The end of the furlough scheme has not led to mass unemployment, but firms are now facing a narrower workforce with older employees leaving the labour market, a report has warned.
While unemployment in the third quarter of 2021 was only 0.3 percentage points above the pre-pandemic level, a YouGov poll of 6,100 people found that workforce participation has fallen among older workers.
The research, conducted for Resolution Foundation and the Centre for Economic Performance at the London School of Economics (LSE), found that the number of 55- to 64-year-olds either in employment or seeking employment had dipped by 1.2 percentage points (from 68.5 to 67.4) between mid-2019 to summer 2021.
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Overall, the number of economically inactive people – those not working or looking for work, increased by 586,000 since the start of the pandemic in 2020, including 364,000 people of working age.
At the same time, ONS data this month shows that the UK unemployment rate – the number of people out of work but actively looking – has continued to remain low, with the most recent unemployment figures estimated at just 4.3 per cent, compared to 4.0 per cent on the eve of the crisis.
The report from Resolution Foundation and LSE also said that the majority (88 per cent) of those furloughed in September were in work in October, while the remaining 12 per cent – corresponding to 136,000 people – remained out of work.
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Kate Shoesmith, deputy CEO of the Recruitment & Employment Confederation (REC), explained that the pandemic and Brexit have combined to reduce the size of the UK workforce, with many older people having taken early retirement and younger people yet to re-enter the labour market.
“We could be seeing a tight labour market for many years to come, making recruitment more difficult across the board,” she projected. “It’s vital that businesses across the UK improve their workforce planning, working with their recruitment partners, so they can source the staff they need for the years to come – whether that’s young trainees, mid-career hires or temporary staff.”
Jon Boys, labour market economist at the CIPD, also said the exit of mature employees from the labour market was “problematic” for firms looking to recruit and retain staff.
He suggested that employers need to look at their value proposition and consider improving line management, offering a range of flexible working options and giving staff opportunities to develop new skills and progress. “Not only does this increase loyalty, it will also improve productivity among the existing workforce,” he explained.
Emily Andrews, deputy director of evidence at the Centre for Ageing Better, said the “extremely worrying” number of mature staff exiting the labour force needed to be considered within the context of longer life expectancy and a rise in state pension.
“Much more action is needed in the months ahead to keep people engaged in the labour market and to make the government’s ambitions for longer working lives a reality,” she said.
The Resolution Foundation and LSE research did find there was one demographic in particular that had seen an increasing presence in the labour market. According to the research, women now make up almost 48 per cent of the workforce, up from 47 per cent in 2019, and 44 per cent in 1992.
It also found that, while labour force participation among men aged 25 to 44 had fallen 1.1 percentage points between 2019 and 2021 (from 93.5 per cent to 92.5 per cent) over the same period, it increased 1.8 percentage points among women of the same age (from 81.3 per cent to 83.1 per cent).
In addition, the reports noted that 74 per cent of mothers of 0- to 3-year-olds were in the workforce in 2021, compared to 68 per cent in 2019 and 2017.
According to the Resolution Foundation and LSE’s research, there were two key reasons for this pandemic-driven boost to women's economic activity.
Primarily, it found that in households where the primary earner saw their pay decrease during the pandemic, secondary earners were working more to compensate. Of the workers polled who had a partner who was furloughed and received less than their full pay, one in seven (15 per cent) either entered the workforce or increased their hours.
In addition, 13 per cent of mothers who were part of a couple said remote working had enabled them to enter work or increase their hours, compared to just 5 per cent of coupled fathers and women without children.
Andrew Bazeley, policy and insight manager at the Fawcett Society, said the data demonstrates that women, and mothers in particular, were “capitalising” on opportunities to enter into work. But he warned against complacency.
“Government needs to require employers to put flexible options into job ads, so that women can move jobs to progress upwards, not get stuck on a flexible work ‘mummy track’,” he said.