‘Childcare, health and disability should be at centre of workforce plans’

A new report by the Resolution Foundation calls for the Government to focus on mums, older workers and disability to address the UK’s economic inactivity rate.

Nursery worker with child

 

Government efforts to boost Britain’s workforce should focus on supporting more mothers into work, and helping older workers and those with a disability stay in work, rather than persuading the large Covid cohort of older workers to ‘unretire’, according to new Resolution Foundation research.

The report welcomes attention on the rising rate of economic inactivity, but warns that a policy focus on trying to persuade this recent ‘Covid cohort’ of lost workers back into the labour market is unlikely to work.

The report finds that increased labour market exits during the pandemic were disproportionately from higher-than-normal retirements among higher-paid professionals, with flows from employment into retirement from many low-paying occupations actually falling. It argues that it will be hard to persuade these people to ‘unretire’.

It adds that using the benefit system – to target more support, or increase the pressure to work – is also unlikely to work, as just 10% of the economically inactive 55-59 year olds who have left employment since the start of the pandemic are relying on benefit support.

It says policy makers should instead look ahead and focus on three groups – older workers, mothers and those with ill-health or a disability – where the UK has a track record.

In the decade running up to the pandemic, the UK saw employment rates rise by 13 percentage points for women aged 55-64 (and four percentage points for men) and by five percentage points for coupled mothers, while the employment gap between those with or without a disability fell by five percentage points between 2013 and 2022.

The Foundation warns against a narrow focus on simply raising the State Pension Age to address the ageing population as it says that disproportionately impacts those on lower incomes and poor places with lower life expectancies. If the Government wants to discourage early retirement – having previously encouraged it for richer people with ‘pension freedoms’ – the Foundation says it could accelerate the rise in the minimum age at which people can draw their private pension, which is currently due to rise from 55 to 57 but to remain 10 years lower than the state pension age.

It also calls for more focus on the maternal employment gap, where participation rates among low-income women aged 25-54 were just 50 per cent in 2017-2019, compared to 94 per cent among high-income women of the same age.

It warns that policy makers need to be clear what their objectives are when it comes to new childcare policies. Popular proposals to extend the number of ‘free’ childcare hours will largely boost the incomes of already-working parents in middle-and-high income households, rather than boost employment among lower income households. Instead it says the government should reform childcare support and work incentives for second earners in Universal Credit.

The report also notes that a growing share of the population lives with a disability or ill-health. It calls on the Government to create a new ‘right-to-return’ so that workers who need take some time off work for ill-health remain attached to their employer and job. The Foundation also warns that proposals from both main parties to reform disability benefits to ease the path back into work are well intentioned, but either relatively minor or fraught with implementation challenges. It comes after a report by LCP also highlighted the need for the Government to do more to tackle ill health, including tackling NHS backlogs.

Without further progress on these three areas, the report warns that the economic inactivity rate for 15-75 year olds is set to rise from 29.5 per cent up to 30.8 per cent by 2030, the highest rate since the turn of the century (2001).

Louise Murphy, Economist at the Resolution Foundation, said: “Britain did a great job of getting more people into work in the 2010s. But some of that progress has been undone by the pandemic, with economic inactivity rising by 830,000 over the past three years.

“We need to reboot progress on getting people into work, but we’re not going to achieve it by persuading the recent Covid cohort of older workers to ‘unretire’.

“Instead, we need to do more to encourage mothers in low-income families into work, and help people who need to take periods of time-off for ill-health stay attached to their jobs.

“Taking the right approach to workforce participation would boost individuals’ living standards, and improve the wider health of our economy.”



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