More than a fifth of UK adults still not looking for work

Official data reveals that over one-fifth of the UK's working-age population remains either unemployed or not actively seeking employment. This phenomenon has garnered significant attention from the government, prompting the development of plans to stimulate economic growth in the UK. These plans aim to address the underlying issues contributing to the high rate of economic inactivity.

In the three months leading up to January of this year, the UK's economic inactivity rate, which represents the proportion of the population neither employed nor actively seeking work, stood at 21.5%. This figure marks a decrease compared to both the previous quarter and the same period last year, positioning it at a relatively low level compared to trends observed since 2009. However, as the government strives to bolster economic growth in the UK, the issue of individuals not seeking employment is becoming increasingly prominent and requires urgent attention.

The release of this data coincides with the government's announcement of controversial plans to cut sickness and disability benefits, as well as Chancellor Rachel Reeves' upcoming spring statement next week, where she is expected to update her economic plans. On Tuesday, the government declared substantial reductions in sickness and disability benefits, aiming to save £5 billion annually by 2030. The government asserts that these measures are designed to encourage people to work while safeguarding those unable to do so. Nevertheless, these reforms have drawn sharp criticism from Labour MPs, trade unions, and charities, who argue that the changes could push more disabled people into poverty and create further hardship.

Secretary of State for Work and Pensions, Liz Kendall, stated that the latest employment data highlights the significant challenges the UK still faces in revitalizing employment. Labour's goal is to achieve an 80% employment rate, while the current rate stands at 75%. Sir Charlie Mayfield, former boss of John Lewis, has been leading the "Keeping Britain Working" review, commissioned by the government to investigate the role of employers in health and disability. He told the BBC: "Employers need to create an environment where people can talk about the help they might need." He also stated that the UK needs to shift from a disjointed system focused on what people can't do to one that focuses on what they can do. "Not being at work isn't always the solution."

The review found that 8.7 million people in the UK have health problems affecting their ability to work, an increase of 2.5 million in the past decade, including 1.2 million 16 to 34-year-olds and 900,000 50 to 64-year-olds. Furthermore, people unemployed for less than a year are five times more likely to return to work than those unemployed for longer periods. The Office for National Statistics (ONS) has cautioned that its employment data should be treated with caution due to low response rates to its employment survey. Despite this, the agency stated that the economic inactivity rate has generally been declining since comparable records began in 1971. Currently, 9.27 million people are classified as economically inactive, citing reasons such as long-term illness, studying, retirement, and caring for family responsibilities. The economic inactivity rate rose during the COVID-19 pandemic and has fluctuated around this elevated level. However, the ONS stated that the economic inactivity rate decreased by 0.6% year-on-year and 0.2% quarter-on-quarter across all age groups, largely due to more 35 to 49-year-olds seeking employment.

In its labor market report, the ONS stated that wage growth continues to outpace inflation. Wages, excluding bonuses, increased by 5.9% year-on-year in the quarter, with strong wage growth in the retail, hospitality, and construction sectors. After adjusting for inflation, real wages increased by 2.2%. In the three months to January, redundancies rose to 124,000, the first increase in a year. The Bank of England closely monitors wage and employment data when making interest rate decisions. In its latest decision on Thursday, the Bank held interest rates at 4.5%.