South West Regional Skills Enterprise and Employment Analysis 2007/2008

Final Report

6.4 Economic inactivity

Economic inactivity measures those people not in employment and not ILO (International Labour Organisation) unemployed i.e. out of the labour market. This group can be split into three:

• People who are seeking work but not available to start within the next fortnight;
• Those who want work but are not actively seeking it; and
• Those who do not want work.

It is the aim of government to reduce nationally the number of incapacity claimants by one million and to increase by one million the number of workers aged 50+ within ten years(101). Training is likely to be needed to enable many of these claimants and older workers to find and maintain employment.

When compared with other regions, the South West has relatively low levels of economic inactivity with 545,000 working age residents currently registered as inactive, which equates to 19.4% of the working age population. Despite the fact that this is considerably below the English average, the numbers are still significant.

A concern is that the trend for economic inactivity in the region has risen slightly over time. Since 2001, the working age population classified as economically inactive has grown nationally and regionally. Regional growth, however, is double that nationally, 1.4% compared to 0.7% by December 2005. The growth in economic inactivity may be due, in some part, to a combination of an ageing population and early retirement.

Figure 23: Incapacity Benefit and Severe Disability Allowance (IB/SDA) claimants in South West, 2006 (click image to open in new window)

Source: NOMIS/DWP

29% of all incapacity benefits claimants in the South West are males aged 50 years or older, compared with 17% that are females aged 50 or older. These are very similar to the national proportions. Age is the most significant factor in claiming Incapacity Benefit (IB)/SDA.

Women account for 41% of all incapacity benefit claimants in the region and, of these, 45% are aged 30-49 years, again, in line with national proportions. About 42% of these people were affected by mental and behavioural disorders, a slightly larger proportion than in England as a whole. All but 3,000 of these benefit recipients are of working age.

In particular, the local authority areas of Plymouth and Torbay have large proportions of those who are economically inactive yet who would like to have a job. One of the reasons for the inactivity could be the lack of skills. Indeed, Plymouth and Torbay have one of the highest working age populations who do not have a Level 2 qualification (about 34%).

Figure 24: Economic inactivity and those who want to engage in the labour market, South West 2005 (click image to open in new window)

Source: Annual Population Survey 2005, ONS

In its response to the CSR, the RDA welcomed the recent initiatives to address worklessness, notably the roll out of the Pathways to Work initiative, which was piloted in the South West. Although this has gone a long way to addressing some of the most obvious barriers, a number remain. Most are linked to jobseekers not taking full advantage of opportunities to test out their ability to return to work (and in doing so reinforce their confidence), due to perceived risks associated with having to re-claim their allowances if they are not suited to a particular job. This may be addressed through changing regulations as part of the proposed Employment and Support allowance.

The Pathways to Work programme is operating in one District (Somerset and Dorset). The programme will roll out to Devon and Cornwall by October 2007 and the West of England, Gloucester and Swindon and Wiltshire by April 2008. The programme will, however, address the flow of new entrants onto IB but will not address the problems of the significant stock of claimants in the region.

In addition, anecdotal evidence from regional partners suggests that further work is required to improve support on childcare and financial management for job seekers. The region, through the CSR submission has proposed the piloting of initiatives which provide such support.

The Government’s welfare-to-work programmes have made significant progress in reducing both unemployment and the number of lone parents on Income Support. However, this has not been matched for people with a health condition or disability who currently do not actively participate in the labour market, despite interventions such as the New Deal for Disabled People. Therefore in early July 2006, the Government announced its Welfare Reform Bill. The primary aim is to overhaul IB by placing the emphasis on helping people back to work. The bill aims to take one million of the 2.68 million claimants off IB by replacing it with a new two-tier 'Employment Allowance' to encourage people back to work. Higher rates will be paid to those who genuinely cannot work, lower rates to those refusing to be reassessed for a job.

The ESF Impact Report(102), commissioned by SLIM on behalf of GOSW and the RDA, indicates that gaps exist in provision in the region in two main areas:

• ‘Pre-employment’ training for people further away from the labour market;
• Geographical areas not covered by ‘Pathways to Work’.

Evidence also suggests that employers and those placed in jobs might benefit from post-employment support aimed at supporting improved sustainability of employment and reducing the ‘churn’ back onto benefits.

Conclusion

Economic inactivity and the numbers on IB are a significant issue for the South West. Whilst the roll out of Pathways to Work will be significant in supporting the flow of those onto IB, it will do little to help the stock. ESF funding may be necessary to underpin initiatives aimed at supporting this group back to work.

(101) A new deal for welfare: Empowering people to work, Department of Work and Pensions, January 2006
(102) EKOS, South West ESF Impact Analysis, Review of Objectives 2 and 3, SLIM, 2006