'Sick-note Britain' and the four-day week

‍More workers are leaving the workforce since the pandemic. The Chancellor is reportedly focussing the March 15th Budget on reducing the amount of people on sickness related benefits and boosting employment, amid growing concern about record numbers of people on long-term sickness and the effect of declining labour force participation on economic growth.

• Why are workers leaving the workforce? Labour market participation has fallen markedly since the pandemic and has not returned to its pre-pandemic level. One important reason for this is the rise of individuals with long-term ill health, with a rise in economic inactivity particularly concentrated in older age groups, women with children and those affected by rising ill-health and disability. The Resolution Foundation’s new research on the drivers of economic inactivity finds that 460,000 more working-age people have become economically inactive due to long-term sickness since the start of the pandemic (now 2.5 million in late 2022).

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‘Sick-note Britain’: the sticking plaster response? The government’s mooted response is a classic mix of carrots and sticks, most of which are targeted firmly at the symptoms rather than the causes of this issue. The Telegraph reports that the government is considering “a new approach to how GPs decide whether people are too sick to work” and telling doctors to “sign fewer people off work with sick notes and instead help them to remain in employment under plans being considered for next month’s Budget.” Other ideas under consideration to encourage older people back to work are: putting work coaches in GP surgeries so doctors can refer older patients who express interest in getting a job to them for advice, giving early retirees financial advice “with many set to be told that they do not have enough cash to see them through life” and encouraging pension companies to offer more ‘mid-life MoTs’. But is this the best way to stop people leaving the workforce? (The Resolution Foundation's Torsten Bell explains why the government's ideas won't work.)

• NHS crisis. One solution which seems to be firmly in the ‘too difficult box’ is actually fixing the crisis in the NHS, and particularly with waiting lists for elective surgery, which lie behind some of these numbers. For economic arguments about how increasing investment in the NHS can reduce long term sickness and increase participation and productivity in the economy, read our previous Digest on reducing the NHS backlog. 
• Elephant in the room. Another issue which is off the table for now is any serious attempt to reform the UK’s migration system in order to encourage more economic migration. Again, this is an issue we have covered previously in our Digest on the economics of migration post-Brexit.
• All about tax. The Resolution Foundation has proposed a solution firmly in the ‘stick’ category this week, urging the government to scrap lucrative tax breaks which they argue are causing workers to seek early retirement. They make the point that these tax breaks are highly regressive, and make it much less attractive for wealthy older workers to stay in work.

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What about work itself? Often missing from this debate on workforce participation is any consideration whether work itself might be part of the problem. With workers often being asked to work longer hours, for less real terms pay, and fewer employment protections than previously, it is surely worth considering whether the focus should be trying to improve the experience of work, rather than attempting to nudge reluctant workers back into jobs that make them ill or unhappy. Perhaps the most transformative proposal in this space is the campaign for a four day working week, which has released some new data this week. Surveys have shown “consistently” growing public support for a four-day week since the beginning of the pandemic. So could reducing the length of the working week be an innovative solution to falling workforce participation?

• World’s largest 4 day week trial a “huge success”. Over a 6 month period, more than 3,300 workers from 70 UK companies from a wide range of sectors took part in the world’s largest four-day week trial. Participants worked 80% of the time for 100% of their pay, in exchange for a commitment to maintain at least 100% productivity. The results? Business revenue increased, whilst mental and physical health both experienced improvements. Job retention “dramatically improved” as employees were 57% less likely to quit and there was a 65% reduction in the number of sick days. 92% of businesses decided to continue with the 4 day week after the experiment. (See our previous Digest for more background on the 4 day working week proposal, our Resource bank page on reducing working time, and follow the European Network for the Fair Sharing of Working Time’s newsletter for developments in working time reduction across Europe.)
• Improving working conditions helps job retention. Firms have been increasingly using the four day week to attract and retain more staff whilst the labour market remains tight. Autonomy and PIRC’s research from 2021 found that 3 in 4 FTSE 100 companies cite labour shortages or staff retention issues as a principal risk to their business. Over 40% of workers surveyed reported that they considered leaving their job, with low pay, long working hours and poor mental health cited as reasons for dissatisfaction. When surveyed, workers reported that higher pay, better in-work benefits and shorter hours for the same pay would prevent resignation. The Women’s Budget Group found that shorter working time leads to a more equal distribution of unpaid housework and caring responsibilities (overwhelmingly undertaken by women) and can help women increase their earnings and reduce the gender pay gap. 
• The importance of flexible working. Joseph Rowntree Foundation’s Helen Barnard argues that the government’s chosen method to draw workers back into the labour market should “look beyond the familiar tools of work coach meetings and benefit conditions”, and instead, focus on facilitating more flexible working conditions across the economy. A recent ONS survey of over 50s has found that 59% of early retirees would not consider returning to work, but of those who would, flexible working arrangements would be required. (See another previous Digest for an explanation of why using benefit sanctions to fill labour shortages doesn’t work.) The Resolution Foundation’s Louise Murphy argues that, “Instead of persuading older workers to ‘unretire’, Government efforts to boost Britain’s workforce should focus on supporting more mothers into work and helping older workers and those with a disability stay in work.”