Source · Select Committees · Treasury Committee
Recommendation 14
14
Deferred
Paragraph: 121
The Treasury has allocated significant and welcome resources to initiatives to help people who are...
Recommendation
The Treasury has allocated significant and welcome resources to initiatives to help people who are seeking work gain employment. However, a more urgent problem now seems to be becoming clear in the sharp fall in the number of people looking for work, compared to pre-pandemic trends. This is harming economic activity and could exacerbate inflation. The Treasury needs to consider allocating or reallocating resources to address the fall in the number of people looking for work since the start of the pandemic. In part, that may mean additional resourcing for ‘long covid’ treatment, to enable those suffering from long-term sickness to re-enter the workforce in greater numbers.
Government Response Summary
To understand what action should be taken as a result of the rise in economic inactivity, the Department for Work and Pensions will thoroughly review workforce participation concluding in early 2023.
Paragraph Reference:
121
Government Response
Deferred
HM Government
Deferred
This section is addressing recommendations in paragraph 121, 131 and 132 on Labour market inactivity after COVID19; addressing gaps in the UK’s skills and easing labour shortages; and the Apprentice Levy in England. In the Autumn Statement, the government also set out the challenging labour market post-COVID19. Since the 2008 Global Financial Crisis, much of the UK’s growth has been driven by an increase in the number of hours worked. This was partly due to falling unemployment–which is now close to its lowest rate in 50 years–and increased labour market participation after 2008. However, since the COVID19 pandemic this trend has reversed. Labour market inactivity Despite low unemployment, there are now 630,000 more inactive working age individuals in the labour market than there were pre-pandemic, primarily driven by those aged over 50 leaving. Amongst the 50–64 cohort the inactivity rate now stands at 27.3%, 2.1ppts higher than pre-pandemic. As the report sets out, this fall in participation amongst workers is a risk for the UK’s economic stability–as labour market tightness and its associated pressures on inflation create the risk of a higher interest rate peak. This shortfall of labour is also dampening the UK’s growth, as businesses struggle to fill roles and the productive capacity of the economy is reduced. There does not appear to be one single cause driving older worker inactivity, and a recent ONS survey of recently inactive people aged over-50 highlighted retirement, redundancy, changes in lifestyle, caring responsibilities, and illness as some of the most common reasons. To understand what action should be taken as a result of the rise in economic inactivity, the Department for Work and Pensions will thoroughly review workforce participation concluding in early 2023.