Britain must find ways to encourage older workers back into the labour force

Unemployment is back. It’s a word we’d almost forgotten, just like inflation was a word we’d almost forgotten until it crashed into the economy with devastating force.

The two are linked: price rises are playing a major role in Britain’s economic woes, forcing the imposition of higher interest rates, which will slow an economy already teetering on the edge of a recessionary abyss.

Higher unemployment, a lagging indicator, will follow. How bad could it get? According to the Bank of England’s most recent (grim) economic forecasts, we might be looking at 6.5 per cent before too long. That looks unpleasant until you realise that it’s actually below par for the last 50 years or so, during which time the rate of unemployment averaged just below 7 per cent.

At its high point, during the de-industrialisation that went hand in hand with the Thatcher government, it hit 11.9 per cent.

Long-term joblessness became a real and wrenching social problem at the time, with devastating consequences for those caught up in it. It was made all the worse by the shameful attempts of Tory politicians to blame the unemployed for a problem not of their own making. Many got on their bikes, or just ran, looking for any sort of work they could find. The jobs just weren’t there.

Today’s labour market is very different. But it suffers from a problem that might be equally as wrenching. It is economic inactivity: people, mostly from older demographics, slipping out of the labour force and not seeking to rejoin. Or not able to rejoin. The current rate of this is at a record level. More than one in five people of working age are in the category, around nine million in total.

Big numbers always tend to draw attention, but the UK has also been experiencing labour shortages in several sectors. Chronic labour shortages. So much has been written about the subject, but ideas for addressing the problem have proved harder to find. We know the scale of the problem, and some of the reasons. More research is clearly required into potential solutions.

Here’s what we know about the numbers, the trends and the causes: from the mid-1990s up to the start of the pandemic, the employment rate for people aged 50 to 64 had been increasing, from 57.2 per cent in 1995 to 72.5 per cent in 2019, per the Office for National Statistics.

The employment rate gap, meanwhile, between people aged between 35 and 49 and those aged between 50 and 64 had been narrowing (from 22.2 percentage points in 1995 to 12.8 percentage points in 2019).

Since Covid, those welcome trends have gone into reverse. The obvious conclusion: older workers are leaving the labour force because of long-term sickness and/or disability. Covid has served as the catalyst.

But as the Institute for Fiscal Studies recently noted, “the rise in the number of people who are inactive due to ill health does not necessarily imply that all these people have left the labour force as a result of ill health”.

In fact, what it found was that the older workers who left the labour force during the pandemic were often departing for reasons other than ill health: early retirement, for example. Troublingly, it also found deteriorating health among those who had been out of the labour force for some time (obviously preventing them from moving back in should they wish to).

These are issues that should be addressed both from a moral and an economic perspective. When it comes to the latter, Britain obviously has an ageing population, while there is considerable resistance politically to importing younger workers by means of immigration to support it. The nation also suffers from some notable skills gaps. UK plc thus needs to retain more of its older workers. This will require action from both government and employers.

The problem is that long-term, strategic policymaking has been all but cast aside. Reports such as the ones cited above, and the hours of research that go into producing them, are for the birds when the party in control of government spends most of its time gazing at its navel and can’t see beyond the next headline when it moves itself to look up.

A rising unemployment rate, in theory, puts this problem on the back burner, because (obviously) the labour shortages that have bedevilled the UK economy should ease.

However, it would be a grave mistake to allow the issue to fade into the background. Britain’s population will continue ageing. Skills gaps in important sectors mean they will still suffer from shortages, even as the rate of joblesseness rises, holding back growth and recovery, which regrettably is not expected to emerge for a couple of years.

Efforts need to be made to improve the health of older workers to encourage them back, or to work for longer. Employers should consider more flexible and part-time options to facilitate this. Remote working, more common since the pandemic, might also help. Managers opposing it might need to rethink their backward-looking stance.

Government needs to put its mind to addressing those health issues. Legislation to help the cause of disabled workers – where the employment gap remains huge and many who want to work can’t find it as a result of prejudice – would also be a good idea.

Regardless, Britain needs its older workers, and that will remain true even as unemployment starts to rise. This is no time for complacency.