Over-50s giving up work is a catastrophe for our economy – but it can be fixed
I HAVE a confession to make.
I am writing this article under severe physical strain as a result of Parkinson’s disease, a condition I have had for more than three years.
As my legs and arms shake, the task of writing each sentence is temporarily a struggle.
But the tremors will pass and eventually I will be back up to my normal typing pace.
Despite this setback to my health and having passed the age of 60, I am keen to carry on my writing career for as long as possible.
It is my good fortune to have an occupation I love and that gives a purpose to my life.
But a huge number of people from my generation do not feel that way.
From either choice or force of circumstances — particularly sickness or disability — many of them are deliberately withdrawing from the labour market long before they reach state pension age.
As the Government admitted yesterday, this is a disaster for our nation on so many levels.
We cannot go on like this
“The biggest challenge we’re facing is how to get people back into the workforce,” said a senior Whitehall source.
The flood of early retirements by the over-50s means a catastrophic loss of talent, experience and tax revenues for our beleaguered economy, as well an increase in the costs of the welfare system.
Moreover, the individuals who become economically inactive can often experience isolation, apathy, depression and reduced incomes.
A recent report by the Resolution Foundation, a respected independent think-tank, revealed that even when the over-50s try to return to employment, they not only find the process tougher than younger people, but they also earn — on average — 17 per cent less than in their previous job.
Worryingly, the problem is getting worse, thanks partly to the continuing fallout from the Covid pandemic and partly to the meltdown in the NHS, which means that the long-term sick are not receiving the treatment they need to return to work.
The statistics are stark.
Since 2019, no fewer than 630,000 people have left the UK workforce, bringing the total number of economically inactive people to nine million — a colossal figure at a time when employers are complaining loudly about staff shortages and there are more than 1.3million current vacancies.
The impact on the nation’s health and public finances is just as disturbing.
There are now 2.5million people of working age on long-term sickness benefits and in the past three years alone, this figure has gone up by 500,000, with mental health problems accounting for 40 per cent of the rise.
We cannot go on like this. Millions of our fellow citizens should not be thrown on the scrapheap.
In a civilized society, participation in the labour market should be both a right and a duty.
That’s why change is vital.
Sentimentality about welfare should be replaced by a grown-up conversation around how to meet the real, long-term interests of the nation and the needs of individual households.
But one of the key difficulties facing ministers is that the exodus of the over-50s is largely made up of two very different groups, who face in almost opposite directions.
The first is made up of the affluent, who have left the labour market early because they could afford to do so, having built up their pensions and assets.
During the first Covid lockdown, people expanded their savings by £125billion.
Research by the Office for National Statistics shows that two-thirds of early retirees own their homes outright, 61 per cent are debt-free and more than half are “very confident” about their pension arrangements.
The same phenomenon of a wealthy, economically inactive elite can be seen on an even bigger scale in the US, where their buzzword is FIRE: Financially Independent and Retired Early.
To be realistic, the only way to entice some of these prosperous Brits back to work is through further cash rewards, such as the extension of tax-free allowances or even a suspension in income tax for the first six months after taking a new job — though that could lead to resentment from other workers who do not receive such favourable treatment.
In graphic contrast are those who are inactive because of their reliance on the welfare system, which has become a vast cost to the state.
This year, according to the Office for Budget Responsibility, expenditure on disability benefits will reach £32.5billion, rising to £50.4billion in 2027/28.
In fact, social security has become a leviathan that next year will swallow an incredible £253billion of taxpayers’ money.
Defenders of this largesse might treat it as a symbol of compassion but in truth it provides perverse incentives to family breakdown, idleness and joblessness.
This has to stop.
We need a welfare system that encourages work, not disincentivises it.
That is why the Government’s promises of action should be welcomed.
Welfare reform never easy
Reports yesterday suggested that several potential measures are being examined.
One is to allow disability claimants to keep some of their benefits if they take a job.
Another is the provision of support, healthcare and skills training that focuses on what they can do rather than how incapacitated they are.
Welfare reform is never easy because it challenges the culture of dependency, but for the sake of our economy’s dynamism, it must be embraced.
In a remarkably perceptive speech at Glasgow in 1908, the Liberal statesman and former Prime Minister Lord Rosebery warned of the consequences of indiscriminate welfare.
“The state invites us every day to lean upon it. The soundest man, if encouraged, may soon accustom himself to the methods of the invalid.”
More than a century later, that is precisely what has happened in parts of our country.
A new course is vital.