An extended-term illness disaster threatens the UK economic system

A queue of ambulances outside the Royal London Hospital Emergency Department on November 24, 2022 in London. In the UK, the number of “inactive” people aged 16-64 who are neither working nor looking for a job has risen by more than 630,000 since 2019.

Leon Neal/Getty Images

LONDON — Combined with sky-high inflation and energy costs, a Brexit-related slump in trade and an ongoing recession, the UK economy is being hit by a record number of workers reporting long-term illnesses.

The Office for National Statistics reported that between June and August 2022, around 2.5 million people cited a long-term illness as the main reason for unemployment, an increase of around half a million since 2019.

The number of “inactive” people aged 16-64 who are neither working nor looking for a job has risen by more than 630,000 since 2019, returning to the labor market even as inflation and energy costs put enormous pressure on household finances.

The UK has avoided mass job losses during the Covid-19 pandemic as the government’s furlough scheme subsidized businesses to retain workers. But since the lockdown measures were lifted, the country has experienced a labor market exodus of a magnitude unparalleled among advanced economies.

In its report last month, the ONS said a number of factors could be behind the latest surge, including record high National Health Service waiting lists, an aging population and the impact of Long Covid.

“Younger people have also seen some of the biggest relative gains and some industries, such as wholesale and retail, have been hit harder than others,” the ONS said.

Although the impact of the above problems has not been quantified, the report suggests that the increase is due to “other health problems or disabilities”, “mental illness and nervous disorders” and “problems related to”. [the] back or neck.”

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Jonathan Portes, Professor of Economics and Public Policy at King’s College London, told CNBC the extent of labor market exhaustion was likely a combination of long Covid; other pandemic health issues such as mental illness; and the current crisis in the NHS.

In addition, he found that factors directly damaging to public health – such as B. longer waiting times for treatment – could have a domino effect: people may have to leave the workforce to care for sick relatives.

“It’s worth remembering that Britain has been here before, arguably twice at least. In the early 1990s, Britain experienced a strong recovery after ‘Black Wednesday’ with falling unemployment, but it also saw a large and sustained increase in the number of people claiming disability benefits,” Portes said, adding that non-work in general bad for both health and employability.

“The government obviously isn’t doing much about it. Aside from resolving the crisis in the NHS the other major policy area is helping sick and disabled people get back to work and it’s not happening nearly enough – instead the Government is harassing people on Universal Credit with fines and penalties that we know about that they don’t help much.

In his most recent Fall statement, Treasury Secretary Jeremy Hunt announced the government will ask over 600,000 people receiving Universal Credit – a means-tested Social Security payment to low-income or unemployed households – to meet with a “work coach” to create plans Increase hours and income.

Hunt also announced a review of problems preventing re-entry into the labor market and committed £280m ($340.3m) to ‘tackle benefit fraud and error’ over the next two years.

Although the pandemic has significantly worsened the health crisis and left a hole in the UK economy, the rise in long-term sickness claims actually started in 2019, and economists see several possible reasons why the country is uniquely vulnerable.

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Portes suggested that government austerity – a decade of sweeping public spending cuts implemented after former Prime Minister David Cameron took office in 2010 and aimed at curbing public debt – played a major role in putting the UK exposed to permit.

“Britain was particularly vulnerable due to austerity measures – NHS waiting lists were rising sharply and performance/satisfaction was falling sharply well before the pandemic,” Portes said.

“And support for those on disability and disability pensions was eroded in the early 2010s. More broadly, austerity has resulted in sharper disparities in health outcomes by income/class.”

Inequality and rising waiting lists

That’s backed up by the national data: the ONS estimates that between 2018 and 2020, men living in the most deprived areas of England lived on average 9.7 years less than those in the least deprived areas, with the gap at women is 7.9 years.

The ONS found that both sexes experienced “a statistically significant increase in inequality in life expectancy at birth since 2015-2017”.

In the wake of the pandemic, NHS waiting lists grew at their fastest since records began in August 2007, a recent House of Commons report highlighted, with over 7 million patients on the waitlist for counselor-led hospital treatment in England in September.

However, the report noted that this is not a new phenomenon and the waiting list has been growing rapidly since 2012.

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“Before the pandemic, as of December 2019, the waiting list was over 4.5 million – nearly two million more than in December 2012, a 74% increase,” it said.

“In other words, while the increase in waiting lists was accelerated by the pandemic, it also happened several years before the pandemic.”

Former Bank of England policymaker Michael Saunders, now senior policy adviser at Oxford Economics, told CNBC that the UK has been particularly hard hit by Covid in terms of severity and that some of that may be due to the country’s higher interest rates was due to pre-existing health conditions – such as obesity – which may have been made worse by Covid.

“Britain is a relatively unequal country so this could be one reason that even if we had the same Covid wave as other countries we may have a bigger public health impact because if you want you have one larger a number of people who would be hit the hardest,” he added.

Saunders suggested that any government growth strategy should include measures to address these healthcare challenges, which are now inextricably linked to labor force participation and the broader economy.

“It’s not just a health issue, it’s an economic issue. It’s important on both counts. I think it’s important enough as a health issue, but it deserves special attention because of the implications for productive potential, which then spill over into these other economic issues.”

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