New research by the International Longevity Centre, the UK’s leading think tank on the impact of longevity on society, highlights deep-seated inequalities in the UK’s changing labour market and the critical condition of the current economy. The recently publicised increase in the number of economically inactive adults due to long term sickness brings to the fore deep seated problems in the UK labour market, according to newly completed research by the International Longevity Centre and Bayes Business School (formerly Cass). The ILC’s analysis over a 30-year period identifies four strategic concerns: • A shortage of active workers: There are now only 1.7 economically active workers for each inactive adult aged 16+. Despite pension reforms and the removal of the default retirement age at 65, this level is the same as it was 30 years ago in 1992. • Too many inactive workers are ill: Of the 8.9m inactive adults under 65, 2.5 million are long term sick, almost a 0.5m increase since 2019. • Numbers in work have increased but men much less than women: The population has grown by 18% since 1992. But while the number of economically active women has increased by 30.6%, the number of economically active men has increased by only 11.3%. Meanwhile the number of women working full-time has increased by 49.2%, the number of men working part-time is up by 130%. • The gap between jobs and skills is growing: The UK population is expected to grow to 72m by 2040. Since 1992, jobs in manufacturing have declined by 37%, while jobs in service sectors are up by 74%. Previous ILC research estimates a shortfall of 2.6m workers by 2030 – yet economic activity rates among 18-24 years olds are almost 50% of the level in 1992 exacerbating labour shortages elsewhere in the economy. Health inequalities are a major limiting factor in preventing people from working. In the unhealthiest local authorities, like Blackpool or Hull, health expectancy is less than 57 years compared with over 70 years in the healthiest such as Wokingham. If health expectancy increased by one year this would increase working lives by 3.4 months and significantly reduce the burden on the NHS and welfare costs. Keeping people healthy is clearly beneficial to the economy given the inequalities highlighted above. But there is a double cost represented by a loss of income plus increases in the cost of health care and sickness and disability benefits. For example, spending on working-age health and disability benefits is over £45bn a year and accounts for about 1.6% of GDP, higher than the previous peak in 1992 when it was 1.5%. Spending on healthcare is also far greater than it needs to be.

1. Is the UK labour
market still working?
Long term changes confirm the need
for a government workforce strategy
Professor Les Mayhew Bayes Business School and
ILC-UK and Dr Vivien Burrows ILC-UK
February 2023

2. Background
• There are concerns about the size and sufficiency of the UK labour market relative
to future demand for workers
• ILC predicts a shortfall of 2.6m workers by 2030, caused in part by an ageing population (see
Plugging the Gap) However,
– The present state of the UK economy doesn’t bode well, with high inflation raising
household living costs, and the recent wave of strikes suggesting work is no longer
working for many
– Economic inactivity has been increasing, with more people exiting the labour market due
to sickness and early retirement, leading to skills loss and higher welfare costs
– The state of the UK labour market is worse today than at any time since 1992, including
during the period of the 2008 financial crisis
• We analyse UK labour market changes over a 30-year period, from 1992-2022, to identify
trends and bottlenecks
• Conclusion: The labour market is at a critical juncture. The Government urgently needs a
workforce strategy in addition to an industrial strategy to address these issues which look to
get worse before they get better
2

3. Indications that all is not well
• The working age population (defined as the number of adults aged 16+) increased
20%, from 45m to 54m. Although more people are in work, the ratio of
economically active men to women has fallen from 1.3 men per woman to only 1.1,
approaching parity
• Economic inactivity increased in most countries during the pandemic, but the UK is
one of the few developed economies where it has not rebounded
• Of the 8.9m adults under 65 currently classed as economically inactive, 2.5m are
inactive due to long term sickness, almost a 0.5m increase since 2019.
• Spending on working age health and disability benefits is over £45bn a year and
accounts for about 1.6% of GDP, higher than the previous peak in 1991, when it
was 1.5%
• The trends for people to work beyond state pension age, whilst initially very
promising, seem to be running out of steam
• There are significant inequalities in adult health span across the UK. These shorten
working lives, are a brake on progress and prevent levelling up
3

4. Some definitions
• The economically active population are adults in work or seeking work and includes the
registered unemployed
• The economically inactive population are adults not seeking work e.g. the retired, long-term
sick, students and others
• A part-time employee or worker is someone who works fewer hours than a full-time
employee or worker in the same organisation.
• The ratio of active to inactive adults is a measure of engagement with the labour market
which we call the Economic Dependency Ratio (EDR)
• The EDR is similar to the dependency ratio (or DR) used by pension analysts based on the
ratio of working age adults to those over pension age
• The key difference is that the EDR is based on employment status and not pension age and
so provides a more representative measure of activity and labour potential
4

5. Key changes: 1992-2022
Category 1992 2022 % change
People age 16+ Men 21.6 26.5 22.7
Women 23.3 27.5 18.0
People 44.9 53.9 20.0
Active Men 16.0 17.8 11.3
Inactive 5.6 8.7 55.4
Total 21.6 26.5 22.7
Active Women 12.4 16.2 30.6
Inactive 10.9 11.3 3.7
Total 23.3 27.5 18.0
Active People 28.4 34.0 19.7
Inactive 16.5 19.9 20.6
Total 44.9 53.9 20.0
Full time Men 13.1 14.9 13.7
Part time 1.0 2.3 130.0
Total 14.1 17.2 22.0
Full time Women 6.5 9.7 49.2
Part time 5.0 5.9 18.0
Total 11.5 15.6 35.7
Full time People 19.6 24.6 25.5
Part time 6.0 8.2 36.7
Total 25.6 32.8 28.1
There has been a 20% increase in the
adult population aged 16+ and a 20%
increase in the number of economically
active individuals.
However, while the number of
economically active women has
increased by 30.6%, the number of
economically active men has only risen
by 11.3%.
Of the economically active, the number
of women working full-time has
increased by 49.2%, while the number of
men working part-time has increased by
130%.
Overall, the ratio of economically active
men to women has fallen from 1.3 men
per woman to only 1.1, approaching
parity.
5

6. Changes in EDR from 1992 to 2022
1.55
1.60
1.65
1.70
1.75
1.80
1.85
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Ratio
of
economically
active
to
inactive
population
Ratio of active to inactive
population
The EDR increased most years
from 1994 onwards, when it
was 1.65.
It dipped in the 2009
recession, before recovering.
But between 2020 and 2022
there was a fall from 1.8 to
1.7 – back to where the EDR
was in 1992.
Key: (A) early 90s recession;
(B). the great recession;
(C) corona recession
The chart combines men and women. The EDR for women increased from 1.14 to 1.44 over the period, for men it fell
from 2.84 to 2.08 and is one the major changes in labour market activity over the period.
B C
A
6

7. Relative change in the EDR by age group
0
50
100
150
200
250
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Relative
change
in
activity
ratio
1992
to
2022
(1992=100)
16-17
18-24
25-34
35-49
50-64
65+ C
This chart shows the relative change in the EDR split into five age groups (1992=100). Of
the huge changes since 1992, we see improvement in three age groups and declines in
the two youngest.
A
B
D
7

8. Relative change in the EDR by age group
The previous chart shows:
- More people are working beyond age 65, doubling the EDR for this group,
although it is still 14 times lower than the all- adult EDR average and now appears
to be plateauing (A)
- The EDR for 50 to 64 years olds peaked in 2020 at 90% higher than in 1992, but
has since fallen back to 70% of its peak towards the end of 2019 (B)
- We see a similar pattern in EDR for 25-34 years olds, which peaked at 70% higher
in 2020, but since fallen back to 50% of its peak in 2020 (C)
- More young people are staying on at school and entering tertiary education, which
has significantly reduced the EDR of the 18-24 age group and 16-17 year olds (D)
8

9. Inactivity by reason – changes since 1993
The black line in the chart shows a negative net change in the number of economically active over 30 years,
especially during the financial crisis, due to increases in the number of retirees, those with long term
sickness and students. Economic activity was boosted by people who previously looked after family now
working and fewer discouraged workers (inactive but would prefer to be in work).
-2,000,000
-1,500,000
-1,000,000
-500,000
0
500,000
1,000,000
1,500,000
2,000,000
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
Number
of
economically
active
Decrease
(-)
Increase
(+)
Year
Discouraged workers
Retired
Students
Long term sick
Temporary sick
Looking after family and home
Other
Net change
Changes in the
number of
economically
active adults from
April 1993 by
reason. Units are
numbers of
people.
9

10. Flows into and out of inactivity due
to long-term sickness
Most who were
economically inactive due
to long-term sickness
were already inactive, and
remained inactive once
they were no longer
classed as long-term sick.
ONS (2023): Quarterly average Q1 2021 to Q2 2022. 10

11. 14.2
13.9
12.3
10.5
6.1
5.6
4.8
2.7
2.7
0 2 4 6 8 10 12 14 16
Process, plant and machine operatives
Elementary occupations
Caring, leisure and other services…
Sales and customer service occupations
Skilled trades occupations
Administrative and secretarial…
Managers, directors and senior officials
Professional occupations
Associate professional occupations
Rate per 1,000 workers
Rates of long-term sickness by
occupation
Rates of long-term sickness
are higher among
occupations where wages
tend to be lower and
employment is less secure.
These are jobs which are
more physically demanding
and where managing a
long-term condition is likely
to be more challenging.
11

12. Impact of health inequalities
on working lives
Whilst good health does not translate directly into work, good health is a spur to longer working but not by
as much as you’d expect. We calculate that a one-year improvement in health leads to a 3.4 month
increase in work and a 8.6 month increase in disability free inactivity – including retirement.
This chart uses local
authority data to show how
work span is influenced by
the years spent in good
health.
Health span ranges from 55
years (point P) to 70 years
in the healthiest areas (point
Q) and can exceed work
span by up to ten years
(SQ).
S
40
45
50
55
60
65
70
75
52 54 56 58 60 62 64 66 68 70 72
Life
versus
health
spans
Health span
Health span
Work span
Q
P
12

13. Questions
• Is the current dip in the EDR a blip due to economic downturn or is it being
driven by long-term changes, such as an ageing population?
• How is job quality and increasing job insecurity affecting economic activity
rates?
• Is the health of the workforce getting worse and has it become more of a
barrier to work? (The 2.5m long term sick is almost exactly the expected
shortfall in labour in 2030 (1))
• What is driving the fall in male labour force participation rates and the rise in
male part-time work? What role do inequalities play in this?
• Why is the EDR of older workers levelling off and why are they choosing
retirement? Are there administrative barriers to working longer, especially for
those In good health?
• Are there enough opportunities for workers to retrain and develop new skills
later in life? Given the rise in the student population, are we providing
students with the right skills and training to meet future needs?
13
(1) ‘Plugging the gap: estimating the supply and demand for jobs by sector in 2030’ (ILCuk.org.uk/plugging- the-gap)

14. • Throughout this period there have also been significant changes on the demand
side – in the types of jobs available, wages, and the education and skills sought by
employers
• Since 1992, jobs in manufacturing and co-related predominantly male occupations
have declined 37%, while jobs in sectors including health, education, and
administrative support are up by 74%
• Earnings inequality has increased dramatically during the period, and wage
progression has been poor, particularly for individuals with low levels of education
• Changes in the structure of work have helped exacerbate inequalities and are
partly to blame for the stalled productivity and sluggish economic growth and
decline in previously male dominated occupations
14
Changing labour markets

15. What can be done?
• Our analysis points to a transformation in the labour market and signs that long
standing problems are deepening and affecting the UK’s future prosperity.
• The problems are multi-dimensional and affect all levels of the labour market.
Some may be temporary and others such as the ageing population are structural
• The Government urgently needs a UK-wide workforce strategy to address these
issues in the short and long term e.g. to address the increasing shortages in
labour in many sectors
• This needs to be divided into two parts – one addressing short term issues such
as changes to work incentives to encourage people back to work and making
work pay
• With a new election looming we urge all political manifestos to include measures
to tackle the deep-seated problems highlighted by our research
15

16. Priorities
• Reversing the decline in high value-added jobs and industries by promoting
investment in innovation and skills and helping to combat the decline in male
labour force participation
• Support a healthy workforce and tackle health inequalities between people and
localities which shorten working lives and add to the tax burden
• Reviewing the role and purpose of tertiary education, re-focusing on vocational
qualifications and STEM subjects
• Making it easier for older people to remain economically active by removing
financial and other barriers
• Invest in opportunities for lifelong learning, to make it easier for people to retrain
or switch careers during their lives
• Investing in skills and training so that people can enjoy second careers when the
alternative is ‘do nothing’
16