Phoenix Insights, the longevity think tank set up by Phoenix Group, has published its latest report exploring economic inactivity among the over 50s since the beginning of the pandemic. Latest official figures show around 27%, or 3,547,000 people, aged 50-64 are currently economically inactive, and further analysis suggests this includes around 900,000 who have left work since the pandemic*.
High financial vulnerability for long term sick
The report highlights a significant gap in wealth between those who have chosen to retire compared to those who are economically inactive for other reasons such as ill health or caring responsibilities.
Analysis shows the average (median) wealth (as estimated according to the total of pension, property, financial, physical assets) for 50-64 year olds who choose to retire is around £1.24 million. This compares to people who are out of work due to ill health or disability, where average wealth is just £57,000, less than 5% the wealth of those who have chosen to retire. Average wealth of those who are out of work to look after family is £137,000**.
Wealth differences suggest older workers who are economically inactive due to illness or caring responsibilities are financially vulnerable and at current savings levels are unlikely to be to be able to afford a ‘moderate’ standard of living in retirement – many may even struggle to achieve the ‘minimum’ standard***.
With around 1.4 million people aged 50-64 economically inactive because of long-term sickness, this illustrates the urgent need to do more to support people who are able back into the workplace, and improve flexible working and absence policies, such as sick leave, so they can continue to build up their assets and save for retirement.
Regional drivers of economic inactivity
The research found there are wide regional differences when it comes to the reasons behind over 50s leaving the workplace, with a clear divide between the Midlands and the North and London and the South East.
For example, 50-64 year olds in Yorkshire and the Humber are twice as likely to have left the workforce early due to sickness or disability compared to those in London and the South East (24% vs 12%).
People in London are the most likely to have left the workforce early to look after family (17%).
Regional variations are important to consider when addressing economic inactivity. They highlight the need for Government to give Combined Authorities and others working at a regional level greater responsibility for tackling the drivers of economic inactivity in their area, rather than adopting a ‘one size fits all’ approach.
Catherine Foot, Director of Phoenix Insights, said:
“Our latest research shows the Government should urgently develop initiatives to meet the challenges of economic inactivity among the over 50s, or risk a worsening financial vulnerability among our ageing population. This should be approached at a local level as there are huge differences in the drivers of inactivity across the UK.
“It’s important not to dismiss economic inactivity in this group as a case of rich baby boomers choosing to enjoy time on the golf course. Stereotypes like this mask real financial and health vulnerability among a group whose successful return to employment will be critical to the UK’s productivity and prospects for economic growth.
“The demographic fact of our ageing population has been hiding in plain sight for decades, warning us that it is critical that we become much more effective at supporting people to stay in good quality work throughout their 50s and 60s. I hope that this focus on reversing economic inactivity will finally help focus minds and action on this very important issue in our labour market.”
The research shows a package of policy measures will be needed to address economic inactivity among the over 50s and Phoenix Insights’ recommendations are below. Over half (55%) of over 50s believe older workers are being left behind in employment and just 1 in 7 (14%) say that support for older workers is sufficient to encourage them to remain in or return to work****.
6 key ways government should look to tackle economic inactivity amongst the over 50s
Take a regional approach – by enabling Combined Authorities and others working at a local level to tackle the specific drivers of economic inactivity in their region.Work with employers – by taking a sectoral approach that recognises the specific reasons people are leaving different industriesCreate more flexibility – by responding to the strong preferences over 50s show for being able to work more flexiblyImprove people’s quality of work – by focusing on the importance of job satisfaction for keeping people in work or encouraging them to return, especially for those who feel financially comfortable enough to retireImprove the provision of financial and careers advice – by finding new ways to ensure this group have access to guidance about their personal financial security and their options for staying in or returning to work.Take a long term approach – by improving the experience of work for people below the 50-64 age group, recognising that the reasons people leave the workforce early are a product of issues, such as low job satisfaction or poor health, that develop over time.