Early retirement making it harder to fill jobs, House of Lords report says
An increase in early retirement is the largest of four factors driving a rise in economic inactivity, according to a report from the House of Lords.
The loss of workers aged 50-64 is making it harder to fill jobs, according to the house's Economic Affairs Committee, and exacerbating efforts to control inflation and improve growth.
Economic inactivity has increased by 565,000 people since the pandemic started, the report says, with increasing sickness, changes in migration and an ageing population also contributing factors.
The impact of the latter was previously concealed by other trends, peers found.
Lifestyle changes linked to the pandemic, including the use of the furlough scheme, may have caused some people to consider leaving work earlier, the committee found, and most of those doing so "appear reasonably well-off".
An increase in savings during the pandemic is suggested as a factor, as are the UK's pensions flexibilities, and "it would be unwise to proceed on the basis that a significant proportion" of this group could be "persuaded back", the committee found.
Meanwhile, there now exists a "mismatch" in the labour force as a result of the departure of lower-paid EU workers in sectors like agriculture and hospitality and the arrival of highly-skilled non-EU workers under the revised immigration system.
Commenting on the report, titled Where Have All the Workers Gone, Lord Bridges of Headley - a former member of the UK Government's Brexit team - said: “Why have so many workers left the workforce, after years of declining inactivity? Earlier retirement seems to be the biggest reason. Those who are already economically inactive are becoming sicker, meaning they’re less likely to return to work. So, while other factors were previously masking the impact of an ageing population on the size of the workforce, they are now reinforcing it.
“Taken together these findings are, like mid-winter, bleak. The rise in economic inactivity makes it harder to control inflation; damages growth, and puts pressure on already stretched public finances. That’s why it’s critical the government does more to understand the causes of increased inactivity, and whether this trend is likely to persist.”