June 2023

Stephen Evans, chief executive at Learning and Work Institute, said:
The labour market remains resilient with employment up and economic inactivity down in the year to April. Average earnings rose by 6.5%, the highest outside the pandemic. Taken together these figures are likely to strengthen the hand of those arguing for further interest rate rises from the Bank of England. However, structural weaknesses remain, with inflation continuing to outstrip earnings making it tough for many to make ends meet. The employment rate is still below pre-pandemic levels, with a record 2.5 million people economically inactive due to long-term sickness. We need to tackle these structural challenges, helping more people to look for work to allow higher growth.
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1. The scale of real wage reductions is falling as inflation declines

The latest data show average regular earnings grew by 7.2% in the year to April 2023. For public sector workers average regular earnings grew by 5.6%, while average regular earnings grew by 7.6% for private sector workers. Declining inflation means real regular earnings fell by only 1.3% (3-month average change) in the year to April 2023, with the single month data for April showing an even smaller decline of 0.3% in the year to April 2023. Inflation declined in April – CPIH decreased from 8.9% in March to 7.8% in April. However, core CPIH (excluding energy, food, alcohol and tobacco) increased from 5.7% in March to 6.2% in April. Also, inflation in areas like food and non-alcoholic beverages remains very high.


2. There are fewer potential workers for employers to recruit, with 506,000 fewer over 50s in the labour market since the pandemic started

Recruitment is more challenging for employers because of rises in economic inactivity – people leaving the labour market. This has been primarily driven by those aged 50 and over and people with long-term health problems and disabilities. The number of people aged 50-64 who are economically inactive has increased by 8.7% since the pandemic started.

Economic inactivity fell in the most recent quarter, but the number of those aged 16-64 who are economic inactive remains 348,000 higher than pre-pandemic. Despite this, only one in ten out-of-work people who are older or have a disability get employment support each year. The Government needs to extend employment support to more people outside the labour market and employers need to think about recruitment and job design to attract and retain staff.


3. Current levels of economic activity have many causes

Post-pandemic increases in economic inactivity have been heavily influenced by the numbers of individuals inactive due to long-term health problems, which have increased by 20.9% since the December 2019–February 2020 quarter. Other important contributors to economic inactivity include students, whose numbers have risen by 2.6% since the start of the pandemic. By contrast, the number of individuals inactive due to family / home responsibilities has decreased by 10.8%, and the number of individuals who are retired has decreased by 4.2% over the same period. The number of economically inactive individuals who do not want to work has increased by 6.7% since the start of the pandemic, whilst the number of economically inactive individuals who do want to work has decreased by 4.9%.


4. The number of working days lost to industrial action is declining, but remains relatively high in comparison to recent decades

December saw the highest level of industrial action in over 11 years, with 829,000 working days lost. In March, the number of days lost due to industrial action stood at 553,000, which decreased to 257,000 in April. Over the past six months 2.6 million working days have been lost to industrial action. Sustained industrial disputes on this scale have not been seen since the late 1980s.


5. The employment picture varies across the country

Employment rates this quarter are higher than the equivalent quarter in 2020 in the North East, Yorkshire and the Humber, West Midlands, Eastern England, Scotland, and Northern Ireland, but are lower everywhere else. The largest increase was seen in Northern Ireland while the largest decrease was seen in Wales. Economic inactivity this quarter is higher than the equivalent pre-pandemic quarter everywhere except Yorkshire and the Humber, the West Midlands, Eastern England and Northern Ireland. The West Midlands and Northern Ireland saw the largest decline in economic inactivity, while the largest increase was seen in the East Midlands. This varying picture, which is even greater at sub-regional level, shows the importance of tackling inequalities so everyone has a fair chance in life wherever they live.


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