Britain’s workforce will fall to a record low, as growing numbers of people who cannot work well will weaken the economy’s future prospects, according to the tax and spending watchdog.
New projections from the Office for Budget Responsibility (OBR) suggest that the proportion of over-16s either in work or looking for a job will never return to pre-pandemic levels. Instead, the combination of an aging population and rising health issues will leave a lasting mark on the labor market.
The Office for Budget Responsibility estimates that the proportion of adults participating in the labor force will fall to 61.8 per cent in the 2060s, the lowest figure ever recorded. This reflects a decades-long pattern in which declining male employment rates have been offset by more women entering the labor market since the 1970s.
The participation rate peaked just before the lockdown at 64 per cent, but has since fallen to 62.8 per cent. Some 2.8 million people are now economically inactive due to long-term health conditions, ranging from mental health problems to chronic pain. While improving health outcomes may seem like a solution, the Office for Budget Responsibility warns that even major developments will not significantly increase workforce numbers.
The warning comes as new figures from the Department for Work and Pensions (DWP) revealed that 1.6 million people have started claiming sickness-related benefits since just before the pandemic, without having to look for work. Of the 2.9 million Universal Credit decisions linked to ill health, two-thirds were classed as having ‘limited ability to work and work-related activities’, giving them an extra £5,000 a year and relieving them of job preparation obligations.
Despite the Government’s hopes that cutting NHS waiting lists will stimulate economic growth, the Office for Budget Responsibility’s analysis casts doubt. She points out that even restoring people’s health does not guarantee that they will look for work. This undermines claims that reducing the NHS’s record backlog of 7.57 million could deliver significant economic gains. The OMB found that only about 28% of working-age individuals who recover from ill health or avoid illness will enter or remain in the labor market.
The Institute for Fiscal Studies (IFS) also highlighted the scale of the challenge. With 6.6% of the working-age population now inactive due to ill health, up from 5% in 2019, meeting the government’s employment targets will be difficult. The problem is particularly acute among older workers: 11.3 percent of those aged 55 to 64 are inactive due to health problems, compared with 8.9 percent four years ago.
Meanwhile, the Office for National Statistics (ONS) has reported a decline in healthy life expectancy. Men can now expect a healthy 61.5 years, and women 61.9 years – both numbers have fallen since before the pandemic.
Overall, the OBR’s findings suggest that Britain’s labor market faces long-term structural headwinds. It appears that ill health and declining labor force participation, not simply a result of an aging society, will remain a persistent drag on productivity and growth, challenging policymakers to find new ways to support people and keep the economy on track.