Britain is facing a labour force crisis. The number of vacancies has started to fall in recent months but still stands at 1.2m, 50 per cent higher than on the eve of the pandemic (when there were 832,000). More than nine in 10 employers have struggled to fill vacancies in the last year, and they can expect little respite over the coming months. This shortage of workers is one of the major drags on the UK’s economic growth.
At the same time, inactivity rates have risen, with more people out of the labour market because of long-term health conditions—now 2.5m. Among women, while sickness is an increasingly cited reason, looking after the home and family remains the leading cause of economic inactivity, cited by 1.4m.
Against this backdrop, it was no surprise to hear the chancellor highlight this issue during his Autumn Statement, and task the Department for Work and Pensions with carrying out a rapid review to work out how to boost workforce participation, to conclude early in 2023. In the same speech, the chancellor flagged the other major challenge in the UK’s labour market—too many workers are unable to find either the hours they want or decent pay, and are cut off from opportunities to progress into better jobs.
The government has identified the right problems, but will it reach for the right solutions?
The only indication so far is not especially promising. The chancellor announced that 600,000 more workers on Universal Credit will now be obliged to meet a work coach “so that they can get the support they need to increase their hours or earnings.” The government’s own report last year into how to support people to progress out of low pay did include recommendations for work coaches to support more people. However, it emphasised both the need for investment in specialist expertise to make these conversations worthwhile, and for additional action on childcare, transport, skills and changes within workplaces. The trials of additional work coach conversations found a positive, but small and possibly short-lived impact on earnings.
New research from the social enterprise Timewise points towards a different approach to tackling the challenges around inactivity and lack of progression—one that’s in danger of being overlooked by both employers and the government.
While employers struggle to fill full-time vacancies, 600,000 people are searching for part-time jobs. They’re competing to fill only 156,000 part-time vacancies, mostly low paid. The groups that experts worry are leaving or being excluded from the labour market are all disproportionately likely to need to work part-time or flexibly—disabled people, older workers and parents. Researchers estimate that half a million people in those groups alone are out of work or stuck in jobs that pay far less than their skills should command. With poverty rising and the cost-of-living crisis driving up hardship and debt, the Institute for Employment Studies estimates that if more quality part-time jobs were advertised, poverty rates for parents, disabled people and older workers could plummet.
When Timewise was commissioned by the government to carry out a small pilot programme focused on flexible work, it was able to get a third of the Universal Credit claimants involved into better paying flexible jobs. Its programme did not just rely on individuals having meetings with work coaches. As well as more specialised coaching, it involved actively brokering between employers and current or potential workers—negotiating flexibility and helping employers overcome barriers to offering part-time or flexible roles. Importantly, given current pressures on public finances and departmental budgets, the pilot approach did not incur significantly higher costs per person. However, it did require specialist provision, which has been stripped out of the system in recent years.
As the workforce ages, more people are having to balance work with caring or ill health. The number of people in the UK who need to work part-time to manage these kinds of situations has shot up from 5.8m in 2017, to 8.4m in 2022. But still very few jobs are advertised with flexible options. Women, older workers and disabled people therefore end up stuck—either in a job where they have been able to negotiate flexibility, and which they now feel they can’t leave, or out of the labour market altogether.
The chancellor has rightly directed the DWP to speedily come up with practical ways to draw workers back into the labour market and raise the earnings of those on low incomes. To succeed in doing either, the department must look beyond the familiar tools of work coach meetings and benefit conditions. Instead, five steps should be at the top of its to-do list:
- Bring forward the long-promised employment bill to include flexible working by default from day one.
- Require employers who win public sector contracts to consider flexibility from day one in any job paid for by those funds.
- Train specialist staff within jobcentres to support people who need flexibility.
- Invest in employer-facing interventions to encourage them to design jobs with flexibility.
- Work with the business department and employers to train small businesses to design jobs flexibly and trial flexible hiring.
All this would not only help meet today’s workforce crisis and stimulate growth, it would be a sound investment in the future. Demographic trends mean the labour force will become more diverse, with more older workers, carers and disabled people needing work that can be done flexibly. Employment support and employer practices urgently need to modernise to match these changes.