The UK is the only OECD Member country, except for Switzerland, to have seen a sustained rise in economic inactivity since the start of the pandemic. The rise in people who are not working and not looking for work has led to significant labour shortages, with impacts for the businesses struggling to recruit and a low growth economy. The Chancellor highlighted this weakness in his speech on economic growth last week. So what’s happened and how might the Government support people to move back into work?
It is important to say that economic inactivity isn’t particularly high in the UK, compared to other developed countries, and many countries are facing widespread labour shortages. The difference is that, while participation rates have bounced back to pre-pandemic levels in many other countries, the UK workforce continues to shrink.
While many countries saw large peaks early in the pandemic, economic inactivity rates are now lower in most other OECD countries compared to pre-pandemic, and in nearly all compared to the highest peak during the pandemic. By contrast, the economic inactivity rate in the UK is at its highest point since the pandemic started. Overall, the number of people economically active in the UK is around one million lower than if pre-pandemic trends had continued.
