The Great British Workforce Mystery
Nearly 400,000 people aged 50 and over have, in the blink of an eye, disappeared from the British workforce in the wake of the pandemic. James Kirkup, director of the Social Market Foundation, asks where they’ve gone – and how we can get them back.
The recent history of the United Kingdom labour market sometimes reads more like 1950s sci-fi than 21st century economics: a large group of people vanished almost overnight, giving few clues about what happened and leaving observers baffled by their mass disappearance.
This is the departure of nearly 400,000 people aged 50 and over from the British workforce since the pandemic, a phenomenon that remains clouded in uncertainty and subject to numerous claims and explanations. Alien abduction is one of the few theories that hasn’t been advanced to explain the abrupt absence from offices and factories of a group roughly equal to the population of Cardiff.
This legion of missing workers is extremely important, and not just because of the weight of skills and workplace experience they have carried away into economic inactivity, contributing to both UK labour shortages and our national productivity problem. Getting at least some of those older workers back to work would offer real economic benefits to the UK.
A significant number of leavers (22 per cent) say they gave up work because they didn’t feel either valued or supported by employers
There would be benefits to public services too, since around a third of over-50s who left the workforce since the pandemic and haven’t yet returned were previously working in education, health or social care. That’s tens of thousands of experienced staff lost.
But those missing workers aren’t just economic units and service providers; they’re people. There is a human need to address here as well as the economic one, since those missing workers include many who need better support. Only about a third of those 400,000-odd say they have actually retired permanently; quite a lot would be open to going back to work, yet find obstacles in their way. Others either need – or will need – to return for simple financial reasons. Rightly, the frontbench teams of all the major parties are looking for the policies that can best support the return to work.
Yet developing and implementing those policies is hard, because of the mystery surrounding those vanished workers. No one knows exactly why they have left work and therefore no one knows what, if anything, can be done to encourage them to return.
The debate about the over-50s is often clouded by pre-judged opinions and preferences. Depending on your policy interests, and political leaning, you can tell a range of stories about the “great withdrawal”. Is it a factor of failures in health policy? More evidence that social care is collapsing? A sign of British cultural hostility to older people? Proof of short-termism by employers? A product of pension policies gone wrong? Or all of the above, and more?
Inconveniently for headline-writers and politicians looking for glib lines to take, there is no single or simple answer. Like many aspects of public policy, this is an area where it falls to think-tanks and other researchers to give our traditional caution: actually, it’s more complicated than that. And there’s still a lot we don’t know.
In that context, here is an overview of what we do – and don’t – know about why the over-50s have left work and what might get some of them to go back. It draws on data from the Office for National Statistics’ (ONS) Over-50s Lifestyle Study Wave 2, as well as our work at the Social Market Foundation.
When the “great resignation” started showing up in the data last year, some were quick to blame Covid-19, with long Covid a prime suspect. Yet only 15 per cent of leavers name Covid as the cause, comparable with the numbers who said “I wanted a change in lifestyle” (16 per cent) and “I did not want to work any more” (14 per cent). Of those who blamed Covid for leaving work, only one in 10 said it was catching the virus that drove their decision; the rest cited the fear of the coronavirus rather than actual illness.
Instead, it is wider health challenges that are a major driver of withdrawal from the workforce. Between them, stress, mental health, illness and disability were cited as reasons by 32 per cent of post-pandemic leavers.
One of the most striking findings in that ONS survey is that 18 per cent of people who left work after the pandemic and haven’t returned were on an NHS waiting list, slightly higher than the 14 per cent figure for all over 50s. We don’t know for certain that delays in getting treatment or operations drove those people out of work, but the same data shows that 24 per cent of leavers said they have health conditions that prevent them doing “a lot” of day-to-day activities. A health service able to address more of those conditions would surely enable at least some of those leavers to return to work.
Pressures in the English NHS are partly a factor of a failing care system that means many patients can’t be discharged from hospital. That same system puts a growing burden on individuals to support sick and elderly relatives, and this is part of the story of the great resignation. Another 10 per cent of our mysterious leavers cited “home” and “caring” responsibilities as a reason.
Here, caution and further research are needed. We don’t know enough about those caring responsibilities, which might not just be for older parents and partners. Anecdotal evidence suggests that looking after grandchildren is another factor. Some work leavers we’ve spoken to say that furlough and remote working allowed them to support children with their childcare; when work returned to a post-pandemic normal, they decided they’d rather give up work than give up time with the grandkids.
This leads to a major – and extremely complicated – factor in withdrawing from work: the nature of work itself. A significant number of leavers (22 per cent) say they gave up work because they didn’t feel either valued or supported by employers.
Interviews and anecdotes support the idea that for some, the pandemic led to a re-evaluation of their priorities. Quite a few decided they just couldn’t stomach returning to a job that didn’t seem so important – or which didn’t treat them as if they were important. Employers who want to lure older workers back are reflecting that better treatment and working conditions might just matter more here than wages. Politicians exploring options for using the tax system to offer financial incentives to return might draw the same lesson.
A desire for flexibility appears to be a significant barrier to those workers keen to return to work. A common complaint aired in interviews with older workers who have left the workplace is that employers are much more accommodating of existing staff than new hires. If you’ve been employed for a few years, your employer may be happy to flex your working patterns and practices to fit around your health and family needs. But that flexibility isn’t so readily available to new recruits, the story goes, so why bother applying for a job that won’t change to fit you? Recently expanded rights to request flexible working could play a role here, but there is little sign yet that leavers are moved by such changes.
Yet flexible working really is very highly prized. Among those work leavers who say they would consider returning to work, the thing that is most likely to draw them back is flexible working hours. That was cited by 32 per cent of potential returners; “good pay” was only named by 23 per cent.
Money and pensions
This, inevitably, brings us to money. Discussing this topic with people in younger age groups, I often hear the question: “How can they just leave work – don’t they need the money?” And yet again, there’s a nuanced answer: some do, some don’t. Two thirds of those disappeared workers own their home with no mortgage and most say they have no debts of any sort.
But others are far from secure: one in five who have left work since the pandemic and not returned say they don’t have enough savings to cover an £850 bill if say, the roof leaks or the car needs major repairs.
It is quite likely that some of those people will find that their pension cash doesn’t last as long as they thought it might
For half the leavers, money from private pensions is supporting their life after work. That money is available long before the state pension: thanks to George Osborne’s 2015 “pension freedom” reforms, people can start drawing on private pension savings from 55. That appears to be fuelling the early withdrawal from work of significant numbers of workers who might otherwise have spent years more in the “economically active” column.
The politics of this are tricky. SMF research suggests that at least some of the people who are using those freedoms to draw on their pension and withdraw from the workforce in their late 50s aren’t making the most sensible or rational financial choices: only a third of all people in that age group make accurate estimates of how much money they need for the retirement they want. A big reason is that not enough are getting good financial counsel: among those who left work since the pandemic and haven’t returned, only 38 per cent took full financial advice. More than half made one of the biggest financial decisions of their lives without getting professional help.
Bluntly, it’s quite likely that some of those people will find that their pension cash doesn’t last as long as they thought it might, meaning they exhaust their private savings long before the end of their lives. That would leave them relying only on a state pension the level of which will increasingly be set on the assumption that most people have a private pension income too. That is not a happy way to spend the later stages of your retirement – and a possible drain on public resources if the state needs to give you further support.
There is nothing surprising about the scenario I’ve just described above: it is one that people have been warning about since those pension freedoms were announced. The tricky part is finding a politician who wants to say publicly that some people aren’t managing their own money well. It may be the truth, but it risks accusations of insulting the voters.
For such reasons, there seems little prospect of any party moving to change the pension freedom rules. Instead, they should all be looking at how to equip people with the information they need to make the smartest choices about work and pensions. Regulations that make advice expensive and off-putting can be further reformed. And a better public understanding of pensions and retirement would almost certainly mean fewer people dipping into their pensions early in order to leave work in their 50s.
Though we know a fair bit about our vanishing over 50s workers, it’s still not enough. For politicians and employers alike to make the changes needed to draw more of them back to work, we need to know more about their choices and how all the factors I’ve described here interact, since big life-changing decisions like leaving work are rarely about just one thing. So our search for more evidence – and for those missing workers – continues. The truth is out there.
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