The link between long term sickness and recession

From last week the UK is officially in a recession, something that economists expected based on the impact on household consumption because of the cost of living crisis. 

However, another potential reason that may have led the UK into recession is the increasing number of people leaving the labour market. In general the employment rate has remained strong the last couple of years and unemployment has been decreasing. 

But the number of people not actively looking for a job has been increasing, we measure that with an index called ‘inactivity rate’. The inactivity rate measures the percentage of people that are not in employment and are not actively looking for a new job between the ages of 16 and 64. For example they might be students, looking after family or they are long term sick. This is different from unemployment; people classified as unemployed are actively looking for a job but they cannot find one, perhaps because they don’t have the right skills, or simply that there are not enough jobs.  

The inactivity rate remained unchanged in the last quarter of 2023 compared with the previous quarter, at 21.9%. However there has been an increase in the inactivity rate since the COVID-19 pandemic. It has increased from 20.8% in the last quarter of 2019 to 21.9% in the last quarter of 2023. 

Increases in economic inactivity in the first year of the pandemic were largely driven by those aged 16 to 24 years. But following the pandemic, increases were driven by those aged 50 to 64 years. Economic inactivity was largely unchanged in the latest quarter, with an increase in inactivity among those aged 25 to 34 years, offsetting decreases in all other age groups. Compared with a year ago (October to December 2022), economic inactivity increased, driven by those aged 16 to 34 years, while inactivity among those aged 35 to 64 years decreased.

Age provides an important insight into the reasons for higher economic inactivity, however when we look at the reasons why people are inactive we can get more useful insights. 

The number of people saying they are inactive due to long-term sickness is now 2.8 million – an increase of more than 200,000 in the past year and of 700,000 since the pandemic started in 2020. As a result our workforce is smaller by 700,000 people. If circumstances were different, these people would be in the labour market, have higher purchasing power and as a result would contribute more to stimulating economic growth. 

There are notable increases in people who were economically inactive due to long term sickness across all age groups, however the majority were aged 50 to 64. This in part reflects how the prevalence of disability and long-term health conditions increases with age, although the recent growth in numbers is larger than might be expected due to ageing factors alone.

The increase in survey-reported long-term sickness is reflected in Department for Work and Pensions data on benefit claims. The number of 50-to-64-year-olds claiming the main types of benefits associated with long-term illness or disability increased by around 400,000 between August 2019 and August 2022–from 2.3 million to 2.7 million claimants.

So why do we see an increase in people's long term sickness? 

Long COVID

Many individuals suffer from long COVID, a situation wherein COVID symptoms last for a longer time than expected, making the individuals suffering from tiredness or brain fog, and not able to participate in the labour market to the same extent (leaving their job, reducing hours, or overall reduced productivity). 

The latest ONS estimates of the prevalence of long COVID in the UK report around 2 million people had ongoing symptoms at least 12 weeks after an infection (as of January 2023). Around 380,000 people reported that their symptoms limited day-to-day activities substantially. The age group most affected by long COVID is 35-to-69-year-olds, which partly aligns with the larger increases in economic inactivity.

The Institute of Fiscal Studies has estimated that more than 100,000 people in the UK are not in work because of long COVID. That has a significant economic impact, as on average, those who stop work because of long COVID are losing £1,100 per month in earnings. Across the country this adds up to almost £1.5 billion per year.

Access to healthcare

There is an argument that the rise in economic inactivity may be due to health conditions worsening because of poor access to healthcare provision. We don’t have the evidence on that, however, we do know there has been an unprecedented increase in the number of people waiting for treatment from the NHS. 

In addition ONS suggested that one in five (18%) who had left work since the start of the pandemic (March 2020) reported that they were currently on a waiting list for NHS medical treatment. This compares with around 13% of the population as a whole.

To conclude, the increasing number of people being long term ill and leaving the labour market, aside from the personal difficulties this entails for the individual, is also not good news for the economy, as we are not able to use all the talent, skills and experience we have in our society, leading to economic and social loss.