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Questions perplexing economists and policymakers are why so many working-age people have dropped out — and how to reverse the trend. The stakes are high. Excessive economic inactivity could hamper the post-pandemic recovery, add to inflationary pressures (as Bank of England Chief Economist Hugh Peel noted on Wednesday) and threaten Britain’s future growth prospects at a time when the UK is already grappling with low growth and productivity. .
A slight increase in inactivity is common following an economic downturn. UK levels are now around what they were in 2018 and the population effect accounts for some of that, so the jump isn’t huge. About 85% of the increase in inactivity among 18-24 year olds was due to schooling (slightly less on recent data), although poor mental health can also have an impact, as a newly published survey shows.
But there are two worrying aspects of Britain’s inactivity rate: the fact that the highest concentration comes from workers in their 50s and 60s, and the role of long-term illness in driving or compounding that inactivity.
Until the pandemic, economic inactivity in Britain had been falling steadily since records began in 1971. Recently released government figures show that the three months in September saw the highest level of long-term illness ever. Of the 3.5 million older workers (in their 50s and 60s) who were inactive in the second quarter of 2022, 1.6 million reported poor health as the main reason. More than 155,000 people consistently report it as an additional factor.
Most advanced countries saw large numbers of workers leave during Covid, but for the most part, these workers returned to employment. Not so in Britain. The Bank of England’s Jonathan Haskell, speaking in October, noted the stark contrast between the UK and most of its peers: the level of inactivity in the median OECD (advanced nation) economy fell by 0.7 percent between 2019 and the first quarter of this year. , while the UK saw a similar increase in inactivity. This will “hold back UK growth,” Haskell noted.
A common explanation is that long covid is to blame. The Office for National Statistics estimates that around 2 million people in the UK had long-term Covid by May 2022, and around three-quarters reported being limited by the condition. But this likely explains only a small fraction of the inactivity. The Institute for Fiscal Studies estimates that only one in 10 people who develop chronic Covid stop working – most go on sick leave rather than quit their jobs altogether.
The slow build-up of wider health problems, including mental health problems and lack of timely access to care in the UK, perhaps explains more of the picture. The ONS found that 18% of older workers made redundant during the pandemic are on NHS waiting lists; And those waiting for medical treatment have lower employment rates than those receiving treatment.
About 7 million patients are waiting for treatment and there are many who could not get a referral. On top of that, the social care system is severely underfunded, which means many older workers have to step in to care for elderly or frail family members. Those pressures have only increased in the past few years.
Many workers cite early retirement or other reasons for leaving the job (especially workers over age 65), but with the exception of a short period in late 2020, those outside the workforce have poor health. David Finch, assistant director of the Health Foundation and co-author of a recent report on health and economic inactivity, notes that unpicking the reasons for inactivity is often difficult because of how surveys are written and because some workers may have multiple reasons for inactivity. is .
The Bank of England had hoped a year ago that the dovish trend would prove temporary. So far, that hasn’t been the case, although with the rising cost of living, there is certainly more cost pressure on retirees. While retired older workers are historically unlikely to return to work, surveys suggest that many would consider resuming employment under the right conditions. Greater efforts to recruit and retain older workers, whether with more flexible working or retraining, could help the process.
And yet, much depends on the government finding ways to improve public health. Their population in their 50s and 60s is set to grow by 600,000 more people in the 2030s. Although cancer survival rates are improving, about half of people born after 1960 will receive a cancer diagnosis – only six in 10 return. Work within a year of completing treatment and more than half of cancer survivors experience unemployment. Therefore improving conditions for those undergoing or recovering from illness will be crucial.
We should also be careful about over praising employment. Many older workers who can afford it prefer to remain “inactive,” statistically speaking, but are very involved in their communities, caring for family members or providing other critical support roles. And with taxes at their highest level since WWII, the fiscal case for remaining on their desks is now hard to make.
Still, getting more older workers into employment – and preventing others from falling into inactivity – would both help Britain’s growth prospects and benefit the aging population more generally. But if that is to happen, the UK will need a health system that doesn’t make sick people wait.
More from Bloomberg Opinion:
• The Decline and Fall of the Tory Empire: Adrian Wooldridge
• Recession probably scares retailers more than China protests: Andrea Felted
• Juventus lay bare soccer’s rotten finances: Kris Bryant
This column does not reflect the opinion of the editorial board or Bloomberg LP and its owners.
Therese Raphael is a columnist for Bloomberg Opinion covering health care and British politics. Previously, he was editorial page editor of The Wall Street Journal Europe.
More stories like this one are available at bloomberg.com/opinion
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