October 2022

Stephen Evans, Chief executive of Learning and Work Institute, said:
We are now in the grip of a prolonged crunch in living standards. Real wages are falling at their fastest rate this century and, with inflation remaining high, further falls are likely. If anything, this makes it more important that the Government uprates benefits in line with inflation, rather than see further falls in a safety net that has been reduced over recent years. Slower pay growth in the public sector than in the private sector increases the risk of a recruitment crunch that could harm efforts to improve public services like health and social care. This will increase pressure on the Chancellor to increase funding to reflect rising prices. Employment remains 300,000 below pre-pandemic level. The rise in over 50s and people with long-term health problems leaving the labour market altogether is making it tough for employers to find the workers they need. Yet only one in ten of these groups gets help to find work each year. The Government should urgently widen access to employment support to people out of work but not on benefits, and employers need to think about how they recruit and design jobs. These would be supply-side reforms that would make a real difference to our economy.

Towards Full Employment

Learning and Work Institute has published proposals for the Government to aim for an 80% employment rate, arguing that extending employment support to older people and disabled people could boost the economy by £23 billion per year.

1. Real earnings continue to fall due to high inflation

The latest data show average regular earnings grew by 5.6% in the year to August 2022, though bonuses for some pushed headline earnings growth up by 5.8%. However, inflation is higher, at 9.9% in the year to August 2022. This means real earnings fell by 2.7% in the year to August 2022. The outlook for earnings remains challenging, with inflation likely to remain relatively high in the short-term. Public sector earnings grew at 2% in the last year, compared to 6% in the private sector. This is likely to add to recruitment and retention challenges for public services.





2. Employment has fallen and remains 319,000 below pre-pandemic levels

Employment fell by 109,000 in June to August 2022 compared to the previous quarter and remains 319,000 lower than before the pandemic. The timelier but less comprehensive measure of PAYE employees increased by 69,321 in September 2022 compared to the previous month and is 729,631 higher than pre-pandemic.

Unemployment decreased by 97,000 in June to August 2022 compared to the previous quarter. However, the falls in unemployment are driven by rises in economic inactivity (people leaving the labour force) rather than rises in employment.

Economic inactivity increased by 252,000 compared to the previous quarter and is 630,000 higher than pre-pandemic. Nearly 9 million people aged 16-64 are economically inactive, 2.6 million of whom say this is due to sickness or disability, 16% higher than pre-pandemic. Our research shows the UK is an international outlier in seeing this rise in economic inactivity, highlighting the need to extend employment support and widen our labour force.



3. There are fewer potential workers for employers to recruit, with 712,000 fewer over 50s in the labour market since the pandemic started

Vacancies are at near record levels, but despite record hiring employers are struggling to meet all their needs. 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 and over who are economically inactive has increased by 5% since the pandemic started.

This is a key challenge – for the Government to support people in this group who want to work and for employers to think about recruitment and job design that will meet their needs. The number of 50-64 year olds who are economically inactive increased by 107,000 in the last quarter, and the number of over 64s who are economically inactive increased by 81,000 in the last quarter.





4. The employment picture varies across the country

Employment rates are higher than pre-pandemic 2019 levels in Yorkshire & the Humber, Eastern England, and London, but are lower or have stayed the same everywhere else. Economic inactivity is highest in Northern Ireland, Wales and the North East, however four regions have a lower economic inactivity rate now compared to 2019 – Yorkshire & the Humber, the West Midlands, London, and Scotland. The West Midlands, the South East, the South West, and Northern Ireland have a higher unemployment rate now than compared to 2019. 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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