Britain’s employment gaps are falling, but its sickness gaps are widening, says Resolution Foundation

Britain’s rise in sickness-related inactivity, and resulting fall in employment, since the start of the pandemic has played out differently across the country – with traditionally low employment areas like Glasgow continuing to record strong jobs growth, but areas with existing high levels of ill-health and disability like West Wales seeing the biggest rises in long-term sickness, according to new Resolution Foundation research published today (Monday).

The Foundation’s latest Labour Market Outlook examines recent changes to employment and economic inactivity due to ill-health in different parts of the country.

Britain’s long-term backdrop has been regional labour market gaps emerging during the deindustrialisation of the 1980s, followed by a welcome fall in employment gaps between different parts of the country during the 2000s and 2010s.  More recent headlines have focused on rising economic inactivity due to ill-health and the fall in employment.

But, while overall employment levels still haven’t yet returned to pre-pandemic levels – the UK is the only G7 economy not to have reached this milestone – many traditionally low employment areas of the country such as Tees Valley and Durham (+1.6 percentage points) and West Central Scotland including Glasgow (+1.5 percentage points) have experienced positive employment growth between March 2020 and September 2023.

Conversely, high employment areas such as Cheshire (-2.2 percentage points) Surrey and Sussex (-1.9 percentage points) have seen the biggest falls. As a result, Britain’s pre-pandemic trend of falling regional employment gaps has continued in recent years.

However, the post-pandemic labour market change that has troubled policy makers the most has been the rise in economic inactivity due to ill-health, which has risen from 5.1 to 5.8 per cent – an increase of 300,000 people – between the 12-months to March 2020 and September 2023.

This issue is particularly concerning as people who are inactive due to ill-health tend to have extended periods of worklessness. For example, over twice the share of working-age people who are inactive due to sickness are workless for at least two years, compared to those who are unemployed.

Worryingly, the areas with the biggest rises in long-term sickness are those where levels of ill-health were already high. Places like West Wales and Merseyside have seen levels of inactivity due to ill-health rise twice as fast as the national average (1.5 to 1.6 vs 0.7 percentage points), with levels now at 9.1 and 8.7 per cent respectively. As a result, long-term sickness gaps across Britain are widening.

Looking at the types of places that have experienced sharp rises in long-term sickness, the research finds that these areas tend to have particularly high shares of people with a disability, and a low share of graduates. The share of older workers in a local area, which was originally considered to be a key driver of rising economic inactivity, is not associated with rising long-term sickness.

The worrying rise in long-term sickness has blunted Britain’s post-pandemic employment recovery. In particular, the report notes that areas like Lancashire and North West London have seen both big rises in long-term sickness and falls in employment – creating huge challenges for their local labour markets.

However, there are important nuances too. Areas like the Tees Valley and Durham have experienced both rising employment and rising inactivity due to ill-health. This shows that the challenges and opportunities of Britain’s post-pandemic labour market – rising ill-health and a tight labour market – can co-exist in the same local areas.

Charlie McCurdy, Economist at the Resolution Foundation, said:

 “The UK’s employment rate is slowly returning back to its pre-pandemic level, a journey that has been prolonged by a worrying rise in long-term sickness. But some parts of the country have fared far better than others.

“While Britain’s employment gaps have continued to fall, its sickness gaps have widened. This has been driven by traditionally low employment areas like Tees Valley and Glasgow recording strong jobs growth, while areas like Merseyside that already had high levels of ill-health and disability experiencing the sharpest increase in long-term sickness.

“It’s vital that national, regional and local policy makers understand these regional differences as they face up to the challenges and opportunities of local labour markets up and down the country.”