The strapline from the famous Conservative Party poster ran in advance of the 1979 election, showed a queue snaking outside an unemployment office. The election followed the Winter of Discontent, characterised by widespread strikes, unions demanding double-digit pay rises and rubbish stockpiled in Leicester Square. Does all this, apart from the rubbish stockpiles, sound ominous? (Although on that matter, I’m well informed by “Disgruntled of Tunbridge Wells”, that the suspension of local recycling collections until the New Year is a pretty close second).
Just before Christmas, The Economist ran an article charting the decline of Britain compared to a group of other countries (including the US, France and Germany amongst others) which showed since the onset of the financial crisis in 2007, GDP per person (adjusted to neutralise currency strengths/weakness) was the lowest of its peers, as was the productivity of the British workforce over the same period. Part of the reason for the decline in productivity has been levelled at falling numbers of over 50’s in work and the rising numbers of those classed as “inactive”, both of which moved in opposite directions at the beginning of the pandemic in early 2020.
Blowin’ In The Wind
In the early days of the pandemic, it was younger workers who found themselves economically inactive[i] as the bars, restaurants and the gig economy shut down. However, the long-term trend that emerged through the next couple of years was the primary group of workers leaving the workforce were those aged 50-64 (the pink/salmon section of the bar in the chart below).
[i] “People not in employment who have not been seeking work within the last 4 weeks and/or are unable to start work within the next 2 weeks.” Office for National Statistics Definition
Since January 2020 within the 50-64 cohort, the number of non-working individuals rose from 37,000 to 386,000 by July 2022, before dropping back to 302,000 by the end of October. Whereas, in the 16-24 age group, whilst there were initially just under 6,000 economically inactive people in January 2020, the numbers ballooned to c290,000 in the three months between January and March 2021, just a year later. This subsequently fell back to 67,000 by the end of April 2022. It should also be noted the total number of people deemed economically inactive was still over 500,000 in the latest set of data[i].
In response to this, the government plans to encourage those who have left the workforce to have a ‘midlife MOT’, a health and wealth check. Presumably, the intention is to highlight how assumptions many may have made early in the pandemic may need to be reviewed given double-digit inflation and difficult investment conditions. Inflation isn’t an equal arbiter and neither is the necessity to work. Currently, the inflation driven by rising food, energy and rent costs, disproportionately impacts lower income workers as they spend a greater percentage of their disposable income in these areas.
[i]Throughout, I have heavily drawn on the data released in the ONS “Reasons for workers aged over 50 years leaving employment since the start of the coronavirus pandemic: wave 2”.
To read the full report click here
Handle with Care
Looking under the bonnet and into the numbers a little more, an MOT may bring some unwelcome news for those hoping for a swift return of many more experienced workers.
Whereas the majority of those closest to traditional retirement age, left work to retire or because they no longer wanted to work (64%), in the younger 50-54 age group, just 16% shared those same motivators. In fact, half of the 50–54 year old workers, who left paid work, did so due to either stress, illness, mental health reasons or disability, rather than leaving from a position of financial strength. Only 38% felt they have the retirement provisions to meet their needs.
An overworked and under-resource NHS will play a key part in returning these workers to the economy – and with it an £8 billion production boost to the UK economy[i]. With the NHS being short of almost 50,000 nurses, 12% job vacancy rates and a 7.2 million backlog in the waiting list queue, the solution won’t be quick.
[i] According to the Institute for Public Policy Research, who estimated approx. 1/3 of workers who have left the workforce since the pandemic was for health-related reasons and sought to calculate the economic impact. IPPR, Health & Prosperity Report, April 2022
Ain’t going to work on Rishi’s farm no more.
Weak wage bargaining power remains prevalent, despite an increase in unions taking workers out on strike. The percentage of British workers who are in a union is currently only about 25% of the workforce, whereas this peaked in the early 1980s at around 50%. Tougher legislation has contributed to a decline in union power since and looking at a chart showing how many days had been lost due to strike action, the most striking feature is just how passive labour has been over the last 30 years or so. Rising costs have brought into sharp focus the reality of sub-inflation pay rounds, and a more determined public sector workforce determined to have their voice heard resulting in a ballooning in the total number of days lost due to strikes to rival any of the millennium, with the exception of 2011.
Source: Office for National Statistics
Not dark yet
Britain is set to have amongst the lowest growth in major economies this year and tackling the UK’s productivity gap will take a multi-faceted and long-term approach. I’m keeping a straight face when I say Liz Truss had a point – we do need growth and we do need to tackle the ‘levelling up agenda’ which stretches far beyond a political strapline to impact the health, wealth, happiness and life expectancies of all Britons. Why should someone born in Blackpool have a healthy life expectancy of 56, but someone in Richmond upon Thames have one nearing 70? We just can’t borrow our way all the way there.
A dear former colleague always said you shouldn’t deliver problems but should deliver solutions to the problem identified. There is no one solution, let alone an MOT, that will drive the changes required. The root causes and required reforms will drill down into the country’s health and education systems, its overly centralised form of government, it’s social care provisioning as well as an economy dominated by its southeastern quadrant. And yes, some personal ownership too.
The solutions do not belong in these pages, but they will (or should) be found in the pages of the manifestos for government at the next election.
Views and opinions are my own and not of any organisation I may or may not be associated with in a professional or personal capacity.