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Friday, 19 April 2024 14:17

The Effects of Economic Inactivity

Figures recently published by the ONS from their Labour Force Survey for December 2023 to February 2024 estimate that 9.4 million people aged 16-64 UK were economically inactive; a rate of 22.2%. This amounts to an increase of around 275,000 over the last year and stands alongside the 1.4 million who are classed as unemployed; out of work and actively seeking a job. Go here for the parliamentary briefing document of the report.

Although vacancies fell in the last quarter to around 916,000, the higher unemployment figure suggests that there is a mismatch between skills and experience required to fill vacant positions and the available skills amongst those who are actually looking for work.

Economic inactivity refers to those individuals of working age who are not just unemployed but are not actively seeking employment. The recent data confirms that this group has been growing, leading to fewer people contributing to the economy through consumer spending or tax payments. This increase in inactivity not only escalates government expenditures on welfare benefits but also results in lower tax revenues which the Government relies on for funding public services.

The rise in economic inactivity can be attributed to a number of factors including early retirement, long-term sickness absence, and care responsibilities. Particularly post-pandemic, we have seen an increase in those stepping back from the workforce due to health concerns or caregiving needs, for both young and old. The lack of accessible and affordable childcare for example can make it unviable for some parents to return to work whilst their children remain of pre-school age.

With the changing dynamics of the workforce, UK employers continue to face recruitment challenges. The skills gap in the available UK talent pool has been widened by the difficulties in recruiting talent from abroad, compounded by post-Brexit immigration policies.

In response to these challenges, the Chancellor has introduced measures aimed at encouraging people to return to the workforce. One notable initiative is the extension of free childcare, designed to alleviate the burden on parents, particularly mothers, enabling them to seek employment or return to their previous jobs. Such measures help in reducing barriers to work, but they also highlight the need for sustained efforts to support other groups within the economically inactive population.

However, employers can’t rely on the Government to do all the heavy lifting when it comes to attracting people back to work or finding ways to fill vacancies. There are a number of strategies that could be implemented:

Promoting from Within: Before looking externally to fill vacancies, businesses might benefit from assessing the potential of their current employees for promotion. This not only boosts morale and retention but also reduces the time and cost associated with hiring externally. Those employers who have invested in effective workforce planning will already be ahead of the curve on this point.

Enhanced Internal Training: It’s becoming more apparent that the education system isn’t keeping pace with the needs of UK employers or are offering courses that are more attractive to recruiting learners rather than preparing students for employment. Employers should invest in comprehensive training programmes to upskill their current workforce, thus transforming existing employees into the skilled professionals needed for more advanced or technically demanding roles.

Engaging with Educational Institutions: To avoid a continuation of the status quo and ensure the future workforce is equipped with relevant skills, businesses need to engage more actively with schools, colleges, and universities. Partnerships and sponsorships can help shape the education curriculum to align more closely with real-world business requirements and give those engaged businesses first choice from the upcoming talent pool.

Flexible Work Arrangements: Implementing flexible working conditions can attract a more diverse workforce, including those who may otherwise remain economically inactive. Flexibility might include remote working options, part-time roles, or flexible hours that can accommodate a broader range of personal circumstances.

Offer a Truly Inclusive Workplace: Our unconscious biases and preconceptions can mean some groups that harbour a range of skills and talent are overlooked. The ONS reported that around half of people with disabilities do not have a paid job, a rate that is more than double the rest of the working age population. Look at where reasonable adjustments can be made in order to tap into this talent pool. Disability employment advisors (DEAs) specialise in advocating for job seekers with disabilities, helping them to find meaningful work. Every job centre in the UK has a DEA.

The state of the UK workforce, uniquely marked by a rise in economic inactivity where the other G7 economies have seen a fall, calls for a comprehensive approach involving both Government intervention and employer innovation. Those businesses who stand still and fail to take progressive action may well become the casualties as the competition surges ahead.

We recommend starting with an effective workforce plan and training strategy to assess your current, short and mid-term workforce requirements, your skills availability and training needs. Contact us for support with is on 01452 331331 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it.

  

Read 649 times Last modified on Friday, 19 April 2024 14:26

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