Where are the missing workers?

Economic inactivity in UK cities

While unemployment rates are at a record low, many people remain excluded from the labour market. New research tries to count them across UK cities.

Report published on 17 October 2019 by Elena Magrini

We are proud to have collaborated with the OECD on their new report looking at trends in economic inactivity, contributing a deep dive into economic inactivity trends in the UK. It is exploratory research on city and regional differences in different forms of economic inactivity.

As the labour market continues to change,  local and national policymakers need to understand how best to support people that are classed as ‘economically inactive’ but who want to work to find a job. This will not only help them, but help address future skills shortages and promote inclusive growth up and down the country.

Looking at economic inactivity across the UK, we reveal that:

  • While the UK has one of the lowest levels of economic inactivity across the OECD, this varies significantly from place to place
  • If you remove students, retirees, or people looking after family from the figures, there is a clear North/South divide
  • This is closely linked to the economic performance of different places, cities with weaker economies tend to have a much higher rate of inactivity than those further South, and to past policy interventions that have encouraged people to leave the labour market as a response to the decline in mining and manufacturing industry
  • All this means that, theoretically, a number of economically-inactive people who, with support, could enter the workforce are not currently counted in official unemployment statistics, which means they are not targetted by active labour market policies. If you add those economically inactive people together with the unemployed, national estimates jump from 4.6 per cent to 13.2 per cent. And in many Northern cities, such as Liverpool, Sunderland and Dundee, approximately one in five people could fall into this category.

What needs to change

There’s a risk of creating another generation of economically inactive people in certain places, when many would actually like to find a job. Here’s what needs to change:

    1. There should be a plan for long-term investment in skills for people who have been out of the labour market for a long time, or are at risk of losing their current job due to local economic conditions.
    2. More places need to better integrate the provision of public services such as employment, social care, childcare, and physical and mental health services at the local level. Manchester’s Working Well Programme is an example of how this can be done.
    3. Cities with pockets of inactivity need to pursue policies to make them more attractive places to set up businesses, and provide targeted support to help economically-inactive people access new jobs.

We are proud to have collaborated with the OECD on their new report looking at trends in economic inactivity, contributing a deep dive into economic inactivity trends in the UK.

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