Why economic inactivity deserves a closer look
There could be over 3 million ‘missing workers’ in the UK – helping them into the labour market is important for their well-being and for productivity.
There could be over 3 million ‘missing workers’ in the UK – helping them into the labour market is important for their well-being and for productivity.
It has been noted that UK is experiencing a ‘jobs miracle’. Sustained high employment growth in spite of growing economic uncertainty means the UK has one of the lowest levels of unemployment since 1975.
What the stats do not say however, is that there could be over three million people in the UK that, because they are not looking for jobs for one reason or another, do not classify as unemployed but could nevertheless potentially work if given adequate support. These are the ‘missing workers’.
This is what we uncovered when taking a closer look at economic inactivity. Every person not currently in employment or looking for jobs and able to start work within two weeks is classified in official statistics as ‘economically inactive’. This includes people that are inactive for a whole bunch of different reasons: students are inactive, and so are early retirees; people can be inactive because they are looking after family or home, or because they have health issues or disability, or because they are discouraged and they believe no jobs are available. Clearly, not all groups warrant policy interventions.
The reasons behind people’s inactivity vary greatly across the country. Take Cambridge and Barnsley for example: on the surface, these places have the same level of economic inactivity — 25 per cent of the working-age population in both are economically inactive. But in Cambridge, it is plausible to assume almost three quarters of people that are inactive have chosen to do so: almost half are students, 19 per cent are looking after family or home and 6 per cent are early retirees. In contrast, one could argue that almost half of the people that are economically inactive in Barnsley could be able to work if given adequate support: 45 per cent of them are either inactive for health issues, are discouraged or are inactive for other reasons.
Similar differences can be seen when looking at Reading and Burnley. Again, both have similar levels of economic inactivity — 19 per cent of their working-age population is inactive — but again, the reasons are different. In Reading, 70 per cent of inactive people have chosen to be so, while in Burnley it is just over 60 per cent.
Going beyond the headlines indicates large untapped potential of ‘missing workers,’ especially in weaker city economies. Approximately a further 52,000 individuals in Liverpool could be in work if given adequate support — 12 per cent of the working-age population. Dundee and Barnsley see similar percentages.
In total, this adds up to 1.8 million individuals that fall into this category in British cities and 3.1 million overall in the UK. All who could work, but are not supported by the system. This needs to change.
Figure 1. In cities with weaker economies there is a large untapped potential of 'missing workers'
Government should take responsibility for people that are inactive. There needs to be a much bigger focus on skills, including for those not in the labour force, and a better joined up approach at the local level, with employment, skills, health and other forms of support all linked together to provide services that are best suited to people’s needs.
‘Activating the inactive’ would not just be good for their own well-being, it would have an important role in making the UK a more inclusive and fairer society, while at the same time addressing some of the skills shortages challenges the country is facing due to technological change and globalisation. Reducing the number of missing workers would therefore bring large gains to the UK’s economy, especially in terms of productivity, while at the same time reducing inequalities across the country.
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