The national story of rising inactivity and labour shortages only plays out in a handful of cities and this has important implications for how policy goes about addressing the issue.
A few weeks ago, Centre for Cities launched its flagship Cities Outlook 2023, looking at the scale and geography of economic inactivity. It has been a growing concern for politicians in recent months, given the large increases in inactivity levels since the pandemic but less is known about how this dynamic picture has played out across the country.
Nationally, economic inactivity went up by nearly half a million people between 2019 and 2022, moving the overall inactivity rate from 20.2 per cent to a six-year high of 21.7 per cent. This largely reversed the downward trend inactivity had been on since the turn of the 21st century and it made the UK a clear international outlier, being one of the only countries in the OECD that still hasn’t returned to its pre-pandemic employment rates.
Looking at ‘involuntary inactivity’ specifically – which should be the most concerning form of inactivity for policymakers (as it only includes people for whom inactivity isn’t a choice, if they’re ill or discouraged) – shows a similar increase of about one percentage point. It is now at 8.7 per cent of the working-age population.
Despite the national focus, though, not all cities saw a rise in involuntary inactivity. Of the 42 cities we have data for, 14 had seen either no change or rates going down, like in Derby, Edinburgh and Wakefield and Liverpool.
Of those cities and large towns that did see inactivity levels go up since 2019, not all experienced the same increase – from less than one percentage point in Wigan to nearly 5 percentage points in Birkenhead (Figure 1).
Cities Outlook 2023 showed that there was a clear North-South divide to levels of involuntary inactivity, with cities in the North of England experiencing much higher rates than those elsewhere. But the geography of the increase isn’t as clear-cut. Places that experienced a large rise in involuntary inactivity levels include a combination of cities in the South East and the Midlands, like Luton, Milton Keynes and Northampton, and northern cities- including Birkenhead, Hull and Blackburn.
Source: ONS 2022. Note: this chart only includes 42 of the 62 cities as only those for which all data was available for both 2019 and 2022 were included.
This could be because some of the factors that have driven involuntary inactivity rates up in recent years, like poor health (likely caused, in part at least NHS backlogs) don’t have a particular geography to them. What’s more unclear and needs further investigation, though, is why those places specifically have seen health worsen much more than others.
The story that has grabbed headlines in recent months is that rises in inactivity levels since 2019 have happened despite rising job vacancies and have meant that businesses struggled to recruit as they emerged from the pandemic.
This only applies to the handful of cities in the top-left corner of Figure 1- mainly southern cities like Milton Keynes, Northampton and Swindon. In these cities, a rapidly shrinking workforce has indeed posed a new problem for their economy and is likely to have fuelled a worker shortage. That story doesn’t hold true elsewhere:
The Prime Minister rightly placed tackling economic inactivity at the top of his agenda. Most of the solutions that have been put on the table so far (fixing the NHS, getting older workers who retired early after the pandemic back to the workforce) have focused on tackling recent increases, so they’re only applicable to certain parts of the country- cities like Milton Keynes and Swindon.
Those measures won’t be enough to address high and persistent levels of inactivity in the North of England that largely predate the pandemic, and they don’t speak to the job shortage problem that is driving it. If policymakers are serious about growing the size of the workforce across the country, they need to look beyond the Covid impact and tackle not only the causes of the recent increase, but the underlying fundamentals that have kept inactivity up for decades in the North. This, as Cities Outlook has showed, boils down to one thing: growing their economies and delivering on the Levelling Up agenda.
As well as providing a deep dive into the latest economic data on the UK’s cities and largest towns, Cities Outlook 2023 shines a light on the UK's growing economic inactivity crisis.
As well as providing a deep dive into the latest economic data on the UK’s cities and largest towns, this year our flagship publication focuses on the scale and geography of economic inactivity across the country.
The launch of Cities Outlook 2023, Centre for Cities annual flagship publication.
The UK’s seemingly record-low unemployment figures mask a hidden army of more than three million working-aged people that are involuntarily economically inactive.
Chief Executive Andrew Carter and members of Centre for Cities’ research team explore the findings and implications of Cities Outlook 2023.
What does the UK's growing inactivity crisis say about the state of the labour market and how should policy tackle this urban problem?
One year after the publication of the white paper, and three years after a general election, the Government has very little to show on levelling up. This is what should happen now.
While many cities perform poorly against the national average, they still play an important role in their regions despite this underperformance.
Cities in the North have higher shares of inactivity due to poor health, as shown in Cities Outlook 2023.
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