Ahead of new ONS data and of November’s autumn statement, the REC’s Kate Shoesmith calls on the government to tackle economic inactivity in the population by working with employment agencies, improving health policies, and showing more flexibility over apprenticeships.
One of the keys to the UK solving its labour shortages and its productivity puzzle will be the chancellor delivering policies to counter the rise in people being economically inactive because of sickness. In his autumn statement (set for 22 November) he must pull all levers to get the NHS waiting list – running at more than seven million – down, and fast.
Labour market
Total vacancies drop for first time in 2.5 years
A big story for the labour market this year is the amount of people not in the labour force and we shouldn’t expect much to change when the latest ONS labour market overview is published.
Last month’s ONS data on the economic inactivity rate increased by 0.1 percentage points on the quarter, to 21.1% in May to July 2023. The increase in economic inactivity during the latest quarter was driven by people aged 16 to 24 years.
Those inactive because of long-term sickness increased to another record high. (More than 2.6 million people now do not have jobs because of their health.)
This constraint in the labour market comes as our recent Labour Market Tracker data shows nearly three million unfilled job postings in the UK.
We need to get people who are economically inactive because of long-term sickness treated by the NHS and back into work. And the government can work in partnership with agencies to tackle inactivity.
In a period of labour and skills shortages, and record economic inactivity, it is nonsensical that the funds are only available to those who have the same employer for at least one year”
Agencies have, via their clients, temp roles available that make a good stepping stone for someone to build up their confidence and their skills as they re-enter the labour market. More, agencies help somebody understand what is required by the employer to get and keep a job and are there to support the worker every step along the way. Agency work gives you the chance to try out something new and see if it fits and/or work around other responsibilities, such as childcare. It’s a way to get flexible work.
Agencies are excellent at retaining healthcare workers in the labour force by offering the kind of work/life balance medical staff are after, who may otherwise leave the sector completely.
Furthermore, agencies can fill the gaps for staff needed to get people well again. There are more than 92,000 unfilled unique job postings for nurses alone. Without healthcare staff we can’t cure illnesses causing health-related inactivity rates to keep shooting up. We will be waiting years for the slightly disappointing NHS Long-Term Workforce Plan to deliver new medical staff.
This is why government must support flexible work arrangements and involve agencies more in its workforce planning.
And why it was disappointing to hear disparaging remarks about the cost of agencies from prime minister Rishi Sunak at the Conservative Party conference. He told delegates: “For decades, we have not trained enough doctors and nurses. The result: the NHS either hiring staff from abroad or paying temporary agency workers huge fees.”
From reforming government procurement to producing better and more effective regulation, there is much his government could do in partnership with recruiters to drive growth and prosperity.
But at least his employment minister Guy Opperman gave us a hat-trick of hope on tackling economic inactivity at the recent Conservative Party conference.
The minister told us he would “strongly support” the continuation of the Restart scheme beyond 2025. This gives Universal Credit claimants who have been out of work for at least nine months enhanced support to find jobs in their local area. We and others in the labour market know this works. Our partnership with employment services company Maximus on the Restart is so successful that it has been shortlisted for an Employment Related Services Association (ERSA) Employability Awards in the Social Value Award category. This reflects that our joint Restart work with Maximus has found roles for 1,500 people so far.
It was disappointing to hear disparaging remarks about the cost of agencies from prime minister Rishi Sunak”
The minister also told us at Conference about his wish to expand the Mid Life MOT, which is a review for workers in their 40s and 50s that helps them take stock of their finances, skills and health, to 25-year-olds and over 55s, claiming it will have a “massive positive” impact on the labour market by convincing people to stay in the labour force. Such a holistic approach to employment is welcome.
Opperman also spoke about his wish for reform of the apprenticeship levy. He spoke of his personal view that it is better to encourage organisations to take on apprentices by switching it from a levy on organisations to a form of tax benefit. Although we are not interested in tax reform of the levy, at least it shows a government willing to consider reform of the levy.
In a period of labour and skills shortages, and record economic inactivity, it is nonsensical that the funds are only available to those who have the same employer for at least one year (ie, the time it takes to complete an apprenticeship). By our calculations, out of the one million temporary workers on assignment in the UK every day, about 960,000 are ineligible for levy funding. We call on the chancellor to allow levy funds for shorter and modular courses.
What organisations that rely on a looser labour market really need from the autumn statement is a long-overdue people and growth strategy to help tackle inactivity. We need a coherent, calming and confidence-boosting long-term plan across skills, welfare to work, infrastructure, transport and taxation. I hope we get it.
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