Its Post-pandemic participation report revealed that despite recent falls in unemployment, the long term impact of Covid-19 has been a rise in economic inactivity, up by 830,000 since March 2020.
While some of this is due to long-term sickness, it noted a large number of highly-paid professionals taking early retirement, contributing to a skills shortage.
The think tank is therefore urging employers to take a renewed look at often neglected talent pools.
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Speaking to HR magazine, Resolution Foundation economist and report author Louise Murphy, said: “While we’re not suggesting there is an ideal participation rate for the UK, the recent pre-pandemic trend for increased participation of women, older people and disabled people has gone into reverse.
"Meanwhile while other OECD countries show post-pandemic rises in participation overall, the UK is showing a decline, which is concerning.”
According to the foundation those aged 55-64 years-old have seen the biggest fall in labour force participation since the start of the pandemic, down from 69% at the end of 2019 to 67% in the autumn of 2022.
Murphy said that it is unlikely well-off professionals who left the labour market during the pandemic will return, arguing employers need to boost the level of support they offer to attract new older workers or keep those they already have.
She added: “It’s likely older people will have caring responsibilities, either for their partner, or grandchildren, so employers need to consider providing better flexible work. The quality of work for older people could also be improved. Often this is lacking, and it's having good work that contributes to older employees wanting to stay.”
Responding to the call to hire more older staff Derval Blehein, HR leader for EMEA and LATAM at LinkedIn told HR magazine: “Employers who actively invest in overcoming ageism in particular can find that they unlock a wealth of talent. In our own organisation we know that diverse teams win, and diversity of thought gained through age and experience is a critical component of this equation.
“By focusing on a candidate's transferable skills, employers will broaden their talent pools and increase diversity in their workforce.”
Although the government’s own manifesto commitment to increase the number of disabled people in employment by one million by 2027 was reached last year, The Resolution Foundation notes that the employment rate for people with disabilities aged 16-64 is still just 54%, compared with 82% for those without.
To improve this, it wants policymakers to introduce a right to return period, which would require employers to keep jobs open to workers who are away due to sickness or disability.
Paul Modley, director of diversity, equity and inclusion at Alexander Mann Solutions, said any change is unlikely to happen overnight.
He told HR magazine: “If we look at each of the talent groups identified by the Resolution Foundation, improving engagement with each of these will be highly complex.
“If we consider those with a disability, for example, the makeup of this talent pool is significantly varied: from the neurodiverse and those with hidden disabilities, to individuals with physical or mobility impairments.
"A broad-sweeping approach to improving engagement with this potential talent pool will have limited results. Knowing which of these groups are under-represented and where in the candidate journey they are dropping out – or at what stage individuals are leaving the business – will be key to successfully adapting talent strategies.”
The think tank also urged policymakers to encourage government to look at the age at which older workers can start withdrawing their pension pot [which it claims supports early retirement], and by making to changes to DB pension schemes so that pensions aren’t impacted if they re-enter work.
Murphy added: “There is absolutely a role for employers to play – including also making reasonable adjustments to hire more disabled people. Pre Covid-19 women’s participation was increasing so it’s a case of not losing this momentum.”