UK will be only developed country in world with lower employment in 2023 than pre-pandemic

The cover image of the report into UK employment, consisting of a large arrow made up of numerous peopleA new report claims that the UK is undergoing one of the worst employment recoveries in the world, fuelled by a shrinking workforce and lack of access to effective employment support. 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 report – Working for the Future – is published alongside the launch of a new Commission on the Future of Employment Support that aims to work over the next eighteen months to gather evidence and develop proposals for far-reaching reform.

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

The report claims to offer an extensive analysis of the UK labour market. Key claims 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 percent.

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.