Unveiling the new UK Spring Statement, the UK Government expected to focus heavily on labour market inactivity.
The latest figures released by the ONS this week show that over a fifth of people aged 16-64 are out of the labour force, neither working nor looking for work, a figure that rose steeply during the pandemic and, unlike many other countries, has largely continued to rise since.
Some reasons for inactivity are financial, with childcare costs receiving a large amount of attention within the debate.
For low-income parents with two children in care, there is often little financial benefit to returning to work, and even families with higher levels of income can find their incentives to work slashed by high daily childcare costs.
But our reasons for working (or not) are much more than financial. We retire later when we enjoy our jobs, have opportunities for growth and can work flexibly. Even decisions that seem out of our hands, such as sickness, depend on our work environment. Improving organisational environments through better decision-making and communication reduces sickness absence, and some studies have even found that people who enjoy their work are 2.5 times more likely to return from long-term sickness early.
There have been efforts to ‘Make Work Pay’, but we also need to ensure work works.
3 Ways to Use Behavioural Insights to Improve Workplace Quality
At the Behavioural Insights Team we have uncovered three insights for labour markets that we think are worth pursuing for an enhanced workplace experience.
1. Focus on increasing workplace flexibility
“The single most important change employers can make to tempt the over-50s to return or remain is to be more flexible about working hours” – Kim Chaplain, associate director at the Centre for Ageing Better
It is not just the over-50s, since the 2020 Covid Pandemic flexible work has come to be expected. Two-thirds of parents say flexible working is a top priority, second only to pay in terms of its importance. Flexible work helps individuals who are on long-term sick leave too: a gradual return to work is one of the strongest predictors of long-term retention.
Employers are responding to this, but not quickly enough. The number of job adverts which mention flexible working has increased by around six percentage points each year since 2020 and is currently at 30%.
Yet employers are willing to offer more flexibility than this suggests. In BIT’s work with the Indeed job platform, simply asking employers what flexible working options they would consider when they post a job advert increases the number of jobs advertised as flexible by 20%. This approach has also enabled jobseekers to filter for flexible jobs, increasing applications to jobs listed as flexible by 30%.
Building these features into the government’s own Find a Job platform would be a strong first step. But to reach scale requires bringing together all the largest job platforms and making the case for them to do the same.
Making flexible work more visible will help to accelerate longer-term cultural change around flexible work. There are other ways to improve visibility too. For example, collecting information on flexible work allowances as part of Full Payment Submissions to HMRC would allow firms that over or underperform for their sector to be highlighted, and help to identify sectors where movements towards flexible work are lagging.
For the long-term sick, and possibly for those who have been out of the labour market for longer periods (for example due to parental or caring responsibilities), there is a role for combining flexible working with targeted government spending too. In Denmark, a graded return-to-work scheme supports employees to return to work gradually. Employers pay usual wages for the hours worked, while the government pays sickness benefits for the remaining time. The impacts are substantial: in a given week, programme participants are 50% more likely to have returned to their regular working hours than non-participants.
2. Provide tailored support based on employee demographics
For a wide variety of employees with varying needs, providing tailored support can be beneficial. Dedicated programmes to improve support that encourages workers to stay in work can make a big difference.
Oslo Airport’s Life Phase Policy (which included training to enable the management of different generations, annual health monitoring and flexible working options) increased their average retirement age from 63 to 66 and reduced sick leave. In November, the Prime Minister advocated for midlife MOTs – consultations that help employees to plan their working future.
Using Behavioural Insights to focus on the different demographics within your organisation can help to improve the uptake of relevant programmes that can improve the quality of work for employees.
The emphasis should be on timely and tailored support that is easy to access. The government could start by identifying companies with immediate risks of workers moving into inactivity and point them towards support relevant to their challenge. For small organisations, which are least likely to pay for external advice, an offer of free one-to-one sessions to help plan an employee’s return to work could be beneficial.
A critical question, however, is how effective this support will be – there is evidence of both effective and ineffective programmes and not enough evidence to be confident in what works.
3. Provide job seekers with help identifying good firms
Finding an ideal job in the current climate can be challenging, with multiple listings for similar roles from a variety of businesses.
In theory, a feature of the jobs market should be that good employers are rewarded by attracting more and better applicants. For example, characterising your immediate supervisor as a ‘partner’ rather than a ‘boss’ provides an uplift in business satisfaction. If companies with ‘bad’ working environments needed to pay their staff 30% more to receive relevant applicants, they would quickly go out of business, and the ‘good’ employers would prosper.
But in practice, it can be hard to spot good companies. Sites like Glassdoor and Indeed, which provide ratings of companies and show them next to their job adverts, play a crucial role. But given the huge importance of this quality information, the government could do more to support them, using the extensive data they already hold.
Whilst the government could improve the representativeness of responses by using HMRC data to identify employees and proactively request reviews, businesses can also work with job providers and agencies to provide a comprehensive view of their business and available roles, allowing job seekers to make informed decisions based on data.
Discover Behavioural Insights for your Business today with The Behavioural Insights Team
Improving the quality of work will not happen overnight, but there are concrete steps that businesses and the government can take to accelerate the rate of change. It should be a top priority for reducing labour market inactivity.
At The Behavioural Insights Team we provide support for businesses across sectors that are looking to improve the quality of their organisation based on employee needs and desires.