It is called the Great Resignation or the Great Retirement. Where have all the workers gone?
Personally, I blame George Osborne, for reasons I will explain later. But it is one of the great economic puzzles of the day. Why have so many in the UK workforce decided, or been required, to become “economically inactive”?
The House of Lords Economic Affairs Committee, in a report published this week, has been trying to answer this.
It finds that the numbers of economically inactive, without a job and not actively seeking one, have increased by 565,000 since the start of the pandemic. This is a sharp reversal to the trend previously and leaves UK employers drastically short of staff.
It finds that the biggest driver has been 50- to 64-year-olds who have decided to retire early. “The majority of those over 50 who have left the workforce since the pandemic neither want nor expect to return to work,” the report says. “Furthermore, most appear reasonably well-off.”
Long-term sickness increase
Other factors include higher rates of long-term sickness and “changes in the structure of migration”, careful coding for Brexit and the inability of employers to source EU workers.
All this is bad news because it tends to ramp up inflation, drive down economic growth and reduce tax revenues required to fund the needs of an ageing population (my summary).
I have myself been pondering the Great Resignation or the Great Retirement for some time now, partly as an early adopter – I chose to leave the workplace about two years before the pandemic hit.
There are, I think, three categories into which those departed workers fit, and finding accurate statistics for each is difficult because they often overlap.
At one end of the age spectrum, some young people have just given up – tuned in, turned on and dropped out, to use a phrase from my misspent youth. A lot of young people can see no reason to engage in the workplace, seeing no long-term career path and no prospect of owning their own home.
They may live at home or sleep on friends’ sofas, doing part-time bar or other casual work to make limited ends meet. Others may have gone abroad – I know of three twenty-somethings working elsewhere for various reasons. They have not formally emigrated and do not show up in those numbers – they are simply not available to the UK workforce.
Increase in long-term sickness
The second category is the growing number of the long-term sick. Partly this may be Long Covid, though again the numbers are hard to access, and not all those with that condition, which displays a wide range of symptoms, will have given up work.
Again there may be an overlap with the first category of disaffected young workers – we know the rate of mental illnesses has grown in children and young people since the pandemic.
The third category is those early retirees. The Lords report talks of “the impact of lifestyle changes during the Covid-19 pandemic”. It says the furlough scheme “could have prompted some people to consider early retirement”. Some will have saved money since lockdown; there is a throwaway mention of “the UK’s pensions flexibilities”, which is where George Osborne comes in.
Workers cheerfully sitting around in their pyjamas working from home will have after lockdown been told by their bosses, get back to the office, back on that ‘gruelling commute’. A fair number seem to have considered their other options.
Again, there is some overlap with the long-term sick. Some early retirees may have been suffering from conditions such as asthma and not cared much for the idea of getting back on a packed commuter train or into a crowded office. Others may have succumbed to Long Covid.
Others, too, may not have relished the risk of encountering a virus that was still very active, having worked out a lifestyle that limits that risk.
Pension reforms aid early retirement
And George Osborne? The former Chancellor introduced sweeping pension reforms that had the effect of making it much easier for UK workers to retire early.
From their late 50s onwards, employees can extract their pensions from their employer’s pension scheme and do what they will with the money. A large chunk can come out tax free in cash, which makes perfect sense if you will be paying tax on the rest. The balance can be invested in a range of assets that should provide an income into retirement.
The reforms came with a degree of risk. There was concern that those now cash-rich 50-somethings would be seen driving around in brand new Maseratis rather than putting the money aside for a potentially indigent old age.
(I heard a rumour then that at least one national newspaper charged a reporter with finding one of more of these ageing novice luxury car enthusiasts. I don’t think they found many.)
One has to wonder how many of those office refuseniks researched their pensions, perhaps for the first time, and found that, if they had been paying into their staff scheme while earning a decent professional or managerial salary for three or four decades, there was indeed another option.
Early retirees ostracised
One gets a sense, reading some employers’ complaints about that shortage of skilled and experienced staff, that those who took early retirement are seen as lazy, unpatriotic or unwilling to contribute their due to the economy. Those complaints, as this report shows have been raised plenty of times before
But any boss who claims such retirees are lazy or unwilling to do their bit needs to answer honestly two questions.
Employment is a young person’s game
One, how many people in that age group have you made redundant or forced into early retirement over the past 10 to 15 years? “Time to put your feet up, you’ve done enough.” “We need fresh blood.” (That would probably mean cheaper blood, then.)
And how many have refused to hire older job applicants? Anyone who has spent any time in the workplace in recent years knows of the pressure to cut costs by hiring younger workers, and the prejudice against older ones.
Two, what are you going to do to attract those early retirees back into the workplace? You may have to be flexible. Part time working, two or three days a week, working from home? And you may find the hourly pay rate has gone up a bit, given how much you need them more than they need you.
It’s called free market economics. It worked well enough for you in the past. Bit painful, isn’t it, now the boot is on the other foot?