One of the lasting legacies of this pandemic is that almost half-a-million workers are missing from the labour market. This increase in inactivity – people neither working nor looking for work – is why our employment rate has not recovered, despite unemployment returning to pre-pandemic levels.
Early in the pandemic, it was young people dropping out of the labour market. But that was often for good reasons, such as to study, and they’ve returned since. The real, lasting story, however, is about older workers. Even as the economy reopened and vacancies hit record level, those aged over 50 have been dropping out of the labour force. Why?
New research investigated the idea that the pandemic might have made us more materialistic because lockdowns gave us lots of what is correlated with materialism: media consumption and loneliness. But it concludes the opposite has happened: we’re placing less importance on money. The authors argue that this might be linked to falls in labour market participation: less wish for money equals less need for work. Maybe.
Survey data indicates early retirements are partly what is happening, which for those who can afford it shouldn’t concern us. But the bigger driver of rising inactivity is a surge in long-term ill health, which matters to all of us. It means lower living standards for those retiring and a smaller economy for everyone. And history tells us when older workers leave work for any length of time they are unlikely to return. For some, the falls in labour market participation may be driven by pandemic silver linings as people reassess their lives or values, but for many the last thing dropping out of work may feel like is a choice.
