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‘Bleak’ outlook on workforce inactivity, House of Lords report finds

Tightness in the UK labour market is set to continue, according to a House of Lords Economic Affairs Committee report published today (20 December).

The committee found a combination of workers’ early retirement, increasing long-term sickness, changes in the structure of migration and the ageing of Britain’s population had reduced the UK’s working population and made it harder to fill jobs.

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Early retirement was singled out as the most prominent cause of increasing inactivity, and moreover a lasting one: according to University of Essex research cited in the report, the vast majority of over-50s who have left the workforce since the pandemic neither want nor expect to return to work.

This problem has been compounded by the fact that rates of ill-health are climbing among the over-50s, according to ONS figures published today.

Lord Bridges of Headley, chair of the committee, said: “Taken together these findings are, like mid-winter, bleak.

“The rise in economic inactivity makes in harder to control inflation; damages growth, and puts pressure on already stretched public finances. That’s why it’s critical the government does more to understand the causes of increased inactivity, and whether this trend is likely to persist.”

Changes to immigration policy over the past decade have also contributed to organisations’ present difficulties in finding staff, according to the report.

Many EU workers who filled lower-paid roles have left the country following Brexit; while in terms of net migration that deficit has been met by non-EU workers, the immigration system has prioritised visas for skilled (qualified) workers.

This, the report said, has contributed to a mismatch in the labour force that has left some sectors particularly reliant on lower-paid workers - such as care and hospitality - understaffed.

Jon Boys, the CIPD’s senior labour market economist, told HR magazine that organisations should see how they can accommodate workers who have dropped out of work, whether through retirement or ill-health.

“One solution,” he said, “is to provide better work, that suits the needs and preferences of more people.

“A key finding of the CIPD’s Understanding Older Workers report was that these workers value flexibility in all its guises. Many people drop out of work because the work available simply doesn’t work for them, and this needs to change.”