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MNI INTERVIEW: Long-term Sickness Hits Jobs Market- BOE Haskel

(MNI) London
(MNI) London

Long-term sickness amongst the UK labour force is more widespread than headline official data suggest, with ongoing work by Bank of England Monetary Policy Committee member Jonathan Haskel and Bank economist Josh Martin suggesting strongly that simply looking at the main reason why people say they are not participating is misleading, Haskel told MNI in an interview.

The inflation challenge for the MPC would intensify if the pandemic-related surge in the level of long-term sickness persists. It would point to a reduction in potential output and more enduring inflation pressures -- with labour market tightness higher than assumed by just looking at jobless rates.

Haskel and Martin stress their work is at an interim stage but the findings so far are striking with some 16% of the workforce long-term sick, and with long Covid accounting for only a fraction of it.

In their estimates, the official Labour Force Survey only captures some two-thirds of the segment who are long-term sick who are economically inactive. Haskel and Martin have tried to capture those who may retire in part due to ill health without giving it as their main reason.


Haskel, an MPC member since September 2018, said that for him the work raised two main points:

“One is the fact that the usual headline measure, … could be in a sense misleading. It is just one way of looking at the data,” Haskel said.

"And the second thing ... One thinks that the long-term sick who are inactive are just a large clump of people who don't have any prospect of working at all. That is just not true,” he added.

Some long-term sick do engage in work, although the 12.8% rise among those who are economically inactive by the first quarter of this year compared to pre-Covid levels does raise concerns about future labour supply.

According to Martin, “They are not just inactive. Some of those surveyed are employed, some of them are unemployed. And even within the inactive there are those who want a job and those who don't want a job.”

Martin added: "There are quite a few breakdowns you can do with all of this … but one quite striking thing that I found was the unemployment rate of the long-term sick is about double that of the non-sick."


The Bank’s August Monetary Policy Report cited risks on both sides around the participation rate. On one side, the labour market could loosen more rapidly than assumed if the then recent decline in inactivity carried on and on the other it could remain tight for longer if the pandemic-related fall in participation endured.

The figures in the subsequent August labour market report showed that the decline in inactivity was rapidly reversed, supporting the MPC’s logic in not placing much weight on it and reinforcing the concerns raised in Haskel and Martin’s work.

One of the next steps in their research will be to try and establish through regional analysis if there is a link between long-term sickness rates and the increases in the National Health Service waiting lists. Another is to get a detailed breakdown on long-term sickness between mental and physical health and by occupation.


The reasons for, and likely persistence, of long-term sickness all feeds through into the Bank’s assessment of labour supply and slack.

A significant question for the Bank going forward is whether, with the damaged labour force adding to supply problems and skills mismatches fuelling recruitment difficulties, these may have “been accompanied by a rise in the medium-term equilibrium rate of unemployment,” as the August Monetary Policy Report suggested may be the case.

The risk then becomes that even if unemployment rises as the economic slowdown kicks in, inflation pressures may abate more slowly than previously assumed.

MNI London Bureau | +44 203-586-2223 |
MNI London Bureau | +44 203-586-2223 |

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