The UK workforce is currently experiencing an unprecedented situation. Official evaluations have noted a startling departure of nearly a million individuals from the labour force through exit, resignation or retirement since the outbreak of the pandemic. This severe lack of workforce has resulted in ongoing scarcities in labour, which analysts predict will burden the nation’s economic health for an extended period.
This phenomenon is unmatched globally, with the UK being the sole prosperous economy displaying consistently reduced employment figures, inferior even to those prior to the pandemic. This is despite accounting for inward migration. This is in stark difference to countries like Ireland, where job numbers have surged to a record 2.71 million, a considerable 14% above their pre-pandemic figures.
Several theories have been suggested, attempting to account for the so-called “great retirement” wave in the UK. However, none seem to entirely represent the situation. One early theory suggested that numerous “baby boomers”, i.e., those in their late 50s and 60s, decided to completely exit the corporate world after experiencing remote work possibilities. However, these assumptions did not hold when the stats were considered. The figures revealed that while retirements initially saw an increase, these numbers rapidly dwindled and are now similar to pre-pandemic levels.
Health degradation, rather than lifestyle rejuvenation, was proposed as the second theory for the mass departure. Recent data from the Office of National Statistics (ONS) shows that the percentage of those aged 16 to 64 categorised as economically dormant soared to a record high of 22.2% in the three months ending February. This is 850,000 more than the figure at the start of the pandemic. The causes of economic dormancy are intricate and fluctuate, with an example being students who are economically passive due to their academic commitments. However, the UK’s situation appears to be related predominantly to those reporting health reasons for their inactivity.
In accordance with the Office for National Statistics, as of February, 2.83 million individuals in the UK were deemed economically inactive due to prolonged illness, representing 7 per cent of individuals of working age. This figure swells past the three million mark when one factors in those absent from work due to temporary health issues.
Such declining health within the general populace is not unexpected amid a health crisis – especially with long Covid now a substantial issue. However, attributing this solely to Covid-19, as per expert opinion, is overly simplistic and not supported by the data.
Experts argue the deterioration of the UK’s health began before the pandemic, and that this increase in inactivity is linked to a surge in enduring health conditions like cancer, depression, or musculoskeletal problems. Despite these long-term health conditions being an expected part of an ageing population, some have associated the country’s higher illness rates with escalating inequality, a lack of sufficient funding in the health service, and queues in the National Health Service.
Tony Wilson, director of the UK’s Institute for Employment Studies, posits that the escalating health conditions are mainly prevalent among those already without employment. He highlights the UK’s shortcomings in providing adequate health and employment-related rehabilitation support for the unemployed. In his view, the lack of a systematic, dynamic approach to help individuals return to work has resulted in many who found flexibility in their roles due to pre-existing ailments struggling to secure comparable employment since 2020/2021.
The upshot is, with a smaller number of individuals participating in employment, job vacancies stay high and the economy’s inherent productivity issue goes unresolved. An influx of non-EU migrants, mostly students and skilled professionals who do not occupy the same roles as EU migrants, only somewhat offsets this reality.
Finally, the impact of Brexit, which has been exacerbating UK labour shortages following the pandemic, especially with the decrease in EU migration, needs to be taken into account.
The swell in migration from non-EU countries into the United Kingdom primarily includes students and skilled professionals, unlike the jobs typically undertaken by the immigrants from EU nations. The reduction in the UK’s workforce, as distinct from retirements, can be ascribed to a myriad of reasons.
The dip in the number of workers compared to the retired population is a looming demographic crisis in most developed economies. At present, this ratio stands at approximately 20%, translating to a ratio of five workers for every pensioner. However, by the mid-century, it is predicted that Ireland’s worker to retiree ratio will drop to just slightly above two for each pensioner. Other nations are expected to see a ratio of just one worker for each pensioner.
The strategy that governments will adopt to cope with the prospective increased costs of pensions and healthcare, attendant with this demographic shift, against a proportionately smaller tax revenue, represents one of the largest uncertain elements in economics.