Chamber and committees

Does the IFS want to comment on this?

Good morning. One of the issues that the committee is keen to properly understand is the extent to which the decline in the workforce post-Covid is directly down to health issues such as long Covid compared to other factors such as people choosing to take early retirement. I know that IFS has done quite a lot of work on this and I am interested to get your perspectives.

We had hoped to have John Burn-Murdoch from the Financial Times along this morning, but unfortunately he is not well. I want to quote a couple of things from the Financial Times. In an article he wrote in July, he said that chronic illness was the main driver behind the stalled labour recovery. A more recent article in the Financial Times, on 2 November by Delphine Strauss, quotes IFS research and says:

“The findings challenge the prevailing idea that ill health is the main explanation for the post-pandemic shrinkage in the UK’s workforce.”

There is quite a contradiction between these two articles. I am interested in getting IFS’s perspective on what is going on here.

Good morning to the panel. I will follow up on some of the questioning from the convener because I think that this is at the heart of what the committee is trying to understand about what has been happening in the labour market. We had some interesting evidence from our panel last week about the reasons for the reduction in economic activity and whether that was directly related to health—for example, whether it was people with long Covid who were struggling to work—or whether it was more about other factors, such as people deciding after two years of home working that they were going to take early retirement because they did not want to go back to an office working environment.

I am interested to get people’s perspectives on that. To what extent do you think that this is directly health related? Are there other factors, particularly among the 50 to 60-year-old age group? Professor, maybe you could start. Do you have any thoughts on that?

I will in bring Philip Whyte in a second, but first I have one follow-up question. We know that there is a cost of living crisis and that household bills for energy and food have gone up substantially over the past few months. Is there any evidence that the people who dropped out of the workforce and perhaps took early retirement thinking that they had enough money to sustain them are now having to rethink that because of cost pressures and inflation?

What do we need to do, therefore, to make it more attractive for the of people set whom we have talked about to come back into the workforce? What are the barriers to their working? Do we need more flexible working from employers, for example? Would that help? Are there any other useful interventions?

Following up on the labour market issue, I note that one aspect that nobody has touched on yet is a potential rise in unemployment. The Bank of England has suggested—I think that it was last week—that unemployment is set to double. If that is right, does it not raise a range of other issues? The current tightness in the labour market, which is the real issue, might flip itself over and we might find that we are no longer discussing the difficulty in finding people to do work, but talking about the opposite problem, which is having people who are unemployed and cannot get jobs.

Thank you.

Susie Fitton, I noticed in your written submission a reference to the analysis by the Financial Times showing that

“The UK is the only country in the developed world where people have continued dropping out of the workforce in ever greater numbers beyond the acute phase of the pandemic.”

There is clearly a specific UK issue here and that will apply equally, or perhaps more so, to Scotland. Do you have any thoughts on what is driving that here as opposed to other countries?

Professor McCartney, what are your thoughts on the question? In particular, is it about ill health or are other factors driving people to leave the workforce?

You say that people are taking retirement. To what extent do we understand the reasons for that? Did they take early retirement because they were working from home for two years and just decided that they did not want to go back into a workplace environment, or are there other factors behind it? Do we have enough data to explain it?

Those who have retired.