Today’s UK Spring Statement is 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 of the reasons for inactivity are financial, with childcare costs receiving a large amount of attention within the debate. Attention here is needed. 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 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 (particularly for women) are able to 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 make sure work works.
Here are three things we think are worth pursuing:
1. Focus on increasing flexible work
“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 over-50s. Two-thirds of parents say flexible working is a top priority, second only to pay (73%) in terms of its importance. And flexible work helps individuals who are long-term sick 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 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 really reach scale requires bringing together all the largest job platforms and making the case for them to do the same.
By making flexible work more visible, this 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 behind.
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 to companies, based on their employee demographics
Dedicated programmes to improve support workers to stay in work can make a big difference. For example, 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.
Subsidising programmes like these could help to increase uptake and improve the quality of work. However, past initiatives to encourage businesses to access support, such as Help to Grow, have suffered from chronically low uptake, suggesting that subsidies alone are unlikely to cut it. Placing more focus on the practical aspects of uptake is key.
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 (for example, those with high numbers of older workers, where several employees are on parental leave, or where workers have gone on long-term sickness leave) and point them towards support relevant to their challenge. This could involve partnerships with bodies such as CIPD to disseminate best practice and information on how to access more extensive support services. Or for small organisations, who 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.
A critical question, however, is how effective this support will be – there is evidence of both effective and ineffective programmes, and not enough evidence (particularly in the UK) to be confident in what works. Complementing this immediate support with funding for more robust evaluation will be critical for long-term benefits.
3. Help jobseekers identify good firms
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 life satisfaction equivalent to a 30% increase in pay. If companies with ‘bad’ working environments needed to pay their staff 30% more, 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.
One approach would be to improve the representativeness of responses by using HMRC data to identify employees and proactively request reviews. Alternatively, they could work with platforms to help verify reviews, or estimate their representativeness (for example, Glassdoor collects salary information, which could be compared to the HMRC-known salary distribution for the company). Finally, HMRC data could complement qualitative review data, by providing indicators of job turnover and pay progression that could be integrated into these platforms.
Improving the quality of work will not happen overnight, but there are concrete steps that the government can take to accelerate the rate of change. It should be a top priority for reducing labour market inactivity. Just as importantly, it would benefit the 80% who are in work too.