Tens of thousands return to work after Covid ‘great retirement’ as ministers draw up plans to bring more back

Tens of thousands of people are returning to the workforce amidst pressure on living costs in an apparent reversal of the pandemic-era “great retirement”.

Unemployment remains low even as wages continue to lag behind inflation, figures from the Office for National Statistics (ONS) revealed on Tuesday.

Businesses are pushing for increased migration in key sectors to relieve labour shortages – but the Government is set to reject this approach as it focuses instead on helping people who are off sick or retired early to return to the workforce.

The national unemployment rate stands at 3.7 per cent, only slightly above its record low, while wages are growing at an annual rate of 6.7 per cent in nominal terms – meaning they are shrinking 3.6 per cent when taking inflation into account.

Around 48,000 more people entered the workforce than left it in the last quarter of 2022, according to the ONS, in a sign that some of the large number of workers who stopped doing or looking for a job during the pandemic have now changed their minds.

Mel Stride, the Work and Pensions Secretary, told BBC’s World at One the UK has a “very high level of economic inactivity” but promised the Government would be announcing policies to counter this in the upcoming Budget.

“I have been doing a huge amount of work in the department and working closely with other departments and the Chancellor and I will have more to say about this around the Budget to show how we bring more of those people back into work to engage with the workforce,” he said.

Mr Stride, who was tasked with leading a review into economic inactivity by Chancellor, Jeremy Hunt, said there was still “a long way to go” – with half a million more people out of the labour force than before the Covid-19 pandemic – and promised a “major push” on the issue.

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The Secretary of State has been in talks with ministerial colleagues and officials for several months around proposals for how to encourage more people into work.

One policy being considered is a push to persuade older workers not to retire – in an attempt to counter rising economic inactivity among the over-50s. Under the plans, pension providers could have a statutory duty to contact those nearing retirement age to encourage them to consider a career change or more flexible working pattern rather than leaving employment altogether.

Another key factor driving economic inactivity is soaring numbers of people out of work due to long-term sickness. There is ongoing work between the Department for Work and Pensions and Department for Health and Social Care to consider how reducing NHS waiting times could see more working-age patients return to work sooner.

Former Bank of England economist Sir Charlie Bean said tackling the “bottleneck” in the workforce was crucial in any economic plan as a shortage of staff would push up wages and therefore inflation.

“A lot of firms are saying they can’t get the labour they need and it is those sorts of circumstances when firms are going to be paying over the odds to keep their workers,” he told i. “So this fall in labour force participation is an issue and it is right that the Government clearly is thinking about this.”

He said, in the upcoming Budget, it would be “reasonable” for the Government to consider what supply side reforms could be implemented to alleviate these pressures – even if they do cost money.

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Listing potential policies, he said: “Measures to get to keep older workers in the labour force, to get some who left to come back, people who are caring, people who’ve got young kids and at the moment find childcare unaffordable, people with disability who some of them might want to work if you can do something with the disability issues. There is a whole range of things that the Government might reasonably be looking at and these are sensible structural policies that that unlike the sort of magic thinking that Liz Truss was engaging in.”

Rishi Sunak will meet Bill Gates for a tour of university laboratories on Wednesday as he seeks to push Britain’s claim to be a world-leading scientific power.

The Prime Minister and the Microsoft founder are expected to meet start-up businesses specialising in “cleantech” – the use of technology to reduce carbon emissions.

The two men will also discuss ways to encourage business and research innovation in the UK and the life sciences industry, i understands.

In a Whitehall reshuffle last week, Mr Sunak created a new Department for Science, Innovation and Technology led by former culture secretary Michelle Donelan.

She has promised to turn the UK into “the world’s number one science and tech nation” in a bid to boost sluggish productivity and boost the economy and living standards.

Britain is currently in a stand-off with the EU over its membership of the European research partnership, Horizon, which has been suspended since Brexit. Ms Donelan says she is keen to explore alternative models for international scientific co-operation if the dispute is not solved soon.