Levelling Up – The labour market and health of the nation

March 14, 2023  

In recent years we’ve seen a continued and increasing link between health and economic outcomes, notably brought into sharp focus by COVID-19. Imran Hashmi and Laura Charlesworth examine what this means for the UK labour market and for levelling up.

Rising inactivity is a specific UK challenge

At the headline level, the UK appears to have weathered the COVID-19 storm well with both employment and unemployment remaining remarkably resilient during the pandemic – in no small part thanks to the furlough scheme. Unemployment has been much less volatile compared to other countries and is now below pre-pandemic levels reaching a historic low of 3.5% in 2022, broadly similar to other major economies.

Source: New Local Analysis of OECD Figures

However, the UK has struggled much more in relation to economic inactivity. In most developed countries, after rising during the pandemic, inactivity has subsequently fallen. The UK is the exception where inactivity has continued to rise by more than 800,000 since 2019.

Source: New Local Analysis of OECD Figures

There are many reasons for this including people that have retired, are studying, or have parental/caring responsibilities. However, a major contributor to the UK’s economic inactivity is the growing level of long-term sickness which has risen by around 460,000 since the start of 2020 (compared to an expected increase of 41,000 due to our ageing population). By the end of 2022 this had reached an all-time high of 2.5m, and long-term sickness now accounts for 28% of all economically inactive people.

Source: ONS Labour Market Statistics Time Series, February 2023

This is a challenge for the whole labour market, observed across all age cohorts. There are several explanations for this, including long-COVID and the impact of long waiting lists due to health service backlogs. However, we should also consider the impact of growing health inequalities.

The increase in life expectancy is slowing, and varies alarmingly across the UK

After many years of increasing life expectancy in the UK, the last two years (2018 -2020) have seen the slowest improvements since records began with life expectancy falling for males and stagnating for females. It is important to note that this trend began before the pandemic. Life expectancy has risen more slowly here than in similar, high-income countries. Meanwhile life expectancy has fallen disproportionately in areas of higher deprivation.

Source: Office for National Statistics – National life tables – life expectancy in the UK

The most significant factor for the labour market is healthy life expectancy – an estimate of the time spent in very good or good health. Healthy life expectancy in the UK is lower than other countries including Switzerland, France, Japan, Singapore and South Korea. As with overall life expectancy, this disproportionally impacts on those in most deprived geographies.

The variation in healthy life expectancy across the UK is alarming. In the least deprived areas this is 70.7 to 70.5 years for females and males respectively, but in the most deprived areas this falls to just 51.9 to 52.3 years. We’ve shown these rates for each local authority in the map below, alongside a map of economic inactivity rates for the long-term sick. It clearly shows the health inequalities that are present, and hotspots in the Borderlands area of Scotland, the Northeast of England, East Yorkshire, the North West of England and South Wales with both low healthy life expectancy and high rates of inactivity due to ill health.

This tells us that we cannot level up economically without levelling up health.

Poor health is undermining the labour market

Research indicates that poor health is undermining the labour market, for those both in and out of work. The Labour Force Survey shows the increasing frequency of health conditions within the workforce. The employment rate for those with ill-health increased from 59% to 64% between 2015 and 2022. Meanwhile, a fifth of the over-50s who have dropped out of the workforce are on an NHS waiting list. The number of working-age Britons unable to work due to chronic pain has climbed by almost 200,000 in the past two years relative to its former trend.

Mental ill health presents a large challenge, with over 60% of those inactive due to health conditions reporting they have a mental health problem according to the latest Labour Force Survey. We also know that there is growing complexity in ill health with the number of working age adults with two or more health conditions increasing by approximately 1.5m (to around 7.5m) between 2015 and 2022.

Crucially, of people with health conditions who are currently inactive, around 46% say they want to work now or in the future (equivalent to 2.2m people). This view is highest amongst those with mental health conditions.

The cost of poor health

These issues all come at a significant cost to the UK economy. A study by the Mental Health Foundation and the London School of Economics estimated the cost of mental health problems at around £118bn a year, primarily due to lost productivity and cost incurred by unpaid carers. Evidence from Public Health England found that health inequalities were estimated to cost the country around £31bn every year in lost productivity, and between £20 and £32bn a year in lost tax revenue and benefit payments. Meanwhile the additional yearly cost to the NHS was £4.8bn.

The other cost is the increased demand this is placing on public services, which are already under pressure. Evidence from the Institute for Government shows that general practices, hospitals and adult social care services are all performing below pre-pandemic levels, with current funding inadequate to restore them.

That’s not to mention future demand from demographic trends such as an ageing population. Layering this on top of the current labour market and health challenges, plus budgetary constraints, it is clear we need to change the way we deliver services to meet this need.

We need to change the way we deliver services to truly level up

Much more is needed to reverse the trend of poorer health and truly level up areas with both health and economic inequality. So what should we do differently?

  • We need genuine devolution, both powers and budgets to local places, so councils can ensure public services meet current and future health and labour market challenges. This also involves creating power in and beyond town halls and civic institutions, so that communities and local partners are involved in decision making to ensure local economies adapt and reflect local challenges and opportunities. Research from the University of Manchester has linked devolution in Greater Manchester to improved life expectancy.
  • We must shift towards a preventative approach, as outlined in our Community-Powered NHS report, and start addressing the wider determinants of health outcomes across all policy areas.
  • Government needs to show a long-term commitment to levelling up and joining of policy across departments, with a focus on the hotspot areas mentioned above. If the health of the local authority areas with left behind neighbourhoods were brought up to national average, there would be an extra £29.8bn in the local economy.

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