Will economic inactivity be another unwelcome side-effect of the pandemic?

The pandemic has put the brakes on decades of improvement in employment rates among people in their 50s and 60s.

An unprecedented number of people aged 50-64 have moved out of work since the start of the pandemic; the number of people in this age cohort who are not even looking for work – the ‘economically inactive’ – has risen by 228,000.

At a time of labour shortages and soaring vacancies, this is a big problem for the economy. Thanks to new data from the Office for National Statistics (ONS), we’ve also got a better idea of how much of a problem this is for individuals and, crucially, what could enable or entice them to return to work. The risk is most pressing for those individuals who do not have access to the financial resources to sustain them in the present – let alone in their later life. This is the group who are claiming state benefits, which means they have access to government employment services via Jobcentre Plus (JCP).

Historically, however, back to work support has not worked for over 50s. The government recognised this in the 2021 Spending Review and pledged welcome resources to provide enhanced support to older workers within Jobcentre Plus. This investment is essential – not only to help older workers now, but to provide a large-scale example of what can happen if employment support services really take the 50+ group seriously.

But most of the older workers who have left the workforce will never set foot in a job centre. Only 12% of people in the ONS survey say they are receiving state benefits (other than a pension) – which is the gateway to government support. What’s more, our recent co-design research has shown many over 50s do not engage with mainstream services such as JCP because they don’t feel the services are suitable for them. Taking steps to address this perception is vital – but so is providing employment support outside of mainstream services to over 50s who may not actively be seeking work but would consider returning.

It appears that most people in the ONS survey – the remaining 88% – feel able to financially support themselves right now, and feel they have saved enough for a good standard of living in the future. This is likely one reason why 59% said they would not consider a return to work.

But there’s also a slightly more worrying picture for people in this group – 42% are currently living off savings and investments, and 16% are being supported by their partner, neither of which are necessarily sustainable.

Overconfidence is a huge issue: four in five (80%) of 50-64s do not have a broadly accurate idea of the level of savings that they will need to achieve their desired income in retirement. Early retirees take a double-hit, too, spending down their savings while also losing the opportunity to save more into a workplace pension. Modelling by the Pensions Policy Institute last year showed that a median earner who falls out of work at 55 could have pensions savings of around 34% less than someone who had stayed in work.

So, what will work to get people back to work? The ONS survey says the answer is flexibility – but many older workers are not finding the kind of jobs they need. Our research shows that some employers are actively ageist, but most simply aren’t considering age at all. They need to be persuaded to do so. Dwindling numbers of younger and European workers mean that economically inactive older workers must be part of the answer to the current recruitment crisis.

As well as tackling ageism in recruitment, the government should also work to meet people where they are, and for most older workers that is outside of JCP. To do this, we need to see re-investment of the underspend from Jobs for Work outside of mainstream employment services.

With more than a third of economically inactive people in their 50s and 60s saying they would return to work for the right job, the right support is more important than ever.