The Labour government is proposing to increase Britain’s employment rate to 80% – the highest in the G7. This is a monumental feat, and it will have to attract not only the unemployed, but also 'the lost workforce' - and reintegrating them into the economy is far from simple.
Although it was buried beneath election coverage, this summer’s Recruitment Outlook carried a sobering warning for the new government. The report, produced by the British Chambers of Commerce, showed 74% of firms attempting to recruit over the past three months had faced difficulties, an increase from earlier in the year, signaling that businesses were struggling to reach employees. This problem – how to get more people into work – is now facing a government that promised to kickstart economic growth.
Part of Labour’s solution, proposed during the election, is to increase Britain’s employment rate to 80% – the highest in the G7. This is no small feat, and would require approximately two million workers to enter the workforce over the next five years. Some of this influx would come from the unemployed, those who do not have a job and are actively seeking work. But this category excludes many of Britain’s jobless that have not recently applied for work.
This group is categorised as “economically inactive,” a title which doesn’t adequately represent the thousands among them who would like to work but are unable to do so. Some face health problems or care responsibilities that currently prevent them from joining the workforce. Others have simply given up on finding work after lodging too many unsuccessful applications, discouraged by the lack of opportunities available to them.
Combined, the unemployed and economically inactive who wish to work make up what we call the ‘lost workforce’. Prospective workers in this group will be pivotal to increasing growth, even if they don’t know it yet.
We’ve produced a report on who these potential workers are and how to reach them. The rewards are monumental. We found that if Labour manages to increase Britain’s workforce as planned, getting two million more people into work, the associated increase in production and spending would boost economic output by £151 billion per year.
But there are reasons the lost workforce remains elusive, and reintegrating them into the economy is far from simple.
Some of these obstacles are obvious. For instance, 75% of the lost workforce lack a degree, and 55% come from low-income households, highlighting the greater difficulty disadvantaged individuals face in gaining employment. Other findings are more striking: we found that the lost workforce is older, with 25% aged 45-54. This can be attributed to several factors, such as higher rates of work-limiting conditions or ageism in the workplace.
Just 35% feel well-equipped to enter the workforce. Unsurprisingly, the most common barriers to employment are a lack of relevant experience and skills. Logistical issues, such as job location and health support, also hinder many, while personal barriers like caring responsibilities and a lack of confidence impede career progression – particularly for women. Women in the lost workforce struggle more with interviews (40% versus 30% of men) and only 18% feel confident in job applications, compared to 24% of men. Poor mental health is also holding back the lost workforce.
This shows that addressing issues like poor health, disability, and gender expectations can influence economic inactivity and improve access to the jobs market. Economic inactivity covers diverse reasons for being out of work, so we must move beyond more narrow definitions of ‘unemployment’ to get more people into jobs. Understanding the lost workforce and the difficulties they face is a crucial first step toward this goal.
The next step is to identify what this group wants in terms of support. We found that help with interviews, CV support, and skills training were most sought-after. Long-term career development and employability support were also seen as key opportunities.
The final step is to implement policies that help the lost workforce find employment. While government policy plays a crucial role, employers and the education system must also address the needs of these individuals. We suggest expanding access to work placements and work experience for young people, improving careers guidance for those in and out of education, and supporting older individuals to enter or return to the workforce.
More ambitiously, the government could introduce a national job and training guarantee programme to ensure that every job seeker has access to education, training, or a paid job. There is already a precedent for such a scheme, including the New Deal introduced by the Blair government in 1998, with evaluations suggesting these programmes effectively increased employment.
There are millions in the UK are eager to work but lack the opportunities to do so. Whatever the approach, to achieve its mission of increasing employment, the government must focus on recovering the lost workforce and provide them with the necessary support. The livelihoods of millions of people, and the growth of the economy, depend on it.
