Your IndustryFeb 20 2023

Long-term sickness causing growth in ‘economically inactive’

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Long-term sickness causing growth in ‘economically inactive’
Pexels/Anna Shvets

The growth in economic inactivity is due to a rise in the number of people who have a long-term sickness, according to research by consultants LCP.

In his 2022 Autumn Statement speech, the chancellor drew attention to the fact there are 630,000 more people of working age who are “economically inactive” since the start of the pandemic.  

Since then, work has been going on across government to understand the reasons for this phenomenon, and the March 2023 Budget is expected to include measures designed to get this number down.

Initial commentary on these figures dubbed it a ‘great retirement’, suggesting that large numbers of older workers have chosen to opt out of paid work and are living off their pensions, after they enjoyed a slower pace of life during the pandemic.

However, consultants LCP argued that early retirement is not the cause of this inactivity. 

LCP said retirement explains none of the increase in inactivity since the start of the pandemic, stating there are actually fewer people of working age who are retired now than there were at the start of the pandemic.

Instead, it said there has instead been a big rise in the number of people who are long-term sick as the key factor, especially among the over 50s. 

This is summarised in the chart below:

Source: ONS statistics for seasonally adjusted levels of economic inactivity.  Base period is Dec 19 – Jan 20, latest data is for Oct 22 – Dec 22.

Steve Webb, partner at LCP, said: “There is a real risk of the government ‘barking up the wrong tree’ when it comes to the growth in economic inactivity. 

“Policy solutions which aim to reduce early retirement or to encourage the retired out of retirement are likely to have only limited effect in reversing recent trends.  

“Instead, the policy effort needs to be focused around understanding why flows into long-term sickness have grown and on early intervention to prevent people’s health from deteriorating.”

The research by the firm combines a range of data sources to understand what is going on - such as the ONS Labour Force Survey data (the same source as used for the chancellor’s figure), DWP benefits data and NHS waiting list data for England.

Key findings found that the growth in economic inactivity is not just about the over 50s with nearly half (45 per cent) of the chancellor’s 630,000 figure for the growth in inactivity relating to those aged under 50.

It said a large part of the growth among those under 50 is in the numbers in full-time education.