Staffing shortage: early retirement to blame
Economic inactivity has soared by 565,000 people since the start of the pandemic. The new report called Where have all the workers gone? was commissioned by the Chancellor in the 2022 Autumn Statement.
The report said the rise in inactivity caused issues for the UK economy as it heightened the problem of inflation, damaged growth in the near term and reduced the revenues available to finance public services while demand for those services will grow.
House of Lords Economic Affairs Committee chair George Bridges said those who were already economically inactive were becoming sicker, meaning they were less likely to return to work.
He believed while other factors were previously masking the impact of an ageing population on the size of the workforce, they were now reinforcing it.
Bridges continued: “Taken together these findings are, like mid-winter, bleak.
Financial pressures
“The rise in economic inactivity makes it harder to control inflation; damages growth and puts pressure on already stretched public finances.
“That’s why it’s critical the Government does more to understand the causes of increased inactivity, and whether this trend is likely to persist.”
Although the population is getting sicker, must of the rise in sickness-related inactivity is among people who were already inactive.
Instead, the decision to retire early among 50 to 64-year-olds has been the key driver in the change in trend since 2020.
The report said this wave of retirement could be down to the pandemic, including the furlough schemes, which may have prompted some to consider early retirement.
Secondly, increased saving during Covid and the UK’s pensions flexibilities could also have enabled earlier retirement.
The report also revealed the majority of those over 50 who had left the workforce since the pandemic are not expected to return to work, and also seemed reasonably well-off.
More changes
Changes to the structure of migration have also had an impact on vacancies after EU workers filling lower paid roles in recent years left the UK.
The research showed hospitality had seen a significant reduction in EU nationals on their payroll, with no commensurate increase in non-EU nationals. The British Retail Consortium also highlighted they were facing challenges with specific occupations such as workers in
supply chain operations.
Furthermore, their departure has been counterbalanced by the arrival of non-EU workers, who were granted visas under the new immigration system which prioritises skilled workers.
According to the report, this has contributed to a mismatch within the labour force, accentuating vacancies and labour shortages in certain sectors.
