Why do we need a gendered approach when tackling rising economic inactivity?

Unemployment did not reach the unprecedented highs that were predicted during Covid-19. However, an unanticipated labour market trend emerging from the pandemic has been rising economic inactivity. Since the beginning of the crisis, there have been sharp increases in the numbers of people who are economically inactive due to retirement and ill-health, particularly among older workers.

Women continue to account for the majority of economically inactive people. Data released in July 2022 shows that there were 1,544,000 more economically inactive women than men in the UK. This is largely a reflection of the fact women’s engagement with the labour market continues to be constrained by their caring responsibilities.

Looking after home or family remains the most prominent reason for women’s inactivity. Women’s unpaid work is worth an estimated £1.1 trillion to the UK economy, or around 56% of GDP. Despite women’s unpaid work being critical to the functioning of the economy, the system of national accounts does not identify it as “productive”. Instead, women doing unpaid work are counted as being economically inactive.

The inactivity challenge is a key focus of the Covid-19 Recovery Committee’s inquiry into the impact of the pandemic on the labour market. Our response to the Committee’s call for evidence highlights the importance of gender analysis in understanding and responding to this trend. Labour market data highlights that there are different rates of inactivity for women and men, alongside different reasons for leaving employment.

Increasing numbers of women are inactive due to ill-health and early retirement. Female-dominated sectors such as care and retail have higher rates of outflow into inactivity due to ill-health. This reflects the physically demanding nature of these roles and means that occupational segregation makes it more likely that women will leave the labour market because of their health. Higher rates of long-Covid among women is also likely to have contributed to this trend, particularly as employer responses to the condition have been inadequate.

Women are entering retirement due to a range of factors including changes to working practices in response to Covid-19; the fear of the virus and ill-health; and the lack of high-quality part-time and flexible work. There are important questions for what this means for older women’s financial security, particularly during the current cost of living crisis. As a result of the gender pay gap and women’s caring responsibilities, older women are already more likely than their male counterparts to be experiencing pensioner poverty.

Research by the ONS found that men are more likely than women to state that they left the labour market because they no longer needed the money from their job. While higher numbers of men use savings and investments to fund their retirement, women are more likely to receive financial support from a partner or family. This is concerning as financial dependence and poverty are both primary risk factors that diminish women’s resilience and can prevent women from leaving an abusive partner. We have urged the Committee to consider the potential implications of rising economic inactivity for women’s financial precarity during their inquiry.

A key question asked by the Committee relates to the policies that may encourage people to re-enter the labour market. Given the higher rates of inactivity among women, it is important that gender mainstreaming approaches are adopted when designing policy responses. If women are to be enabled to re-enter the labour market, there is need for action to improve access to high-quality flexible working; provide support with caring responsibilities, including greater access to affordable and flexible childcare; develop gender sensitive upskilling and reskilling initiatives; and provide better support for those experiencing long Covid.

It should also be noted that economic inactivity rates may decline in the coming months as people return to paid work in order to prevent their household falling into poverty during the cost of living crisis. This trend is already visible, with recent data releases pointing to “unretirement” among older workers. This is likely to be particularly acute for those who are already at greater risk of poverty, including older women, single mothers, Black and racialised women, and families with a disabled member.

While the cost of living crisis may lead to a reduction in economic inactivity, this would not be a trend to celebrate. Recent research commissioned by the Fair Work Convention noted that older women cited a number of reasons for their wish to retire or reduce their hours, including pursuing leisure and personal interests while they were still in good health; improving their own health; and to spend time with family, particularly their spouses. The necessity of returning to work during the cost of living crisis may therefore deprive women of choice over their lives and when they leave the labour market, with implications for older women’s health and wellbeing.

The experiences and implications of economic inactivity are not universal, with particular impacts for women due to occupational segregation, women’s caring responsibilities and women’s pre-existing financial insecurity. This, once again, underscores the need for a gendered approach to labour market policymaking in Covid recovery. The Covid-19 Recovery Committee’s inquiry is an important opportunity to prioritise policymaking that promotes women’s economic and labour market equality.

You can read Close the Gap’s full response to the Covid-19 Recovery Committee’s inquiry into the impact of the pandemic on the labour market here.