This month’s labour market statistics show signs that the labour market is weakening, employment falling and both unemployment and inactivity due to ill health growing.

Given the scale and the entrenched nature of these issues, policy-makers should be wary of introducing arbitrary and short-term goals for increasing employment rates and reducing the number of people on benefits which are unlikely to resolve structural issues. In the run up to the General Election political parties should instead be outlining their long-term plans for increasing sustainable, good-quality employment, that is inclusive of people experiencing health conditions and other work-limiting factors.

The participation puzzle

This month’s labour market statistics show that the employment rate was down by 0.2 percentage points on the quarter to 74.3%. These figures must be treated with caution, as the data that these estimates are based on has been subject to issues over recent months.

At the same time, the unemployment rate has increased to 4.4%, which is the highest it has been for nearly three years. This represents people who are out of work and actively looking for work.

The number of working-age people who are out of work and not looking for work has also risen, to 22.3% (9.4 million). People may be out of work for a number of reasons, such as attending full-time education, retirement or taking care of families and home life. However, concerningly, a record 2.83 million working-age people are now out of work and not looking to due to long term sickness. This group makes up 6.7% of the working age population.

There are now 702,000 more people out of work and not looking due to long term sickness than there were pre-pandemic (Jan-March 2020)

Figure: Number of people out of work and not looking for work due to long term illness, 2019-2024

Source: Work Foundation calculations of ONS data (11 June 2024) using Dataset A01, table 11: Economic inactivity – People aged 16 to 64 by reason for inactivity (seasonally adjusted).

Addressing workforce health for the new Government

On 5 July 2024 a new Government will face the dual challenge of a sluggish economy and a workforce that is smaller and sicker than in 2019. They will have an initial five years to address these challenges, but there is no silver bullet to overcome some entrenched challenged.

Mental health issues, musculoskeletal pain and chronic conditions, such as cancer, have been on the rise for years – pre-dating the pandemic. Coupled with cuts in public services and increases in NHS waiting lists, it is perhaps little surprise to witness the health of the working age population declining. These issues are driving people to exit from the labour market.

The challenge for the next Government is to keep people in employment by enabling them to work flexibly and with support whilst managing and recovering from conditions. Leaving work altogether due to chronic conditions is in some cases unavoidable. But with the UK population becoming sicker, stemming the drop out will be required if we want to limit the harms that long-term involuntary unemployment can cause individuals s as well as wider society.

The Labour Party wants to boost labour market participation and get two million more people into work, raising the employment rate to 80%. The Conservative Party has also put forward plans for more stringent assessment of people’s ability to work and tougher rules for benefit claimants to help increase labour market participation. While both plans aim to grow participation, such strategies do not take into account that many workers have already left work due to ill health and are now further away from accessing labour market.

It is key that Government supports those with health issues who want to stay in or return to work, to do so. It should move away from a punitive approach that tries to force people into ‘any’ job, and rather provide tailored support to get people into good quality, secure roles that fit their skills and ambitions and which support a sustainable career.

At the same time, we should focus on the increase in poor health among those who remain in work. They may be limited in how and where they work do due to their impairments or conditions, and may be at higher risk of falling out of the labour market if they are not appropriately supported by occupational health services and their employers and line managers.

To tackle the structural challenges we face in the UK labour market, the next Government should focus on four key areas:

• Increasing levels of sick pay and introducing more flexibility into the system so that people can manage conditions for longer whilst remaining in employment
• Providing better access to occupational health services, particularly for workers in small and medium sized businesses
• Introducing a default right to flexible working, based on a secure contract, which is key to people with health conditions
• De-risking the journey back into work for those who are on Universal Credit by ensuring that the take up of employment does not result in any reduction or gaps in payments

Later this year we will be publishing new analysis of the role of sick leave and other forms of paid time-off play in supporting people to live healthy working lives. We will also be exploring whether inclusive remote and hybrid working may enable people with long term conditions and disabilities to access work, and the need for an ambitious and joined up approach between employers and government to foster good workforce health.

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