- Jonathan CribbAssistant Director
- Institute of Fiscal Studies, London
Two worrying economic and social trends in the UK emerging from the covid-19 pandemic are the decline in the employment of people aged 50 and over and the increase in disease rates among the population. The decline in employment was not caused by rising unemployment (when people would normally be looking for work), but rather by rising “economic inactivity” (when they normally are not).1 These declines have not occurred in most industrialized nations with the notable exception of the United States. 23 A natural conclusion can be that the two trends are related. But a closer look at the data suggests that – at least in 2020-21 – these problems were quite different.
In the fall of 2022, almost 27% of people aged 50-64 were economically inactive, compared to less than 25% just before the pandemic. This may not sound like much, but it is striking given the almost continuous decline in inactivity seen in this age group since the early 2000s. ).5
At the same time, the percentage of people aged 50-64 who say they are out of the labor force because of ill health is rising significantly.4 Other indicators also point to increasing ill health. The proportion of the population who say they have a health condition that limits their daily activities has been increasing since 2017 and has risen sharply since the start of 2019.6 The number of people applying for and receiving disability benefits has jumped .6 The number of people on NHS waiting lists is also increasing.7 All these trends are worrying. But at least so far they do not seem to have led to an increase in economic inactivity.
Instead, there seem to be two separate problems.48 First, people in their 50s and 60s are increasingly leaving paid work and retiring. The fact that the generation currently at or approaching state pension age has more wealth than any generation before them, and high levels of home ownership have probably facilitated this.910 Second, declining health – across a range of measures – means that more people of these ages now report being out of work for health reasons. But three-quarters of the increase in health-related inactivity was among people who had already been out of work for at least five years (because, for example, they were unemployed, looking after family or even retired). This means that, overall, the increase in long-term illnesses has not led to post-pandemic economic inactivity.1
To what extent might this tale of two divergent trends change in the coming months and years? It will probably develop, bringing the issues together. Some of the increases in economic inactivity happened almost immediately after the pandemic hit. Other people lost their jobs when the leave scheme was less generous and never looked for another. There have been other big spikes in retirements as we emerge from the pandemic and the leave scheme has been scrapped altogether.
Deterioration in the health of people in their 50s and 60s is known to be one of the main reasons why employment rates decline with age.11 Unhealthier people may leave work earlier and there is little are likely to return to work, raising inactivity rates even further (although other factors may act to limit such a rise).
Either way, there are unlikely to be any easy levers to pull for a government looking to tackle rising economic inactivity that is reducing tax revenues and worsening labor shortages. Encouraging retired people or people out of work for health reasons to return to work, especially full-time, is extremely difficult. But the cost-of-living crisis may encourage some of those over retirement age to return to work if they find their standard of living has eroded sufficiently. A longer-term worry for policymakers is that these trends will run counter to the government’s desire to extend working lives in response to demographic and aging pressures on public finances.
Conflict of Interest Statement: JC is an Associate Director at the Institute for Fiscal Studies. This article is based on IFS research funded by the Economic and Social Research Council. In recent years he has received research grants in this area from the Center for Better Aging, the Nuffield Foundation and the Joseph Rowtree Foundation. In each case, the research was circulated to funders for comment before wider distribution. However, final editorial control was retained by the authors.
Provenance and peer review: Custom; not peer-reviewed.