The UK currently has around 800,000 fewer people in employment, costing public finances at least £16bn annually.
According to a report by The Times, this decline is more than double the drop observed following the 2008-09 recession.
Similarly, the Commission on the Future of Employment Support reports that there has been a 1.5 percentage point reduction in the proportion of people aged 16 and over who are either working or actively seeking employment since the onset of the COVID-19 pandemic.
This suggests that the UK’s labour force is shrinking at its fastest rate since the late 1980s, as highlighted in a recent report.
The report also points out that the UK’s declining labour force participation sharply contrasts with trends in other developed nations, where the average participation rate across OECD countries has increased by 1.3 percentage points.
In contrast, it notes that if the position had been maintained, the economy would have seen a boost of £25bn while public finances would have been better off by £16bn annually.
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UK’s labour force still experiencing a drop.
The UK stands out almost as an exception among developed nations, having experienced a decline in employment rates over the past five years. As a result, the country has dropped from holding the eighth-highest employment rate to the fifteenth, according to the report.
In response, the report proposes a series of reforms to employment support, focusing on four key areas.
It advocates for a three-strand approach to a new Jobs and Careers Service, aimed at making the service universal and more accessible. Additionally, it calls for an end to the “compliance culture” in Jobcentres by overhauling the sanctions system.
Launched in November 2022, the Institute for Employment Studies (IES) and Abrdn Financial Fairness Trust have, over the past two years, consulted more than 300 individuals and organisations both in the UK and internationally.
Among the commission’s other recommendations are the creation of New Labour Market Partnerships within local areas, and the setting of clear goals for the coming Parliament.
These goals would help ensure progress is made towards achieving the government’s target of an 80% employment rate, while also addressing in-work poverty and reducing inequalities in the labour market.
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The UK needs more workers.
Commenting on the report, Mubin Haq, commissioner and chief executive of the Abrdn Financial Fairness Trust, remarked that the UK is in urgent need of economic growth, and one of the key ways to achieve this is by increasing the number of people in employment.
He stressed, “However, our system isn’t working, with the UK’s employment service the least well-used in Europe. Our approach to supporting people into jobs is too short-term and draconian, failing too many employers and those locked out of the labour market”.
“That’s a huge loss to our economy, to our public finances, and a missed opportunity to raise living standards.”
Haq added that the current moment presents a crucial opportunity to “reset and refresh” employment support services.
