{"id":19418,"date":"2022-09-23T14:18:33","date_gmt":"2022-09-23T13:18:33","guid":{"rendered":"https:\/\/www.economicsobservatory.com\/?post_type=question&p=19418"},"modified":"2023-07-25T14:44:27","modified_gmt":"2023-07-25T13:44:27","slug":"working-backwards","status":"publish","type":"question","link":"https:\/\/www.economicsobservatory.com\/test\/working-backwards","title":{"rendered":"Working backwards"},"content":{"rendered":"\n

Newsletter from 23 September 2022<\/strong><\/p>\n\n\n\n

In recent months, various politicians in the UK have been celebrating what they see as the healthy state of the post-pandemic labour market. At 3.6%, the unemployment rate<\/a> is currently at its lowest level since May 1974. And in June this year, the total number of workforce jobs rose by 290,000 on the quarter, going past its pre-pandemic level to a record 35.8 million.<\/p>\n\n\n\n

But the reality is more complex. Economists have been quick to push back against the narrative that the labour market has recovered with high employment rates alone. For example, other labour market data from the Office for National Statistics (ONS) show that in May to July 2022, the economic inactivity rate \u2013 the share of people not working and not actively seeking work \u2013 increased by 0.4 percentage points on the quarter to 21.7%.<\/p>\n\n\n\n

The important distinction here is that when people who are out of work stop <\/em>looking for a job, they are no longer counted as \u2018unemployed\u2019 and are instead listed in the data as \u2018economically inactive\u2019. These data indicate that while the UK\u2019s unemployment rate is low, there is a large number of people not working. What\u2019s more, with prices rising \u2013 particularly for food and energy \u2013 many people in work are struggling to make ends meet.<\/p>\n\n\n\n

With all this in mind, this week on the Observatory we looked at a number of challenges facing the UK labour market.<\/p>\n\n\n\n

Late to work<\/strong><\/h3>\n\n\n\n

On Tuesday, we posted an article by Jonathan Cribb, Bee Boileau and Laurence O\u2019Brien (Institute for Fiscal Studies, IFS) on how employment of older workers has changed since the pandemic<\/a>.<\/p>\n\n\n\n

They note that since the 1990s, more and more people in their 50s and 60s have stayed in work. Indeed, the share of these age groups in paid employment increased from around 46% in 1994 to about 61% just before the Covid-19 crisis. This shift was driven mainly by women aged 60-65, whose employment rate increased by 25 percentage points.<\/p>\n\n\n\n

But this trend is changing. On one side, there were large increases in employment rates among 65 year olds between 2018 and 2021 (due to the most recent rise in the UK\u2019s state pension age). In contrast, employment rates of those in their 50s and 60s (a larger group) have fallen by around 1.2 percentage points since March 2020 \u2013 partially reversing the pattern seen since the 1990s. This change has been driven by increasing rates of economic inactivity and is not<\/em> the result of rising unemployment rates for this age group. Specifically, there were over a quarter of a million more economically inactive people in their 50s and 60s between October 2021 and March 2022 compared with October 2019 to March 2020 (immediately before the pandemic).<\/p>\n\n\n\n

Figure 1:<\/strong> Number of people aged 50-69 moving from employment to inactivity (and vice versa) and from unemployment to inactivity (and vice versa) within three months, by half-year<\/strong><\/h4>\n\n\n
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