Where are Wales’ missing workers?

Joshua Miles, Director for Wales at Learning and Work Institute

To say the last year has been a turbulent one economically would be a huge understatement but by now, we’re all well acquainted with economic challenges being a factor of our day-to-day lives. This week, it’s tomatoes and cucumbers that are making the headlines, but there’s been no shortage of shortages recently, from fuel to loo roll to those huge bags of pasta – we’ve all experienced it.

But there’s one shortage that’s been particularly challenging and casts a long economic shadow over us all in the short term – staff.

The labour market has been historically tight with unemployment hitting significant lows and companies the length and breadth of the UK – including Wales – scrambling to hire workers.

So, what’s happened? Learning and Work Institute recently published a report on the UK’s missing workers that starts to get to grips with the real story behind the headlines. In a nutshell, there’s been a sustained rise in economic inactivity over the pandemic, which in contrast to other major economies, has persisted in the UK well into the post-Covid period (see figure below).

There is a myriad of reasons for this increase, but the one most commented on is the significant rise in over 50s leaving the labour market. Retirement is undoubtedly a driver leading to the UK Chancellor, Jeremy Hunt urging retirees ‘back off the golf course’ and into work. But the truth is as ever far more nuanced with ill health in particular being a barrier to work for those who would like to re-join the labour market.”

But is this also true in Wales? Economic inactivity has always been a more pernicious problem in Wales, and despite longer-term progress up until around 2018 when it looked like we’d finally converge with the UK average; Wales has usually had a larger cohort of economically inactive people.

This new trend has exacerbated our position with the most recent data from February’s Labour Force Survey suggesting economic inactivity in Wales is 25.5%, compared with the UK-wide average of 21.4% (see graph below). By our reckoning of the 486,800 economically inactive people in Wales around 79,200 say they want to work, but only one in ten out-of-work disabled people and older people are getting help to find work through support programmes run by the DWP and other agencies.

Our research identifies that people in Wales are more likely than other parts of the UK to have left the labour market for health reasons than to retire early, and of those economically inactive who want to work approximately one half are disabled or have long-term sickness. That leaves a significant proportion of economically inactive people out of the conversation.”

Behind the figures there’s also a really important class and gender divide that needs to be acknowledged. It’s clear that those that retire early tend to be in well-paid, professional occupations. Whereas those that cite health issues as a reason for leaving the labour market tend to be in lower skilled, more manual occupations. Often these are women in low paying and under-appreciated sectors of the economy with poorer outcomes and experiences – suggesting a real question of equality at play.

So, what’s the solution? Policy can increase employment in the decades ahead: widening employment support to all those out of work; joining up work, health, and skills support; and working with employers on how they recruit and retain staff, including how job design can widen opportunity.

The Welsh Government has a role in all these areas through its employability strategy Stronger, Greener, Fairer Wales and programmes such as Working Wales. The current pressures on the Welsh NHS are also a clear factor that the government needs to consider.

But it starts with acknowledging the problem – in all its complexities – and having the willingness to tackle it. Only then will we deserve our tomato and cucumber sandwiches.