‘Activating’ the economically inactive should be top of the Government agenda, but it should be realistic about whether it can fill the gaps the new immigration system will create.
Much has been said in the past day about the new Government’s immigration plan that will come into force from January 2021. The main concerns are around the labour shortages this new plan will create in a number of industries – care, hospitality and construction to name a few – and the impact this will have on the national economy.
To counteract these concerns, Home Secretary Priti Patel has suggested firms should invest in training British citizens and that these gaps could be filled by approximately 8.5 million people that are currently economic inactive in the UK. While it’s true that there are more than eight million people outside the labour force, they won’t all be able to enter it.
Economic inactivity is a broad category: students are inactive, people that decide to retire early are inactive. As are people currently looking after family or the home, people with disabilities or other health issues, and people that are discouraged and believe no job is available. Clearly, not all these people are able – or interested – to enter the labour market, even with the best support.
Previous research we carried out with the OECD suggests that, when accounting for that, we are left with about three million people that could be brought back into the labour market, rather than the Home Secretary’s 8.5 million.
Geography matters when considering labour market policy
Three million people sounds like a large potential workforce, but yesterday’s proposal fails to consider a central piece of the jigsaw: geography.
The places more reliant on foreign born workers –such as London, Cambridge and Oxford – have among the lowest shares of people that are inactive and could be in work if given support. In London, there are nine people that are foreign born for every economically inactive person who could potentially be in work. In Oxford the ratio is 15 to one. Conversely, the places with the highest rates of inactive people that could be in work, such as Sunderland, Liverpool and Mansfield are not particularly reliant on foreign born nationals.
Share of economically inactive people that could be in work (2017) Share of the population in UK cities that is foreign born (2011)
This means there is a mismatch between the places that are currently reliant on foreign workers and those that have inactive workers living there.
And the big problem the Government will find is that people with few or no qualifications tend to stay put. Research shows that around 50 per cent of people only ever work in the local area where they were born, and the figure rises to 60 per cent for people without a degree. So trying to fill lower-skilled jobs in London with previously economically inactive people from Liverpool or somewhere similar is unlikely to succeed.
Greater focus on adult education is needed
Government policy should be ‘activating’ the economically inactive for the contribution they could make to the economy with the right skills and training. A benefit of yesterday’s statement was that it brought political attention back to this often overlook group.
But if the Government is serious about getting these people to a position where they can fill potential labour shortages, then it needs to set out exactly how it plans to do so and address the complex challenges that prevent them from working. This means proper investment in adult education, technical skills and work coaches to help long-term economically inactive people back into the workplace.
What is clear however, is that professional training and development is a long-term project, particularly for people who have been out of the workplace for years or even decades. So this is unlikely to address the short-term labour market shortages that lie ahead under the Government’s plans.
See our research and analysis on the changing world of work in the UK and how this plays out differently in cities and large towns across the country.
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Stephen Britt
3 Million is the official figure of EU migrants in the UK so that tallys up nicely. UK jobs have had tough competition from cheaper EU influx. This has not helped us workers (BSc comp sci, HNd eng). Why labour did not support Brexit is beyond me. If you dispute then look at what happened to the jobs and income after the black death. There is much talk of social mobility. I cant and dont want to play golf or be a freemason. What we need is economic mobility. Companies that do engineering in the UK not just an outpost of an EU head office. Cisco and many others. You cant fool UK workers forever. In any event I thought that AI was supposed to be doing everyones job tomorrow. Dont hold your breath…