Further to our recent article on the Government's plans to address labour shortages, the House of Lords Economic Affairs Committee has just published a new report which concludes that early retirement amongst those aged 50-64 is the biggest factor behind the problem with labour shortages in the UK economy.
Early Retirement
A recent report published by the Office for National Statistics (ONS) found that the number of those who are economically inactive is 565,000 higher for the period August to October 2022, compared to the quarter immediately prior to the Covid-19 pandemic (that being the period December 2019 to February 2020). In its report, entitled "Where have all the workers gone?", the House of Lords Economic Affairs Committee found that the principal contributory factor in terms of that increase was early retirement.
The Committee's report also found that:-
- Whilst early retirement is the main factor that has contributed to labour shortages within the UK economy, other issues which have also contributed to it are an increase in poor health (including long covid), an ageing population, and changes as regards migration
- That the labour shortages that the increase in early retirement has exacerbated, has in turn contributed to a number of additional problems within the UK economy. This includes the cost of living crisis, inflation, low growth, and a fall in revenue to fund public services.
Press Release
In the Committee's press release relating to its report, it states that "the decision to retire early among 50-64 year-olds has been the key driver in the change in trend since 2020. It is critical to understand better what drove this wave of retirement. Possible hypotheses should be explored. First, the impact of lifestyle changes during the Covid-19 pandemic, including the furlough scheme, could have prompted some people to consider earlier retirement. Second, increased savings during the pandemic and the UK’s pensions flexibilities, could also have enabled earlier retirement."
The press release adds: "The majority of those over 50 who have left the workforce since the pandemic neither want nor expect to return to work. Furthermore, most appear reasonably well-off. Although this group may yet feel the full impact of the cost of living crisis, it would be unwise to proceed on the basis that a significant proportion of those who have exited the labour force since 2020 will come back, or be persuaded back."
Economic Damage
The Chair of the Committee, Lord Bridges of Headley, added: "Taken together these findings are, like mid-winter, bleak. The rise in economic inactivity makes it harder to control inflation; damages growth, and puts pressure on already stretched public finances. That’s why it’s critical the Government does more to understand the causes of increased inactivity, and whether this trend is likely to persist."
Midlife MOT's
As we highlighted in our aforementioned previous article, the Government is looking to encourage those who have taken early retirement back into the labour market, in order to address the problem of labour shortages.
One of the Government's proposals is to offer those who have taken early retirement a ‘midlife MOT’, in which an assessment of the retiree's finances would be carried out and opportunities identified within the labour market, including flexible working.
Flexible Working
According to recent analysis by the Office for National Statistics (ONS), the majority of those who said they were open to returning to the labour market (61%), were at the younger end of the early retirement age range (i.e. those aged 50-59). Moreover, money worries were cited as the main reason why a return to the labour market would be considered, and that is the reason why the midlife MOT's being contemplated are being designed to assess financial circumstances, and what opportunities are available in the labour market to address them.
A separate report conducted by the ONS found that flexible working is the key to encouraging those who have taken early retirement during the Covid-19 pandemic to return to the labour market.
