MNI INTERVIEW: UK Economic Inactivity Rise Likely To Persist

A rise in inactivity among the UK’s working age population since the Covid pandemic looks likely to persist despite choppy recent data, Professor Donald Houston, whose research has attracted the attention of the Bank of England, told MNI.

The effects of the latest Covid waves have still to feed through in full to labour supply, said Houston, professor of economic geography at the University of Portsmouth, and whose work along with co-author Darja Reuschke on the central role of sickness in labour shortages, which tend to fuel wage inflation, has been cited by BOE Monetary Policy Committee member Jonathan Haskel. (See MNI INTERVIEW: Long-term Sickness Hits Jobs Market- BOE Haskel)

“There is going to be an upward trend in inactivity due to sickness," Houston said.

Houston and Reuschke found that 80,000 people had dropped out of the workforce by early March 2022 due to long Covid, based on a longitudinal Economic and Social Research Council survey to monitor those who were employed in January 2020, before the pandemic struck.

But that is far from the whole effect. In February, at the peak of the Omicron wave, 2.9 million working-age people, 7% of the UK workforce, had suffered enduring Covid symptoms, but infections take time to feed through to economic inactivity. Effects also continue to emerge from another wave in early summer.

"That is going to produce more Long Covid cases, because vaccination only gives fairly modest protection against infection and against Long Covid (although) it is very good protection against serious illness,” Houston said.

SICKNESS AND EARLY RETIREMENT

Office for National Statistics data showed a rise of around 140,000 in those not employed and not searching for work since the pandemic hit, which Houston says suggests Long Covid accounts for more than half of that number.

"There has also been a big increase in early retirement. It would be likely … that a fair chunk of that increase in early retirement is also due to ill health but the people think of themselves as retired, not sick,” Houston said.

While inactivity numbers, particularly in the monthly ONS labour market data, have been volatile, with surveys having moved online during the pandemic before going back to face-to-face collection, Houston noted that there is a raft of fresh work to come on the impact of the pandemic on employment.

“I think there is some uncertainty around the reliability of the figures particularly if you are comparing months or quarters. You need to take a change over very short time periods with a bit of a pinch of salt … looking at the slightly longer-term trends and patterns is probably a bit more reliable,” he said.

Houston is set to go on secondment to the ONS to work on the Covid data while a labour market “stock take” is likely to come from the Bank. The House of Lords Economic Affairs Committee launched a labour supply inquiry this week with the ONS’s Deputy General Economic and Social Statistics Mike Keoghan announcing that fresh survey work due to be released at the end of the month should help answer whether the rise in inactivity is likely to endure.