The number of older workers returning to the workforce rose sharply at the end of last year, a study by a leading think tank suggests.
The results may indicate that the exodus of hundreds of thousands of workers during the pandemic is reversing, according to the analysis by the Institute for Fiscal Studies of data published by the Office for National Statistics.
The rise in participation among workers aged between 50 and 64 was particularly pronounced among those who had left work since the start of the pandemic to become inactive, analysts said. Workers are considered economically inactive if they are neither working nor available to work.
Workers who had left their jobs after the start of the pandemic accounted for 57 per cent of the 197,000 workers aged 50 to 64 who left inactivity to return to work between October and December last year.
About half a million workers left their jobs during the pandemic with no plans to return to work. Some of the rise was caused by the ageing of the population, which meant a greater share of workers reaching retirement age, but the trend was driven mainly by older workers aged between 50 and 64 who retired early or were forced to resign because of long-term sickness.
The trend has contributed to a shortage of labour supply that central bankers have warned would weigh on economic growth.
“A number of these people say they are unlikely to come back into the labour market,” Andrew Bailey, the governor of the Bank of England, said after the central bank’s decision to raise interest rates in February. “This significant and lingering fall in the labour supply weighs on the UK economy’s potential.”
Unemployment is close to historic lows, but it is not because more people are in work, according to ONS figures. Employment remains below pre-pandemic levels, while the number of people who are “inactive” is at historically high levels.
The flow of workers back into the jobs market led to a slight drop in the total inactivity rate among 50 to 64-year-olds from a post-Covid peak of 27.7 per cent last summer to 27.1 per cent by the end of last year, the IFS said.
The lack of participation is a concern for the government, which is looking at measures to encourage workers to return to the labour market.
Bailey said the fall in participation “will take time to unwind . . . so we have revised down our estimates of the trend in participation with persistent effects from Covid adding to population ageing”.
The figures show signs of the beginnings of a reversal, but more data is needed to establish a change in trend, according to the IFS. The share of inactive older workers who said they would “probably” or “definitely” not work again has fallen for two consecutive quarters, while the share who said they would like to work has risen.
Xiaowei Xu, a senior research economist at the think tank, said: “We may be seeing a rise in older people returning to the workforce. If ‘unretirements’ continue, this could ease pressures on the labour market, but if the return is triggered by the cost of living crisis it is no cause for wider celebration. It is a response to people becoming poorer.”
Recruitment gets harder
Businesses faced renewed difficulties with hiring staff last month as wage and cost pressures remained high, a Bank of England survey shows (Arthi Nachiappan writes). Forty-five per cent of businesses said they were finding it “much harder” than usual to recruit, up from 35 per cent in January, according to the bank’s survey of about 2,500 chief financial officers between February 3 and 17.
The findings are likely to push up wages as companies compete for workers. Annual wage growth rose to 6.6 per cent in February, up from 6.3 per cent. Respondents expect wage growth to average 5.7 per cent in the next year.
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