With 2.7 million UK adults out of work due to ill health, a report has warned “the rise shows little sign of slowing”.
The Resolution Foundation report, which examined trends in economic inactivity in 2024, found that this increase has been U-shaped by age. People aged 16 to 24 and 50 to 64 accounted for nine-tenths of this increase in economic inactivity since the end of 2019.
The report said that while more young people are economically inactive and in full-time education (up 160,000, or 15 per cent, in the past year), “it is the rise in economic inactivity due to long-term sickness that stands out”.
The number of adults economically inactive due to long-term sickness has been increasing for more than four years. For November to January 2024 it dipped slightly to 2.7 million from a record-high of 2.8 million in September to November 2023, according to analysis of ONS data in the report.
The report, titled ‘A U-shaped legacy’, highlighted the headache that “fast rising” claims for illness- and disability-related benefits will cause for the Treasury.
By December 2023, almost a third of people receiving universal credit (UC) had a health condition or disability that affected their ability to work. Again the pattern was U-shaped by age.
“More than half of claimants in their late fifties and sixties have a health condition or disability reflected in their UC award. But UC claimants in their early twenties are more likely than those in their thirties or early forties to have a health condition or disability that restricts their ability to work, and it is among young adults that health-related UC awards have increased most significantly in recent years.”
But the report said the “most striking” rise has come in claims for PIP (Personal Independence Payment) – the main non-means-tested benefit for people with health conditions or disabilities.
“Among working-age adults in England and Wales, new claims for PIP have increased by two-thirds (68 percent) between early 2020 and early 2024.
Older adults aged 55 to 64 are most likely to claim PIP, but among young people, the rise in PIP claims in recent years has been most pronounced. The number of new PIP claims in England and Wales is up 138 percent for 16 to 17-year-olds, and up 77 percent for 18 to 24-year-olds.”
Covid-19 legacy
The report said that high economic inactivity is the labour market legacy of the Covid-19 pandemic, as real pay growth, unemployment and job vacancy measures have all returned broadly to 2019 rates.
Real pay growth reached 1.8 percent in the most recent data for January 2024. The foundation said this is only slightly above real pay growth in 2019, which averaged 1.7 percent. It also found a similar trend for job vacancies, which after peaking at 4 percent had fallen back to 2.7 percent. This is only slightly higher than the pre-pandemic 2019 average of 2.5 percent. Unemployment also “remains low, at just 3.9 percent – this is the same as the average rate in 2019”.
However, the report flagged up the working-age employment rate, which it said “looks far from normal”. This rate is still below pre-pandemic levels, down from 76.2 percent to 75 percent.
“Not only does this reverse the trend experienced in the UK in the 2010s (when the employment rate was rising consistently), it also sets the UK apart from its neighbours.
“The UK is the only G7 nation where the employment rate has not reached its pre-pandemic level. In fact, most G7 countries have seen their employment rate surpass its pre-pandemic level: on average across the G7, the working-age employment rate is up by 0.8 percentage points.
“As a result, the UK has fallen from having the second-highest employment rate in the G7 in 2019 Q4 to having the fourth-highest employment rate in 2023 Q2, with Germany and Canada rising into second and third place. Looking at the OECD more widely, the UK has slipped from an impressive sixth place down to thirteenth place.”
The Resolution Foundation said it is high economic inactivity, not high unemployment, that is behind the UK’s trailing employment rate.
Since the start of the pandemic, the overall size of the UK working-age population has increased by 700,000, a rise of 2 percent. But economic inactivity has risen at a faster rate, the report said, with the number of working-age people who are economically inactive increasing from 8.6 million to 9.3 million between December to February 2020 and November to January 2024, a rise of 700,000 or 8 percent. Meanwhile, the number of working-age people in employment and unemployment is near-identical to that just before the pandemic hit with employment rising, and unemployment falling, by just 30,000.
