Government should bolster efforts to support mothers into work

The Resolution Foundation, which aims to improve the living standards of people with low to middle incomes, believes that a policy focus on trying to persuade the “Covid cohort” of older workers to “unretire” is unlikely to work.

The country has been grappling with a rise in economic inactivity, which has been increasing over the course of the pandemic – up by 830,000 between 2019 and 2022, with three quarters of the rise concentrated among those aged 50 and over.

Chancellor Jeremy Hunt has appealed to early retirees that “Britain needs you” as he promised a “fundamental programme of reforms” to tackle the country’s shrinking workforce.

However, the authors of the report say that while attention on this issue is welcome, pleading with them to re-enter the workforce will fall on deaf ears.

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The report found that increased labour market exits during the pandemic were disproportionately from higher-than-normal retirements among higher-paid professionals, with flows from employment into retirement from many low-paying occupations falling. 

It will be hard to persuade these people, two-thirds of whom own their own home outright, to “unretire”, said the authors.

It added that someone who took early retirement during the summer of 2020 has now been economically inactive for two-and-a-half years. Historically, just 1-in-50 people in this situation return to work every three months.

Hunt should instead focus on three groups - mothers, older people, and those with ill-health or a disability – where the UK’s experience tells us progress can be made, it said.

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In the decade running up to the pandemic, the UK saw employment rates rise by 13 percentage points for women aged 55-64 (and four percentage points for men) and by five percentage points for coupled mothers, while the employment gap between those with or without a disability fell by five percentage points between 2013 and 2022.

First, demographic changes mean that there will be many more older age workers in Britain in the 2020s – the number of people aged 65 and over will rise by 2.5 million between 2020 and 2030.

Simply raising the state pension age disproportionately impacts those on lower incomes and poor places with lower life expectancies, it noted.

It said that the government could accelerate the rise in the minimum age at which people can draw their private pension, which is currently due to rise from 55 to 57 but to remain 10 years lower than the state pension age.

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The thinktank also said the UK must address its maternal employment gap, where participation rates among low-income women aged 25-54 were just 50% in 2017-2019, compared to 94% among high-income women of the same age.

The foundation warned that popular proposals to extend the number of “free” childcare hours will largely boost the incomes of already-working parents in middle-and-high income households, rather than boost employment among lower income households. 

The report also noted that a growing share of the population lives with a disability or ill-health. As well as a wider policy agenda to tackle the underlying causes of this trend, including rising mental ill-health, policy makers can do far more to help those affected stay in employment, for example creating a “right-to-return” so workers who need take some time off work for ill-health remain attached to their employer and job. 

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Without further progress on these three areas, the authors warn that the economic inactivity rate for 15-75 year olds is set to rise from 29.5% up to 30.8% by 2030, the highest rate since the turn of the century.

Louise Murphy, Economist at the Resolution Foundation, said: “We need to reboot progress on getting people into work, but we’re not going to achieve it by persuading the recent Covid cohort of older workers to ‘unretire’.

“Instead, we need to do more to encourage mothers in low-income families into work and help people who need to take periods of time-off for ill-health stay attached to their jobs.

“Taking the right approach to workforce participation would boost individuals’ living standards and improve the wider health of our economy.”