Britain’s workforce will slide to a record low as growing numbers of people too unwell to work dampen the economy’s future prospects, according to the tax and spending watchdog.
New projections from the Office for Budget Responsibility (OBR) suggest the share of over-16s either in work or looking for a job will never return to pre-pandemic levels. Instead, the combination of an ageing population and escalating health issues will leave a permanent mark on the labour market.
The OBR estimates that the proportion of adults participating in the workforce will decline to 61.8 per cent in the 2060s, the lowest figure on record. This reverses a decades-long pattern in which decreasing male employment rates had been offset by more women entering the workforce since the 1970s.
The participation rate peaked just before lockdown at 64 per cent, but has since fallen back to 62.8 per cent. Some 2.8 million people are now economically inactive because of long-term health conditions, ranging from mental health struggles to chronic pain. While improving health outcomes might seem a solution, the OBR warns that even major advancements won’t significantly boost workforce numbers.
The warning comes as new figures from the Department for Work and Pensions (DWP) reveal that 1.6 million people have started claiming sickness-related benefits since just before the pandemic, with no requirement to look for work. Of 2.9 million Universal Credit decisions linked to ill health, two-thirds were classified as having “limited capability for work and work-related activity,” granting them an additional £5,000 per year and freeing them from job preparation obligations.
Despite government hopes that cutting NHS waiting lists would spur economic growth, the OBR analysis casts doubt. It notes that even restoring people’s health does not guarantee they will seek employment. This undercuts claims that reducing the record 7.57 million NHS backlog could yield significant economic gains. The OBR found that only around 28 per cent of working-age individuals who recover from ill health or avoid becoming ill would enter or remain in the labour force.
The Institute for Fiscal Studies (IFS) also highlighted the scale of the challenge. With 6.6 per cent of the working-age population now inactive due to ill health, up from 5 per cent in 2019, hitting government employment targets will be tough. The problem is particularly acute among older workers: 11.3 per cent of those aged 55 to 64 are inactive due to health issues, compared with 8.9 per cent four years ago.
Meanwhile, the Office for National Statistics (ONS) reports a decline in healthy life expectancy. Men can now expect 61.5 healthy years, and women 61.9 years—both figures having dipped since before the pandemic.
Overall, the OBR’s findings suggest that Britain’s labour market faces long-term structural headwinds. More than just a consequence of an ageing society, ill health and diminished workforce participation look set to remain a persistent drag on productivity and growth, challenging policymakers to find new ways of supporting individuals and keeping the economy on track.
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