Economic Growth Requires Breaking The Cycle Of Poor Work And Ill Health

20th September 2024

The UK's workforce is facing a growing health crisis, with rising levels of long-term sickness affecting productivity and economic stability. Aadya Bahl explores the relationship between health and work, highlighting the policy responses needed to tackle the issue.

Work is an important part of our lives and crucial to wellbeing. But "good" work that offers security and autonomy is unevenly distributed. Workers in lower-paid jobs often find themselves trapped in "bad" jobs, characterised by unpredictable hours, volatile pay and limited autonomy. As many as six million workers in the UK report feeling anxious about unexpected changes to their work hours, with these anxieties primarily concentrated among the lower-paid workforce.

In the past, low-paid workers reported higher job satisfaction compared to their higher-paid counterparts, but this trend has shifted as low-paid work has become more stressful and demanding. Workers in high intensity roles, such as those in lower-skilled and low-paid occupations, are more likely to experience stress, depression and burnout.

The Economy 2030 Inquiry highlights several policy recommendations aimed at improving workplace conditions for those most vulnerable. A central issue is the inadequacy of the current statutory sick pay (SSP) system. Under the existing framework, UK employees are entitled to SSP, which offers no pay for the first three days of sickness and a flat rate of £116.75 per week after the fourth day. To qualify, workers must earn at least the lower earnings limit (LEL) of £123 per week. As of 2023, this left 1.1 million workers ineligible for SSP.

For lower-paid workers who rely on statutory sick pay, this system fails to offer sufficient financial support during periods of illness. For instance, a full-time worker on the national living wage (NLW) would receive only 10 per cent of their normal earnings during a week of sick leave. For those earning a median weekly wage, this figure drops to six per cent, highlighting the system's shortcomings in providing adequate income protection.

Reforming the system
The Inquiry recommends reforming the SSP by reducing the three-day waiting period to one day, expanding eligibility to include workers earning below the lower earnings limit (LEL), and increasing SSP to 65 per cent of weekly earnings (in line with OECD norms). The government's current plans involve removing the waiting days and eliminating the LEL eligibility threshold, which would raise SSP for full-time national living wage workers from £46.70 to £116.75 for a week's absence, according to the Resolution Foundation's latest Low Pay Britain report.

But without increasing the statutory sick pay rate itself, these reforms will still leave many workers with insufficient earnings protection. If the SSP rate was raised alongside other proposed changes, a full-time worker on the national living wage would receive £294.44 for a week of sick leave. This would be six times what they get under the current system, and twice the amount they would receive under the new proposed system.

A pervasive problem spanning generations
Ill health affects people in various ways: some may only need a few days off, while others face extended absences. The growing prevalence of long-term sickness, defined as illness lasting four or more weeks, has become a significant concern.

Both mental and physical health play a crucial role in determining an individual's life satisfaction, a key indicator of overall wellbeing. As such, the rise in long-term sickness presents not only an economic challenge but also a broader societal issue that demands attention.

Long-term sickness has traditionally been associated with older workers, as more than one in nine people aged 50-64 are classified as long-term sick. Yet the share of the over-50 population considered long-term sick is lower in 2024 compared to the early 1990s. This suggests that long-term sickness has been an issue for at least two generations of older workers.

Further, long-term sickness among the 16-49-year-old population is at an all-time high, raising concerns that the next generation of workers may be just as vulnerable to long-term sickness. In 2023, over eight million people in the working age had a long-term health condition that limited their ability to work. This includes 3.9 million who were in work and four million who were economically inactive, namely those who were neither in work nor seeking employment.

Supporting those who are economically inactive
Economic inactivity has been described by the government as the "greatest employment challenge for a generation." At the heart of this challenge lies the need to reduce the proportion of workers off sick, as ill health accounts for one-third of all economic inactivity. Every year, approximately 375 million workdays are lost due to people being out of work with long-term ill health, representing a significant loss of productivity.

By the end of 2022, the number of people who were economically inactive due to long-term illness had increased by 460,000, reaching 2.5 million. Many of them are grappling with chronic conditions like musculoskeletal issues, stress and mental health problems.

Occupational patterns also play a significant role in determining who is most affected by long-term sickness. Workers in lower-skilled, manual occupations, and those who have never worked are disproportionately affected by ill health. This highlights the critical need for early health interventions in the workplace to prevent employees from being pushed out of work and into economic inactivity.

The government has set up a Labour Market Advisory Board, which includes LSE professor Stephen Machin, to develop new ideas and initiatives to tackle this issue. While the government has recognised the scale of the issue, investing in preventative measures is crucial in avoiding the long-term economic and societal costs of an unhealthy workforce. Health and employment support must be integrated, ensuring that workers with health conditions receive adequate support before they become economically inactive.

Conclusion
Economic growth and productivity hinge on breaking the cycle of poor work and ill health. Comprehensive reforms to sick pay, along with targeted interventions to address economic inactivity, are key to strengthening the UK labour market and enhancing the wellbeing of society more broadly.

Author
Aadya Bahl

Note
This article is from the blog of the London School of Economics. To read it with many links to more information go HERE

PHOTO
Phil Whitehouse - Flickr, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=32474066