A new report reveals that the UK’s labor force is shrinking at its fastest pace since the late 1980s.
The Commission on the Future of Employment Support reports that there has been a reduction of 1.5 percentage points in the number of people 16 and older who are employed or looking for work, since the Covid-19 pandemic.
It means that there are about 800,000 less people working in the UK. This costs the public finances at least PS16bn per year and is more then double the decline following the recession of 2008-09.
In its report, released today (18th September), the Commission highlighted that the UK’s participation in the labour force is a stark contrast to other developed countries who are experiencing an increase of 1.3 percentage point in activity on average across the OECD.
The UK has been ranked 15th out of the 20 developed countries in terms of employment rate. It was ranked 8th five years ago.
If the current position had been maintained, it would have given the economy a boost worth PS25bn and the public finances a benefit of PS16bn per year.
The report proposes reforms in four areas of employment support. The report suggests a three-pronged approach for the new Jobs and Careers Service that would make it more universal and accessible. It also proposes a system of sanctions to end the “compliance” culture in Jobcentres.
In the two years since the Institute for Employment Studies and Abrdn Financial Fairness Trust launched the project in November 2022 they have consulted with more than 300 individuals and organisations in the UK as well as internationally.
The commission also recommended the creation of New Labour Market Partnerships in local areas, and setting clear goals for the next Parliament in order to make progress towards the government’s goal of achieving an employment rate of 80%. It also suggested tackling poverty in the workplace and reducing inequality in the labour market.
Mubin Haq said, in response to the report: “The UK desperately requires economic growth, and increasing the number people working is one way of achieving that. Our system doesn’t work, and the UK’s Employment Service is the least used in Europe. Our support for people to get jobs is too short term and draconian. We fail too many employers as well as those who are locked out of employment. This is a massive loss for our economy and public finances, as well as a missed chance to improve living standards. Now is the time to refresh and reset our employment support services.
A YouGov survey, analysed and supported by IES, found that 70% of people who are unemployed or working at low wages, excluding students and pensioners, would prefer to receive support if they were available to everyone.
The survey showed that more people with disabilities (62%) would access help more readily if the support was offered on a volunteer basis. Four in five people (79%) aged 50-64, and a similar number (78%) disabled people were more likely access support if they could get it close to their home.
Tony Wilson, Director at the Institute for Employment Studies said: “We have a chance to correct things once in a generation. This report outlines how to achieve this, as well as help boost economic growth, improve public finances, and create a more fair and inclusive economy.
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