While this morning’s labour market statistics show a slight uptick in employment figures and unemployment has fallen to pre-pandemic levels, there is concern over the continuing downward trend in labour market participation among over-50s. Coupled with rising living costs that are expected to acutely impact those in low paying and insecure employment, there is clear impetus for the Chancellor to provide targeted support to key worker groups in his Spring Statement next week.

Incremental improvements in employment although inactivity continues to rise

After the initial sharp fall in employment during the first wave of the pandemic, we saw a rapid recovery in employment figures in the latter half of 2021 when restrictions eased. However, that recovery appears to have levelled off. This quarter’s 0.1% increase represents an incremental increase in the employment figures and still falls 440,000 short of the employment levels in the November-January quarter of 2019/20.

It is positive to see the continued decrease in unemployment down to 3.9%, which is broadly back to pre-pandemic levels. Particularly, this quarter shows a decrease in long-term unemployment. It remains unclear whether this recent outflow from long term unemployment signals positive outcomes for individuals, i.e., that they have found work, or whether they have stopped looking for work altogether, as overall inactivity continues to grow. However, there are still 93,000 more workers who have been unemployed for over 12 months than there were prior to the pandemic.

Figure 1: Unemployment levels over the past two years, for all those aged 16+

Source: Work Foundation calculations based on ONS (15 March 2022), Dataset: A01 March – Labour market activity by age group (seasonally adjusted).

Why some workers stop working and are not looking for work

This quarter highlights continuing labour market participation challenges, with inactivity levels increasing by 0.5%, representing an additional 44,000 people aged 16-64 who are out of work and not looking for work.

At the start of the pandemic, rising inactivity was driven by young workers, many of whom became students, and by older workers, where the rise in ‘other reasons’ for not looking for work may have related to Covid-19 restrictions and increasingly, long term ill health. Since restrictions eased in the second half of 2021, younger people have increasingly come out of inactivity, but older workers continue to exit the labour market. This quarter, another 60,000 workers aged 50-64 left employment and are not looking for work.

This trend may appear slightly puzzling given that we know there are a higher than average number of job opportunities available at the moment. Many organisations are coping with labour shortages in sectors and occupations under pressure from Brexit. We have seen sustained high levels of vacancies from the second half of 2021, now at a record of 1.3 million in December-February 2022. So, what is driving older workers to continue to exit the labour market?

Recent evidence from the ONS shows that older workers can have different reasons for leaving work. While retirement remains the main motivation nearly one in five (19%) workers aged 50-59 reported leaving work for stress or mental health reasons. Another 14% indicated wanting a change in lifestyle, and 13% stopped working because they did not feel valued in their job.

A substantial share of older workers who left their jobs during the Coronavirus crisis are not interested in re-joining the labour market, but two in five (39%) are. For these workers, flexibility in hours, the ability to work remotely, and fitting work flexibly around caring responsibilities will play an increasingly important role in encouraging them to look for work again. Additionally, workers aged 50-59 were more likely than their older counterparts to prefer a permanent, rather than a temporary role. All this goes to show that working conditions and job quality will play an increasingly important role in increasing labour market participation among older age groups.

Figure 2: Priorities in choosing a new job for those who would consider returning to work, workers aged 50-70

Source: ONS (14 March 2022), Reasons for workers aged over 50 years leaving employment since the start of the coronavirus pandemic. Fig. 6. Over 50s Lifestyle Survey.

What a plan for participation could look like

Employers can play an important role in tackling the participation challenge by embedding flexibility within their organisations. Given older workers value flexibility around when and how they work, Government should work with employers to develop an employer campaign and accreditation programme to promote inclusive flexible working practices, making flexible working the default for all employees, with flexible options included in all job adverts. This would have the dual advantage of incentivising older workers to re-enter the jobs market, and helping employers address recruitment challenges.

And while it is clear that the Plan for Jobs was successful in preventing an unemployment crisis and protecting income and living standards throughout the pandemic, the Chancellor now needs to go further and launch the next phase of support – a Plan for Participation.

This should focus on commissioning specialist services with experience in supporting older workers and individuals who face multiple barriers to entering work. These services should be designed to take a different approach to the rapid and light touch support that Job centres can offer individuals who are in-between jobs; they should involve tailored guidance to access work and training opportunities that reflect their ambitions, skills and personal circumstances. There may also be a need for jobs brokerage, with service providers working directly with employers to review job design and explore potential adjustments through recruitment and onboarding. This personalised support can be particularly valuable for individuals who might face barriers accessing and staying in work, including older workers.

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