Leaks ahead of the Chancellor’s ‘Back to work Budget’ tomorrow show welcome signs that the Government is taking a longer-term view on health challenges following its previous consultation and response on ‘health is everyone’s business’.

The Chancellor is now looking to invest in preventative healthcare through subsidising annual health appraisals and access to Occupational Health services for small and medium-sized organisations who are least likely to offer this to staff.

The latest labour market statistics published this morning indicate that although the focus on health and employment may be right, delivering meaningful change will require a focus on flexible work.

Although employment is growing, ill health is still on the rise

This month’s labour market statistics saw an increase in the employment rate of 0.1 percentage points to 75.7%, while the number of people who are economically inactive, meaning those who are out of work and not looking for work, decreased.

The slight (0.2 percentage point) decline in inactivity this quarter continues last month’s trend and is driven primarily by young people moving from full-time education in to work.

While the overall decrease in inactivity is welcome, beneath this is a more concerning trend: the number of people who are inactive due to ill health has risen by 2.6% over the last quarter. Disabled people face structural long-term barriers in entering, staying in and progressing in work, and this has been coupled with a short-term recent increase in people who are not working due to illness following the onset of Covid-19.

Figure 1: Inactivity due to long-term sickness is rising again

Change between Aug-Oct 2022 and Nov-Jan 2023

Source: Work Foundation calculations based on ONS (14 March 2022) Dataset A01 – Table 11: Economic inactivity for those aged from 16-64 (seasonally adjusted).

Older people are struggling to find work

While unemployment remains historically low and has been stable overall from the last quarter, the amount of time people are spending in spells of unemployment varies by age. Among young people (18-24), short term-unemployment has risen slightly, likely driven by those leaving education. Encouragingly, long-term unemployment has fallen, which suggests that young people are able to move into work without too much difficulty despite the economic turbulence of recent months.

However, unemployment figures for older people are more concerning. Despite high vacancies, they are struggling to move into work. The number of people aged over 50 who are long-term unemployed (over 12 months) has increased by 2.8 percentage points over the last quarter. This is a cause for concern given that older people can face real challenges in moving back to work after a period of unemployment, and so there’s a risk that some in these circumstances may drop out of the labour market and retire earlier than planned, potentially leading to financial difficulties.

The Office for National Statistics found that among older workers who would consider returning to work, the most important factors were flexibility, including flexibility in working hours and being able to work from home. This suggests that the proposed plan to offer tax incentives for those who have recently taken early retirement may be a poorly targeted use of resources.

UK are opting into part-time work but also need other forms of flexibility

This month’s labour market statistics show that ill health does not only play a role for those who are out of work, but also those who are in work. This quarter, 20,000 more people chose to work part-time for reasons of being ill or disabled.

Tomorrow, the Chancellor will announce plans for an annual health check for individuals in work, which represents a welcome recognition of the valuable role that occupational health can play. However, we must recognise that these services vary widely in their focus and their quality.

Rather than an annual check-up for all staff, it is important to provide tailored support specifically for individuals with health conditions as they start work, and for individuals returning to work after absence. This targeted approach is more likely to identify and appropriately address a need for adjustments or changes in working practices. For example, previous Work Foundation research found that flexible hours and work location can play an important role in supporting disabled people to enter, and to remain in work.

During the Covid-19 pandemic, we saw a large fall in the number of part-time workers, which interrupted a longer-term trend towards lower working hours. This now appears to be recovering somewhat, although the total number of part-time workers remains lower than it was before the pandemic.

This quarter, part-time employment increased by 162,000, of which the majority of workers indicated they did not wish to work full-time. Recent Resolution Foundation research indicates that for many workers, reduced hours can be a positive choice. However, we also know that although some people may not wish to work full-time hours, this can be due to the inflexibility in full-time roles which make them incompatible with personal responsibilities. For example, recent Work Foundation research has found that working mothers with young children are particularly likely to experience insecure work – in large part due to the constraints of unaffordable or unavailable childcare provision.

Figure 2: An increasing number of UK workers are choosing to work part-time work again after Covid-19

Source: Work Foundation calculations based on ONS (14 March 2022) Dataset A01 – Table 3: Full-time, part-time and temporary workers (seasonally adjusted).

The Chancellor’s focus may be right, but the delivery needs work

This month’s statistics show little indication that older workers who can afford to leave the labour market before retirement age are keen to re-join the workforce. The Chancellor may wish to incentivise their return using tax credits, but this approach is at odds with what we know about what people truly value in work. The Chancellor could explore incentivising employers to advertise flexible posts, which could support employers to make their positions more competitive in a challenging landscape for recruitment.

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