Britain has too many sick workers and it’s holding back the economy

Welcome to sick Britain. The Office for National Statistics has released the results of its latest application of a thermometer to the labour market. They weren’t altogether happy.

The number of people branded as “economically inactive” – a category that includes everyone from students, to carers, to those too sick to work – fell during the most recent period (December to February). The jobs market also softened a little. With employers under considerable pressure, vacancies fell. There were also 220,000 more people looking for work year on year. The employment rate crept up to 75.8 per cent (good) but unemployment also rose, to 3.8 per cent from 3.7 per cent (bad). It should be said that is still low by historical standards.

The cause of the increased number of people seeking work was chiefly an influx of students into the workplace. Those economically inactive as a result of illness, however, hit a record high of 2.53 million. And yes, that is a horrible number. This category accounts for almost all the increase in inactivity recorded since 2020.

Needless to say, there is a heavy concentration of them in the 50 to 64-year-old age group, where economic inactivity was up by 298,000 on pre-pandemic levels.

This, obviously, presents the government with a difficult and complex problem. The sort of problem Britain’s politicians have historically struggled with. It doesn’t lend itself to soundbites, cheap headlines and easy quips with which to swat aside troublesome questions at PMQs. It nonetheless needs to be addressed because it is applying a powerful brake to the UK economy.

“Reversing this trend – which predated the pandemic – is a huge priority that is likely to take years to address, said the Resolution Foundation describing it as “a key test of the new health and disability white paper”.

That paper is supposed to offer solutions. But I find it debatable whether what amounts to the biggest shake-up of the benefits system in a generation will achieve its aims.

The chief problem with that paper is its emphasis on a tactic that studies have repeatedly called into question.

The white paper proposes to abolish hated workplace capability assessments in favour of a focus on “what people can do”. This will be left to job coaches to decide. Quite how having these people potentially push sick and disabled people into unsuitable roles they are unable to keep up with is ultimately going to help Britain’s labour shortages is far from clear.

It may simply end up increasing the number of people made economically inactive through illness, the opposite of its stated intention.

I believe a far better approach would be to address the health service’s woes. If people could access the treatment they needed, it would clearly help them along the road to re-entering the labour market. No, that won’t happen overnight. But there are steps that could be taken.

Settling the labour unrest that plagues the NHS would be your “starter for 10”. That would come at a cost. But the benefits could be formidable. Now might be a good time to task someone in the Treasury with conducting a cost benefit analysis.

Another good step would be to consider what services this cohort might need to improve their ability to work. Physiotherapy might, for example, be extremely useful to some. Currently, it is readily available to those who can pay, less so for those reliant on the NHS.

The other main takeaway from the figures is, of course, that wages rose by 6.6 per cent. This is a decline in real terms, of 3 per cent year on year, 2.3 per cent if bonuses are excluded from the calculation. There really hasn’t been much evidence to suggest Britain is entering the sort of wage-price spiral that keeps economists up at night.

However, there might still be enough there to make the trigger fingers of the members of Bank of England’s Monetary Policy itchy, especially when combined with other recent indicators. The most important of those is, of course, the latest data on inflation. Buckle up.