Tackle recruitment crunch to unleash £23 Billion boost to economy

The UK has suffered the biggest drop in employment of G7 countries through the pandemic, leaving employers short of workers. New research by Learning and Work Institute suggests that a plan to get 1.7 million people back to work could boost the economy by £23 billion per year and increase annual incomes of the poorest households by up to £2000. 

Despite low unemployment, employers are struggling to fill all their roles. A key reason is an exodus of people over 50 and those who are long-term sick from the labour market, a trend not seen in most other countries and likely exacerbated by long NHS waiting lists. Many of these say they want to work, but the research finds only one in ten are getting help from the Government to look for jobs. That’s because current support from Jobcentre Plus is mostly focused on those who are unemployed and claiming benefits, meaning millions miss out.

In its new report, Towards full employment, Learning and Work Institute shows that, to tackle the stagnating labour market and have the highest employment rate in the G7 within a decade, on a path to a world-leading 80% employment rate by 2035, an extra 1.7 million people would need to be in work. This would help boost our economy by £23 billion, improve the public finances by £8 billion, and raise average household incomes by £830 per year. It would require a step change in the scale and reach of employment support, in particular to better help disabled people and older people who want to work.

Stephen Evans, Chief Executive at Learning and Work Institute said: 

“Increasing the number of people in work can contribute to the new Prime Minister’s goal of growing the economy. But only one in ten out-of-work disabled people and over 50s getting help to find work now, so there’s huge potential for rapid change. Getting an extra 1.7 million people into work would help ease the recruitment crunch, boost the economy by £23 billion per year, and could increase the annual incomes for the poorest households by £2,000. This is even more urgent as the cost of living crisis deepens.”

“We need to see significant investment in joining up health and work support and finding new ways to link up employers with those wanting a job. To do it right, this could cost up to an extra £1 billion per year to deliver but would ultimately save taxpayers money, grow our economy and help people and employers. Not acting would be a false economy.”


Roisin Sheehy, Senior External Affairs Officer, Learning and Work Institute press@learningandwork.org.uk


  1. Learning and Work Institute is an independent policy, research and development organisation dedicated to lifelong learning, full employment and inclusion. We research what works, influence policy, develop new ways of thinking, and help implement new approaches.
  2. The research shows getting an extra 1.7 million people in work is achievable by extending support to find work to groups often excluded from the labour market. For example, the employment rate for disabled people is 29 percentage points below that for non-disabled people, yet 900,000 disabled people are either unemployed or say they want to work. Similarly, levelling up employment rates in the areas with the lowest rates now would increase employment by 500,000.
  3. Our previous research shows that employment in many comparator countries is now higher than it was pre-pandemic and that they had not seen the same rise in economic inactivity among the over 50s seen in the UK: The participation gap: The UK’s labour market through the pandemic in international context – Learning and Work Institute

Labour Market Overview: August 2021

As Covid-19 restrictions have been lifted the labour market picture continues to show a top-line increase in the employment level but with a paradoxical (and sharp) increase in the number vacancies across the labour market as a whole. In fact, as the Institute for Employment Studies reports, vacancies have hit one million for the first time on record. A key part of the reason for this odd dual rise in employment and vacancies, apart from the high rate of growth as the economy reopens, stems from both a higher number of people deciding to go into full-time education and those abstaining from returning to paid employment because for health and other reasons. This economic inactivity may ease as government pandemic-related policy support is withdrawn and more people return to work, although this won’t account for a large number of those who still need further assistance to return to work.  

The problem of labour supply, which has become a feature of our post-pandemic economic reality in most countries, is likely to continue relative to demand for several months. As the IES and others are arguing, government support will have to continue and do so in a way in which labour market policy has largely not been employed in recent decades, namely to encourage greater labour market (re)entry when top-line economic growth and  employment numbers are going up and looking healthy. The need for extended government support, and probably into 2022, is given further reinforcement by recent update by the LSE’s Programme of Innovation and Diffusion (POID). The POID ‘Risk of Business Failure’ tracker, as also reported in the Observer on 15 August, says that only 1-in-16 firms (6.3%) say they are ‘at risk’ of closure; a marked improvement from January when this was 1-in-7 (15%).

This sharp rise in business confidence explains much of the above rise in vacancies as businesses have greater confidence (and need) to hire new staff. The manner in which government support ends for businesses and individuals, the POID update states, will need to be done with care and should avoid the sort of cliff-edge drop-off in support in favour of part phased closure of Covid19-related policies and part extension and retention of other policies.

As the IES argue in their update, “there is a clear economic as well as social case for doing far more to support those who are economically inactive to return to the labour market and then to take up work”  and “employers will need to do more too, particularly by designing jobs and recruiting to them in ways that will enable students, older people, those with health conditions and parents to take them up.”

Andrew Morton joined the ERSA Team in August 2021 as Local Labour Market and Policy Officer, ERSA

The next Communications and Political Insights Network (CPIN) is on 2 November. ERSA members can register in advance for a joining link.

Further reading

ONS Labour market overview, UK: August 2021

IES: Labour Market Statistics, August 2021

ERSA Member Briefing: Labour Market, Policy and Research – 30 July 2021

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