Our initial analysis suggests that changes in the absolute number of people in economic inactivity is mostly driven by an increased in the likelihood of inactivity, but a small component is also an increase in the size of the population aged 50–69 years since 2020. However, in Q1 2022 there were 7 million people with a condition that limited the amount of work they could do, which has grown by 2 million since the late 1990s. Several recent pieces of work have painted a somewhat contradictory picture of whether the increase in inactivity is being driven by early retirement or ill-health, something we plan to unpick in future work. Higher inactivity levels could have significant consequences for growth and the public finances through a limited labour supply and reduced income generation. It will be important to understand the barriers to work for this group and effective policy responses to boost employment.
One factor that remains unclear is the impact of long COVID on labour market outcomes. Analysis by the IFS for 2021 found around 1 in 10 workers with long COVID went on long-term sick leave, with relatively few losing employment. This was equivalent to around 110,000 workers, with the longer term effects unclear but potentially dissipating. Other recent academic estimates based on the Labour Force Survey and the ONS long COVID survey suggest around 96,000 people leaving employment due to long COVID. There is still work needed to understand the longer term employment prospects of people with long COVID.
COVID-19 sickness absence
The ONS estimates that in 2021, 2.2% of working days were lost to sickness absence – the highest rate since 2010. COVID-19 was responsible for around 24% of these sickness days across the year, equivalent to 35.8 million days. This does not necessarily mean that this will be the ‘settled’ COVID sickness absence rate for the next few years.
The presence of ongoing lockdowns and restrictions in the first part of 2021 reduced mixing between people, depressing the potential rate of COVID-19 and other sickness absence. Because the population was less exposed to COVID-19 through infection and vaccination throughout the year, sickness absence could be lower in future due to higher levels of immunity.
Changes to rules around self-isolation will also influence the level of absence, as will the frequency and severity of future variant-driven waves of infection. It will be important that state provision, such as statutory sick pay, and employer practices are adapted to fairly take into account any increased rate of sickness absence in future. Some employers, particularly those in service industries and the delivery arms of the public sector (including the NHS), may also need to adapt staffing approaches – such as having more flexible on-call staff – to cope with temporary labour shortages.
Income and family finances
As with concerns about unemployment, significant government support – largely through the CJRS and the £20 per week uplift to Universal Credit – meant that the potentially large effects of restrictions on income have tended, on average at least, to be mitigated. Analysis by Resolution Foundation found that median incomes for working age families were estimated to grow in real terms by 1.5% in 2020/21, with lower income working age families faring particularly well due to the support put into place in the first year of the pandemic.
However, the experiences of individuals and families have varied. There were rises in some measures of deprivation at the start of the pandemic and many reported financial concerns during the pandemic. In part this reflected a lack of resilience before the pandemic, in the 2 years prior more than 1 in 4 adults said they would not be able to manage for a month if they lost their main source of income. By June 2021, a survey funded by the Health Foundation and designed by Resolution Foundation showed that 16% of working age individuals’ savings had fallen, rising to 32% of people on the lowest incomes and 22% of people in the second-lowest fifth of income.
Having endured 2 years of the pandemic, families’ financial positions are set to be severely tested by the cost-of-living crisis. This will have significant implications for health, including through the risk people are unable to afford essentials such as sufficient heat and food, and through the stress associated with financial strain.
Rising energy prices are driving high inflation, expected to peak at over 13% by the end of 2022. Lower income families will be most exposed given essentials represent a greater share of their spending. In May government set out large-scale support that would broadly offset the average increase in energy bills expected at that time. However, larger families are likely to have higher than average energy costs; cost pressures are growing on other areas of spend, such as food; and latest expectations suggest energy prices will increase by more in October than anticipated when measures were first set out. Further help will be necessary for families to cope.
The precarious position of many lower income families largely reflects historical policy choices to reduce the value of support provided through the social security system, as well as cuts to public service provision. This has also been a factor in determining the scale and shape of the additional support required during the pandemic and in the current cost-of-living crisis.