As Sir Keir Starmer aims to stimulate economic growth, he faces a worsening worklessness crisis inherited from his predecessor, Rishi Sunak. Recent figures reveal that around 9.5 million people of working age in the UK are economically inactive, meaning they are neither working nor seeking work. This presents a significant challenge for the Prime Minister, who must grapple with a shrinking workforce that threatens to impede GDP growth.
The data highlights another pressing issue: rising migration levels. As the number of British-born adults disengaging from the job market continues to climb, businesses and public sector employers are increasingly turning to foreign workers to fill vacancies. Since the onset of the COVID-19 pandemic, over a million foreign workers have arrived in Britain, adding to concerns about migration and placing additional strain on public services. This shift could also leave the UK vulnerable to a labour market crisis if it becomes less attractive to immigrants.
The number of economically inactive people in the UK has surged by more than 1 million since the pandemic began, with British-born individuals accounting for 833,000 of this increase. In contrast, 230,000 of the increase is attributable to people born outside the UK. This stark contrast underscores that the surge in worklessness is predominantly driven by those born in the UK.
The principal factor behind the rise in inactivity is long-term sickness, with many individuals citing health issues as a reason for their inability to work. Additionally, there has been a significant rise in the number of students, who are not participating in the workforce. For those born in the UK, this category only accounts for a fraction of the increase in worklessness.
On the employment front, the number of British-born individuals in work has dropped by 967,000 since late 2019. Conversely, employment among foreign-born workers has increased by just over 1 million. Consequently, the proportion of UK-born individuals in the workforce has fallen from 82% before the pandemic to just under 80% currently, and a steep 92% at the turn of the century.
This decline in British-born employment is occurring despite a high demand for workers. At the peak of the hiring frenzy in 2022, there were 1.3 million job vacancies. Although this number has decreased to 884,000, it remains above pre-pandemic levels of around 810,000. Employers continue to struggle with worklessness as they face difficulties in filling critical roles.
Petra Tagg, director at ManpowerGroup UK, notes that employers are struggling to achieve their growth ambitions due to a lack of workforce participation. “A lack of workforce participation from those who are of working age is still constricting economic growth,” she says.
Alexandra Hall-Chen from the Institute of Directors emphasizes that the scarcity of skills and labor remains a pressing issue. “Economic inactivity remains significantly higher than prior to the pandemic,” she says. Hall-Chen warns that without effective measures to increase workforce participation, sustained economic growth will be challenging.
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Chancellor Rachel Reeves has vowed to address these issues, pledging to tackle benefits claimants and reform the welfare system. “Today’s figures show there is more to do in supporting people into employment because if you can work, you should work,” she says. Reeves plans to address these challenges in her upcoming Budget, focusing on spending, welfare, and tax reforms to rebuild the economy.
The dynamics of employment and worklessness are influenced by various factors beyond simple transitions between status categories. Factors such as retirement, relocation, and new entrants to the job market contribute to workforce changes. Similarly, the rise in migrant workers often aligns with the decline in British-born employment, although the jobs filled by migrants may differ from those previously held by UK-born workers.
Neil Carberry, chief executive of the Recruitment and Employment Confederation, highlights that employers are increasingly reliant on foreign workers. “Someone who is willing to change country to work is highly motivated to work – they are coming in and engaging in the job search,” Carberry explains.
In summary, the escalating worklessness among British-born adults is contributing to a migration crisis, as employers turn to foreign workers to fill the void. This shift poses significant challenges for economic growth and public services, underscoring the urgent need for effective policies to address these emerging issues.
