Britain’s working age population will fall to a record low as a growing number of people too sick to work will dampen the economy’s future prospects, according to the tax and spending watchdog.
New forecasts from the Office for Budget Responsibility (OBR) suggest that the proportion of over-16s working or looking for a job will never return to pre-pandemic levels. Instead, the combination of an aging population and escalating health problems will leave a lasting mark on the labor market.
The OBR estimates that the proportion of adults participating in the labor force will decline to 61.8 percent in the 2060s, the lowest figure on record. This reverses a decades-long pattern in which declining male labor force participation has been offset by more women entering the labor market since the 1970s.
The participation rate peaked at 64 percent just before the lockdown, but has since fallen to 62.8 percent. About 2.8 million people are now economically inactive due to long-term health problems ranging from mental health problems to chronic pain. While improving health outcomes may seem like a solution, the OBR warns that even major improvements will not significantly increase workforces.
The warning comes as new figures from the Department for Work and Pensions (DWP) show that 1.6 million people have started claiming illness-related benefits since just before the pandemic, without being required to look for work. Of the 2.9 million Universal Credit decisions linked to ill health, two-thirds were classified as ‘restricted ability to work and work-related activities’, giving them an extra £5,000 a year and freeing them from preparation obligations of work.
Despite the government’s hopes that cutting NHS waiting lists would boost economic growth, the OBR analysis casts doubt. It notes that even restoring people’s health does not guarantee they will seek work. This undermines the claim that reducing the record NHS backlog of 7.57 million could deliver significant economic gains. The OBR shows that only around 28 percent of working-age people who recover from ill health or avoid becoming ill will enter or remain in the labor market.
The Institute for Fiscal Studies (IFS) also highlighted the scale of the challenge. With 6.6 percent of the working-age population inactive due to poor health, up from 5 percent in 2019, meeting the government’s employment targets will be difficult. The problem is especially acute among older workers: 11.3 percent of 55-64 year olds are inactive due to health problems, compared to 8.9 percent four years ago.
Meanwhile, the Office for National Statistics (ONS) reports a decline in healthy life expectancy. Men can now expect 61.5 healthy years, and women 61.9 years – both figures have fallen since before the pandemic.
Overall, the OBR’s findings suggest that the UK labor market faces long-term structural headwinds. It appears that poor health and reduced labor force participation are not just a consequence of an aging society, but will remain a persistent drag on productivity and growth, challenging policy makers to find new ways to support individuals and keep the economy on track.