March 25, 2024 - 11:00am
There are many reasons why the nation’s finances are in a mess, but one of the most significant is the rise of economic inactivity. This is distinct from — and worse than — unemployment, because its victims aren’t even seeking work.
In the UK there are 700,000 more working-age people who are economically inactive than there were before the pandemic. Some are in full-time education, but most are on benefits and costing the country dear. What’s especially concerning is that the British situation is uniquely bad. In all other G7 nations, employment levels are higher now than before Covid.
A new briefing paper from the Resolution Foundation delves into the causal factors. The most important is the dramatic rise in the number of people claiming benefits because of long-term sickness — in particular, mental health conditions. Frustratingly, this comes after a long decline in sickness-related inactivity.
So what went wrong? The glaringly obvious explanation is the effects of lockdowns during the pandemic. However, report author Louise Murphy argues that our national turn for the worse began in the summer of 2019: “it does not appear to be a short-term, Covid-19-related blip.” Fraser Nelson makes a similar point, tweeting that the “rise in sickness benefit started about a year before Covid.”
On the face of it, Murphy and Nelson are correct — the change from a downward to an upward trend does happen many months ahead of the virus. Yet it’s vital that we don’t shift the blame away from the pandemic — or, for that matter, the policy response to it.
For a start, we shouldn’t over-interpret the precise point at which economic inactivity begins to rise. A quick glance at the above chart shows that there are many minor variations around the long-term trend. The fact that an uptick happened shortly before the pandemic — when, by the way, the world economy was slowing down — could be coincidental. There’s no reason to assume that it explains the much bigger changes that took place during the pandemic.
In any case, prior to Covid, there was no sudden deterioration in long-term sickness trends that can explain the 2019 rise in economic inactivity. The Office for Budget Responsibility’s 2023 Financial Risks and Stability report (page 28) does show a long-term rise in self-reported disability, but that started years earlier.
Page 24 of the same OBR report also shows that the contribution of long-term sickness to inactivity levels was low at the beginning of the pandemic, only to grow in significance until it became the dominant factor by 2023. Again, this suggests that what happened during the pandemic was more important than anything which came before it.
And no wonder. For this country, Covid-19 was the most disruptive and deadly event since the Second World War. Sickness, bereavement, confinement and enforced worklessness affected millions of people. Unsurprisingly, the impact lingers.
Of course, we weren’t the only country to suffer. So why has the recovery in UK employment levels been so much slower than our competitors?
Paradoxically, the explanation may be the rapid progress that was made getting people off benefits and into work in the decade before Covid. The reforms pioneered by Iain Duncan Smith during his long tenure as Work and Pensions Secretary were controversial, but effective. Since he left the job in 2016 he’s had no fewer than eight successors — and one can’t help but think that this absurd lack of continuity has weakened the Government’s resolve to keep Britain working.
Certainly, the pandemic found us out. While we’ve continued to create jobs — enough to absorb record levels of immigration without any increase in unemployment — hundreds of thousands of British citizens have been consigned to a life on sickness benefits. After 14 years of Tory rule — which began with such ambition — it is a sad and ignominious conclusion.
Peter Franklin is Associate Editor of UnHerd. He was previously a policy advisor and speechwriter on environmental and social issues.
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SubscribeI strongly opposed lockdowns, and their long-term economic impact is undeniable, but wouldn’t other counties experience the same thing?
I agree. I’m usually among the first to point out that the UK’s current issues aren’t that dissimilar to many other nation’s problems, but this does not appear to be one of them.
It’s perhaps the case that lockdown exacerbated some other underlying issue, but I don’t think it’s an exclusive cause.
Of course, but this is labelled as an Unherd ‘factcheck’ so it must be true.
Both British and Dutch governments were concerned that employers would shed staff due to the self-inflicted economic crash caused by lockdown. A Dutch friend told me that in Holland staff had to keep working for the employer to receive State aid. However, in Britain staff had to stop working for the employer to receive State aid. Big difference with entirely forseeable consequences.
I, too, strongly opposed lockdowns, and I recall getting laughed at on a regular basis for predicting that there’d be economic hell to pay for borrowing all that money just to pay people to do nothing. It’s shocking, but from what I can tell, millions of people really thought that it wouldn’t be a problem, and the idea that such people happily grabbed a year off work on 80% pay but are now unhappy with the government about the economy, really does make me quite angry.
It is because we have invented a “mental health” crisis. If you allow people to go on the sick because they feel unhappy or anxious, every workshy chancer is going to take advantage. It could be fixed in five minutes by withdrawing sickness benefits on mental health grounds.
The glaringly obvious explanation is that NHS GPs are only to happy to sign people off sick without cause
This is an excellent explanation, unfortunately unfortunately it’s not true because that’s not actually how the sick benefits system works
I suggest you check this website which explains the process https://www.mentalhealthandmoneyadvice.org/en/welfare-benefits/will-i-need-a-work-capability-assessment-to-claim-benefits/what-is-the-work-capability-assessment/
My brother has been on the sick for almost 40 years
Given his history of managed but persistent schizophrenia, which you outlined (movingly) on another comment board: Does your brother seem capable of steady work to you?
There are chancers and people who game the system in every area of life, but they’re typically in the minority. As ever, with an issue like productivity or lack thereof, the reasons for it are myriad, deeply embedded and are the result of long-term behaviours and decision making. So, lockdowns or the media’s recent obsession – ‘the mental health crisis’ are likely contributing symptoms of a less obvious cause. You could just as easily argue that it’s the quality of education, the lack of an aspirational vision for the country, our sub-par political class, the housing crisis, etc.
The irony is having something productive to do is the best thing for mental health and having nothing to do is the worst. The long periods on furlough will have contributed to the problem we are now seeing. Drs should prescribe getting back to work.
This is all based on the assumption that there are employers who really want to hire people with mental health problems. I’m afraid that that’s simply not true. I had the experience of hiring somebody with severe mental health problems, simply as a dog walker it became clear that this person, although lovely, was not really going to be reliable Because they were subject to all kinds of mental breakdowns. Things have improved with medication but aside from intermittent dog walking. I don’t think that this person is employable by any stretch of the imagination. I’m quite happy to pay taxes to support their benefits so they don’t starve to death but if I was running a company I wouldn’t touch them with a 10 foot pole .
I think you make a very valid point, that the employer does have a say in who is hired! i have worked in community work for over 20 years and while there maybe are a few people who do not want to be a productive member of society, the vast majority of people who were not in employment had significant barriers that would impact on employers deciding to employ them! I would much rather see people working reduced hours that not at all and i think our benefits system will have to recognise that much more flexibility is required for those who are impacted by poor mental health.
If you ever suffer mental anguish it will be a useful learning experience for you
One of my neighbours had been on benefit for years, then was finally forced to get a job. This actually helped them enormously and their general carry-on improved no end as a result.
But this was all interrupted by lockdowns and now they’re back on benefit and, no doubt, it will take another mammoth effort by somebody else to get them off the sofa once more and into employment.
The whole lockdown methodology was an utter disaster and we’ll be living with the fallout for a generation.
In the UK there are 700,000 more working-age people who are economically inactive than there were before the pandemic.
Every omelet requires a few eggs. Or a few hundred thousand of them. If only someone had warned of the foreseeable consequences of such a policy. By the way, foreseeable consequences are intentional, not accidental.
Firstly the kind of “jobs” we’ve created are McJobs- jobs with no scope for progress or development, mostly zero hours contracts and gig economy joblettes. This has left the middle classes fighting for the fewer Decent jobs that remain viable. The natural consequence of this is that there are no entry-level roles for the working classes who have to stick with the working class jobs and forgo social mobility. This means that jobs that would otherwise have been taken by the lowest classes – what we might call the underclass – low, skilled awful jobs Are done by those who are able to, but the fact people who are uneducated and undernourished and in poor health probably can’t do most of those jobs
add to that an acknowledge culture of worthlessness in the former industrial regions.. topping it off like the cherry on the cake is the vast increase in low skill migration so those terrible jobs have been hoovered up by immigrants.
If we would’ve managed to create high-quality jobs over the last 14 years and expand the knowledge industry, we would’ve done really well, but we really didn’t; it’s the details we need to focus on the numbers.
I have lived and worked in the UK and the USA. The US system of social support is much weaker, but most people are happier than in the UK. I suspect that if social services are too generous, they mostly spread misery around.
This is just a wild guess but could it have anything to so with the fact that the UK benefits system is known to be so generous that migrants will cross large parts of Africa and Europe, in the face of grave dangers, just to land on our shores.
If all one has to do to qualify for ‘self-reported disability’ is claim they’re depressed, anxious or otherwise down in the dumps, there is an enormous temptation to try it on. Occam’s razor?
I could be wrong (I’m sure somebody can pull the figures from somewhere) but anecdotally when I’ve spoken to people from other European countries the benefits in the UK actually lag a long way behind those in Ireland and on the continent
You may be right, but if that’s the case why do so many risk a dangerous Channel crossing in a dinghy to get to the promised land? They can’t all have relatives in the UK.
It’s not just health issues, it’s also financial incentives. Beyond needing money to pay the bills there is zero reward in working hard. Moreover, unless you subscribe to progressive values you can forget ever getting a promotion, especially in public sector work.
A bigger problem is that we have increasingly took away the incentives for working in the first place, for youngsters especially. Why bother going to work all week (with long expensive commutes) simply to hand the bulk of your wages over to a landlord to live in some grotty flat?
If you’re watching house prices climb ever further out of reach and have little hope of ever buying one, accruing capital or getting ahead then what’s the point? Why spend 50 years slaving away in a job you hate if it’s never going to improve your financial situation?
People will put up with a lot, as long as they can see that life is slowly improving for them and the next generation. That’s no longer happening
I agree with your final point: in fact, during the Thatcher/Major/Blair years, the majority of people were revealed as quite tolerant of wealth inequality, but with the important condition that they themselves were not wholly excluded from the game. As long as people had even a tiny stake in the game, as a general rule they didn’t mind other people winning more. The caveat to this of course is that the game must be played fairly – nobody minds Richard Branson, but most people dislike Fred “the shred” Goodwin, for example.
On the matter of young people and housing, the advice I usually try to give is that although the present state of the housing market is admittedly unfair, there are two crucially important reasons why a young person should not avoid even badly-paid work. The first is simply that jobs improve a person’s CV and experience, which puts that person at an advantage over someone who has been on the dole when sat in front of an interviewer whenever a job with prospects comes along.
Secondly, everyone should learn Einstein’s lesson of the magic of compound interest: save a fixed amount per month for ten years at the start of a 40 year period and then nothing, or nothing for the first ten years then the fixed amount for the remaining 30 years: the former strategy is the one that ends up with more money. So, you can’t afford a house right now? Doesn’t mean you can’t save money into other investments. At some point, housing affordability will return, and you’ll need a deposit and a reliable income stream for mortgage affordability – where will you get that, if you haven’t worked and haven’t saved?
How do you prompt economic engagement or activity out of someone who has applied for thousands of jobs but who only even gets an interview once or twice a year ? That’s the situation of many, whether on benefits or funding themselves privately.
In either case, they obviously buy far less.
And being absent, they are not engaged in other ways.
Hence if opportunities arise, for example preparatory research into new products or services, or for developing new businesses, they’re never likely to hear of them.
Of course they’ll be multiple reasons and one should guard against temptation to over generalise based on one’s prejudice.
A large cohort, almost a quarter of the total economically inactive in the UK are ‘carers’ (or who state that as the reason). This cohort is growing as fast, if not faster, than Long term sick with poor mental health. One might suspect some overlap too between Carers/Sick in primary reason stated.
Demographics are clearly a factor – aging population an obvious driver. Economics too – grandparents looking after grandchildren when they could in fact still be in the economically active.
The Author, perhaps unsurprisingly, silent on this trend whilst majoring on the shirkers/pandemic theory. Yet the ‘carers’ element may be the most difficult issue with the most challenging policy intervention choices which the current Govt promised to tackle and has not.
I disagree. I’m not usually great at recalling statistics, but on this one I can: in 1997 there were 900,000 people on the disability benefits register. By a decade later (when the banking crisis hit us and policymakers realised that it might be a good idea to pay attention to the numbers again), that number had almost exactly tripled, to 2.7m.
The reason I recall this is that it formed part of a pretty angry public debate around Iain Duncan-Smith’s welfare reforms during the Coalition years, when the Left was screaming blue murder about people being deemed fit for work who had previously had years of easy pickings on welfare. All that was achieved by this political slanging-match was to bring this fact to the angry attention of millions of decent people who had always worked for a living.