The UK’s labour force is diminishing at its fastest rate since the late 1980s, a new report has revealed.
According to the Commission on the Future of Employment Support, there has been a 1.5 percentage point reduction in people aged 16-plus who are either in employment or seeking work since before the Covid-19 pandemic.
This means there are roughly 800,000 fewer people working in the UK, which is costing public finances at least £16bn annually and is more than double the decline that followed the recession in 2008-09.
In its report released today (18 September), the commission highlighted that the state of the UK’s labour force participation is a clear contrast to that experienced by other countries in the developed world, which are seeing an average rise of 1.3 percentage points in activity across the OECD group.
It says the UK is almost the exception in the developed world in noting a drop in employment rates in the past five years, leading to it falling from having the eighth highest employment to fifteenth in the group.
Had the position been maintained, the economy would have seen a boost of £25bn while public finances would have been better off by £16bn annually.
The report therefore proposes a number of employment support reforms, specifically in four key areas. It suggests a three-strand approach to the new Jobs and Careers Service, which would make it universal and more accessible, and ending the “compliance culture” in Jobcentres by overhauling the sanctions system.
Launched in November 2022, in the past two years the Institute for Employment Studies (IES) and Abrdn Financial Fairness Trust have consulted more than 300 people and organisations, both in the UK and internationally.
Other recommendations by the commission include the formation of New Labour Market Partnerships within local areas and the setting of clear goals for the coming Parliament to ensure progress is made towards the government’s target of reaching an 80% employment rate, tackling poverty at work and reducing inequalities in the labour market.
Commenting on the report, Mubin Haq, commissioner and chief executive of Abrdn Financial Fairness Trust, said: “The UK desperately needs economic growth and one of the critical ways to deliver that is increasing the number of people in work. 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. We now have a chance to reset and refresh our employment support services.”
The proposals are also supported by a YouGov poll, analysed by IES, which discovered that among people out of work or in low-paid work, excluding pensioners and students, 70% and 76% respectively would be more likely to access support if it was available to anyone who wanted it.
The survey also showed that more than three in five (62%) of disabled people would be more likely to access support that was available on a voluntary basis, while four in five (79%) of those aged 50-64 and a similar percentage (78%) of disabled people would be more likely to access support if it were available close to home.
Tony Wilson, director at the Institute for Employment Studies, added: “There’s been a lot of analysis and talk over the last few years of what is going wrong in the labour market, but we’ve now got a once-in-a-generation opportunity to try to put things right. The proposals in this report set out how we can do that, and help drive stronger economic growth, better public finances and a fairer and more inclusive economy.”
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