Is Worsening Health Leading To More Older Workers Quitting Work, Driving Up Rates Of Economic Inactivity?

27th October 2022

From The Institute for Fiscal Studies.

We examine labour market trends for older people to see if poorer health is driving down employment rates and causing a rise in economic inactivity.

Since the beginning of the Covid-19 pandemic, there has been a fall in the employment rate in the UK, driven by a rise in the rate of economic inactivity rather than in unemployment. There has been increasing discussion about the links between worsening ill-health and rising inactivity. The Health Foundation and the Institute for Employment Studies have both argued that a key reason behind the increase in economic inactivity has been worsening health, and John Burn-Murdoch has written for the FT about worsening health in the working age population and the role chronic illness has played in driving inactivity rates higher.

These analyses, in general, have used cross-sectional Labour Force Survey (LFS) data. This dataset does show a significant rise in health-related inactivity. Indeed, inactivity due to long-term sickness or disability has been the form of inactivity that has seen the largest increase in the working-age population since the end of 2019 (see Appendix Figure 1). Increases in health-related inactivity have especially affected those aged 50-64, the age group that has contributed the most to rising rates of inactivity since the beginning of the pandemic (Institute of Employment Studies, Oct 2022). Indeed, for 50-64 year olds, the rate of inactivity due to being long-term sick or disabled rose from 9.0% in 2019Q4 to 10.1% by 2022Q2, a rise of around 160,000 people. This rise is important in its own right.

However, the rise in the number of people who are inactive due to ill-health does not necessarily imply that all these people have left the labour force as a result of ill-health. More people may be leaving the labour force for other reasons - for example, because they are taking early retirement - and, simultaneously, those already out of the labour force may be getting sicker. This explanation would imply that there are two problems for policymakers: first, the rise in movements from employment into inactivity; second, the increasing levels of sickness among inactive people.

There is, of course, some overlap between these two issues. But we present evidence in this brief comment, that health reasons do not seem to be the key reasons for older people leaving the labour force, which has been driving up economic inactivity since the start of the pandemic. Intending to clarify the issues at stake, we will focus on 50-64 year olds, since this age group are all below state pension age and have been key in driving the rise in economic inactivity.

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