Liz Kendall, the Work and Pensions Secretary, has announced what the government is describing as the “biggest employment reforms in a generation” to address the fact that 9.25 million people in the UK are economically inactive. The reforms include a new National Jobs and Careers Services, changes to how apprenticeships are funded, an overhaul of the Jobcentre system, mental health support and other public health measures.
Those last two measures are the key point, because while there are many parts of the employment system that need fixing – the Apprenticeship Levy, for example, has long been misused by some businesses to pay for things like management training courses – the most frightening thing about Britain’s labour market is the number of people in it who aren’t well.
Britain’s unemployment rate – the number of people looking for a job who can’t get one – is fairly low, at just over four per cent (during the recessions of the 1980s and 1990s, it reached into the double figures). However, 22 per cent of working-age Britons are economically inactive, which means they aren’t actively seeking a job (although they might want one), because they’re ill, or caring for someone else, or studying, or retired. Illness is the biggest factor in this.
In 2019 we had the second-lowest rate of economic inactivity among advanced economies; only in Japan did a higher proportion of working-age people go to work. But then came Covid, and Britain’s workforce got sick. The government says a quarter of all working-age people in the UK have “a long-term health condition that limits their day-to-day activities”. With 2.8 million people out of work due to long-term ill health, we are the only country in the G7 whose people are less able to work than they were in 2019.
Less able, or less willing? The last government thought Britain had developed a “sick note culture”; in this week’s column, Andrew Marr reports one government insider’s view that the benefits system incentivises people to claim benefits for disability rather than unemployment. But if this is the case, why don’t we see the same results in Germany, France and other countries where disability benefits are a lot more generous?
The rise in economic inactivity has also been mischaracterised as Gen Z snowflakes claiming mental health issues that would, in their day, have been diagnosed as an allergy to elbow grease. There are a lot of people with mental health problems in the UK, and today’s reforms include hiring 8,500 new mental health staff, but the largest share of the rise in new Personal Independence Payment claims has been from people aged 45-64 claiming for physical conditions. There are a lot of bad backs in the inactivity data. The data tell a grim story of untreated pain becoming depression; nearly 40 per cent of people who are off work with long-term illness have five or more health conditions.
This is why the money being spent directly on employment reform (£240 million) is dwarfed by the additional cash being spent on the NHS (£22,600 million). The crisis in the labour market is a symptom of the crisis on waiting lists, and in other health-related areas such as housing and nutrition.
This is also why it will be important for the government to focus on work that is dignified and made attractive by decent employment rights, because there is no getting around the fact that this plan is part of Kendall’s commitment to stick to the spending plans set by the previous government, which entailed £3bn in benefits cuts by the end of this parliament.
One thing that might make Kendall’s target for 80% employment easier to hit is the fact that the statistics around work are almost certainly wrong. The increasingly open secret of the Labour Force Survey is that it has for years had very low response rates, and a study published last week by the Resolution Foundation produced a more accurate picture of the labour market with 930,000 more workers. This divergence led the governor of the Bank of England, Andrew Bailey, to admit: “we don’t know how many people are participating in the economy”.
This doesn’t mean the UK’s ailing labour market can be dismissed as a spreadsheet error, however. It may be that larger numbers of people are economically active and claiming benefits; 41 per cent of new claims for Personal Independence Payments are from people in work. This will make Kendall’s job harder, because the rise of in-work poverty has been attributed to benefits cuts; if it has brought with it a rise of in-work ill health, then this will make further cuts harder to justify.
This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here.
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