The final report from the two-year Commission on the Future of Employment Support claims that the UK needs ‘once-in-a-generation reform’ to boost growth and improve living standards in the face of a huge contraction in the country’s labour force. The report suggests that the UK is one of the few developed nations where employment has fallen post-pandemic. The UK has dropped from having the eighth-highest employment rate globally to fifteenth. Had the original position been maintained, the economy would be £25 billion larger annually, with public finances £16 billion better off.
The report claims that the decline is driven by fewer people entering the workforce, rather than by more people leaving it. Ninety per cent of the rise in ‘economic inactivity’ stems from individuals who have been out of work for over four years or have never worked. Therefore, assisting people in returning to work is critical to addressing this issue.
The Commission has conducted what it says is the most extensive review of employment support in a generation, offering detailed proposals to increase labour force participation and boost productivity. These include reforming employment support to ensure help for those in need, ending the ‘compliance culture’ in jobcentres, and creating new Labour Market Partnerships to address local priorities and streamline service delivery.
The report outlines what it says are the challenges facing the UK labour market, alongside detailed proposals to reform employment support. The report, produced by the Commission on the Future of Employment Support, was launched by the Institute for Employment Studies and the abrdn Financial Fairness Trust in November 2022. Over the past two years, the Commission has conducted what it claims to be the largest consultation on employment support in a generation, gathering input from over 300 people and organisations, including service users, employers, policymakers, and experts from the UK and abroad.
The Commission’s findings suggest that the UK labour force is shrinking at its fastest rate since the late 1980s. Since the onset of the Covid-19 pandemic, the percentage of people aged 16 and over who are either in work or looking for work has dropped by 1.5 percentage points, equating to 800,000 fewer people in the labour force—more than double the contraction seen after the 2008/9 recession.
This “participation crisis” contrasts starkly with other developed nations, where employment has grown by an average of 1.3 percentage points across the OECD. As a result, the UK has fallen from eighth to fifteenth place in terms of global employment rates. The economic and fiscal implications are substantial. Modelling by the IES suggests that if the UK had maintained its position, the economy would be £25 billion larger, and public finances would benefit by £16 billion annually.
Further analysis from the Commission indicates that nearly all of the rise in ‘economic inactivity’ stems from individuals who last worked before the pandemic or have never worked, accounting for 90% of this growth. This trend is also reflected among those with long-term health conditions, where 74% of the increase is attributed to those who left work before the pandemic or have never worked. This suggests that reforming employment support is vital to addressing the UK’s labour market challenges.
The Commission’s report proposes the most significant employment support reforms since the creation of Jobcentre Plus in 2001. Key recommendations include the development of a new Jobs and Careers Service that is more accessible, with services delivered online, in high street employment, skills and careers centres, and through integration with other public services. The report also calls for an end to the ‘compliance culture’ in jobcentres, urging reform of the sanctions system and the introduction of guaranteed support for disadvantaged individuals. Additionally, it recommends creating local Labour Market Partnerships to enable localised planning and service integration.
The Commission sets out clear goals for the next Parliament, including achieving the government’s target of an 80% employment rate, tackling in-work poverty, and reducing labour market inequalities.
Public polling by YouGov and analysed by the IES supports these proposals. Seventy per cent of people out of work and 76% of those in low-paid jobs (earning less than £25,000 annually) indicated they would be more likely to seek support if it were universally available. Sixty-two per cent of disabled people expressed a preference for voluntary support, and nearly four-fifths of those aged 50-64 (79%) and 78% of disabled people would be more likely to access support if it were available close to home.
