At the Autumn Statement last year, the government announced plans to expand Universal Support with the aim of supporting 100,000 people per year. However, it is still in pilot stage at the moment, and therefore is supporting only a relatively small number of people this year. 

The more significant problem is that the government does not have an easy way of contacting this group of people to let them know about the offer of support. In the pilot stage of schemes, it is mainly relying on private sector providers to recruit people. To this point, the scale of the programme – and the accompanying advertising or brand building – is not commensurate with the challenge.

More generally, there is a clear need for policy makers to take seriously the links between health and work. A population with more ill health results in lower productivity among workers and a smaller active workforce. At Demos, we have previously highlighted the importance of addressing the UK’s ageing workforce challenge, particularly focusing on supporting people’s long-term health over the course of their lifetimes – bearing in mind that people starting work today will have a 45-50 year career.

THERE ARE A MILLION WORKING-AGE PEOPLE WHO HAVE RETIRED – AND THEY ARE UNLIKELY TO RETURN TO WORK

Another large group of working-age people outside the workforce describe themselves as retired. The ONS estimates there are around 1 million people in this category. Unsurprisingly, almost no one in this group wants a job, and historical data shows that people who describe themselves as retired are unlikely to return to work.

For policy makers, the implication is clear: more proactive interventions are needed to enable people in their 50s and 60s to remain in the workforce with action targeted before people leave work for retirement. 

Our research, including focus groups with people in this age group, showed that many older people do leave work earlier than they really want to – for a range of reasons including a perception that their work is not valued by wider society, a lack of occupational health support, a lack of access to part-time or flexible work, poor experiences of management, and ageism in the workplace. Our report The Platinum Pound includes recommendations designed to encourage people to stay in work, including an annual Priority Jobs Bonus for older people working in shortage occupations, expanding occupational health services and encouraging employers to improve line management for older workers.

THE UNEMPLOYMENT RATE REMAINS HISTORICALLY LOW – BUT DESPITE THIS THERE ARE OVER 200,000 LONG-TERM UNEMPLOYED

The latest estimate of unemployment is 3.8%, which remains historically low – around the same level as before the pandemic, but much lower than the high of 8.5% in 2011 after the global financial crisis.

This is a good news story: up to now, unemployment has never risen as high as some feared it would after the pandemic or after the recent rise in interest rates. Organisations including the Bank of England and the IFS previously projected that unemployment would be 5-6% by now.

On the other hand, there are an estimated 260,000 people who have been unemployed for over a year. This is a slightly lower figure than before the pandemic, but it is perhaps surprising when there have been such a large number of vacancies in the economy for a sustained period.

For policy makers, this is a group which it should – in theory – be easier to help. Most people in this group will be receiving Universal Credit, and have access to both support from Jobcentres and other government-funded programmes such as Restart. The government has recently extended the Restart programme until 2026, and plan to change eligibility so that people unemployed for 6 months or more have access to it, which is sensible.

However, given the large numbers of vacancies in specific sectors, policy makers should consider whether the links between programmes such as Restart and shortage sectors are strong enough. In the course of conducting research I have spoken to multiple policy makers and other stakeholders who have expressed frustration that there aren’t more efforts to link people looking for work to specific sectors. Last year we wrote a case study of a scheme called I CAN in Birmingham which did exactly that, linking people looking for work with entry-level jobs in the NHS. Policy makers should look to expand this kind of approach to address the shortages which the UK economy is experiencing.

Original article link: https://demos.co.uk/blogs/new-statistics-confirm-that-the-pandemic-has-had-a-sustained-negative-impact-on-employment-in-the-uk-heres-how-policy-makers-should-respond/

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