The Labour Government plan to produce a white paper, using a new report called 'Pathways to Work' as its blueprint, for tackling the problem of growing economic inactivity. In addressing the issue of economic inactivity, the Government is looking to increase the level of employment within the economy, and thereby in turn boost economic growth.
Economic Inactivity
As we highlighted in a recent article, a report released in February 2024 by the Office for National Statistics (ONS) revealed that there were 9.4 million people who were economically inactive, of which 2.8 million were on long term sick.
Latest ONS Report
Little has changed since February in terms of economic inactivity. The latest report from the ONS found that the number of people aged 16 - 64 who were economically inactive during the period March - May 2024, was 9,383,000 (equating to 22.1% of the working population), of which 2,812,000 are on long-term sick.
IPPR Report
Moreover, according to a state of the nation audit by the IPPR, on the issue of economic inactivity "six in 10 people who are economically inactive because of long-term illness are living with a mental health problem".
Pathways To Work Report
According to the Pathways to Work report, the key to boosting economic growth is to increase the level of labour market partipation, and the best way to do that is to reduce the level of economic inactivity by getting those who are inactive back in to work. It is not enough it contends to focus only on reducing the level of unemployment. The Government must also reduce the level of economic inactivity as well
Findings
In relation to economic inactivity, the report found:-
- Support should be in place to assist those who want to work, whilst tough measures should be in place to combat fraud and abuse of the welfare system
- There must be "robust conditionality" in relation to benefits, meaning that there must be stringent requirements and conditions that individuals must meet to be eligible for and to continue receiving welfare support. This concept emphasizes accountability and aims to ensure that recipients are actively working towards improving their circumstances, such as seeking employment, attending training programs, etc. The goal is to encourage self-sufficiency, reduce dependency on welfare, and to try to get individuals back into the labour market
- Those who would benefit most from support are those who have health problems, caring responsibilities, and younger people with heath problems and/or poor qualifications
- Of the 8 in 10 people who are economically inactive, just 10% "have to demonstrate taking steps towards work. The vast majority of those who would be interested in taking a suitable job receive no support and guidance from the state"
- The current system is "fundamentally not set up or designed to identify, reach, and support economically inactive citizens on a pathway back towards work. There are missed opportunities to stem flows out of work and poor data linkage and quality at the local level inhibits more targeted approaches once people have left employment. Links between employment services and health services will have to be strengthened. Businesses must be enabled and expected to play their vital role in the system, keeping people healthy in work and supporting inclusive employment practices"
- The system must be set up so that work is "worth it"
Comment
On the issue of economic inactivity, the chair of the Pathways to Work Commission, Alan Milburn, stated in The Times: "We have to reduce our dependence on immigration...At the same time, if our public services are to receive the investment they need, we have to grow our economy by expanding the labour force. The answer is to double down on getting people out of inactivity back into work."
Milburn added that the current system is "perverse [as] it pays to be classified as incapable of work rather than actively seeking it...Those who are classified as officially seeking work are offered some support to do so but also face harsh conditionality and lower benefit payments than those who are classified as unable to work...By contrast, the latter economically inactive group get little support to find work but face no conditionality and receive higher payments than those actively seeking work".
White Paper
The Pathways to Work report will provide the blueprint for a white paper, and Liz Kendall, the new Secretary of State for Work and Pensions, confirmed in a speech on the 23rd July 2024 at an event to mark the release of the report, that the new Government would be aiming to increase the proportion of the working population that is in employment to 80%.
The latest ONS report found that just 74.4% are currently in employment, which means that to get to 80%, another 2 million people need to be brought back into the labour market
Kendall stated in her speech that: "The DWP will shift from being a department for welfare to being a department for work...My department will support local areas to make a success of this new approach, starting by devolving new powers over employment support to catalyse action and change."
