According to a report on Britain’s missing workers, the UK workforce is shrinking faster than it has in the past 40 years, costing £25 billion annually and adding $£16 to fiscal pressures to the public finances. The UK has one of the most serious economic inactivity issues in the developed world. A two-year study of the current state of the workforce found that over 800,000 people had left the labour force since the Covid-19 epidemic. This is the biggest drop in employment since the 1980s.
According to the findings of the Commission on the Future of Employment Support, the 1.5 percent decline in employment rate since the pandemic cost the economy £25billion a year. It also added fiscal pressures of £16billion ayear on the public finances due to lost tax revenue and increased welfare payments. The government and central bank face a major challenge in reversing the decline of the workforce and putting people back to work. This could lead to inflationary pressures and limit the growth potential of the economy.
Tony Wilson, Director of the Institute for Employment Studies said that 90 percent of UK’s missing workers are people who have not worked in the last four years, or never entered the labor market. This is different from an exodus people leaving the job market since 2020. He said that the government should do more to encourage disadvantaged workers to return to work and to those with long-term illnesses to enter the workforce, rather than tightening up the benefits system.
According to the commission, a “culture of compliance” in which benefit applicants are required to prove they have worked 35 hours per week while looking for work is driving people away from employment centres because it “forces people constantly justify their actions”.
The UK now has some of the most stringent rules in the world. The report concluded that the changes made to the system have worsened rather than improved things.
Wilson said: “We have created an environment hostile for people who are unemployed and receiving benefits. We are the only developed country where fewer people use employment assistance than any other. “We do not have a service for employment as such. Jobcentre Plus pays benefits and asks people to justify their spending.”
Commission: The reforms that would change the role and funding of local employment services will cost an extra £150 million per year for the entire parliament. The benefits to the public finances could be £300 million and £750 millions a year if 5% more people access employment support.
The Institute for Public Policy Research (a left-leaning research institute) said last week that the government should invest £15 billion a year into sweeping reforms of the health system in order to improve the well-being of the population and to get them back to work.
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