Economic inactivity in Scotland: supporting those with longer-term health conditions and disabilities to remain economically active

Executive Summary

Prior to the COVID-19 pandemic, rates of economic inactivity (ages 16-64) across the UK were at an historic low.^[1] Since then the rate of economic inactivity has been increasing. This trend puts the UK at odds with the majority of other OECD countries – one fifth of OECD economies still have a higher inactivity rate than pre-pandemic.^[2]

‘Economic inactivity’ is a complex category, made up of individuals who have retired, who are in full-time education, who have caring responsibilities, or who are experiencing long-term ill-health or disability. Much of the recent upturn in economic inactivity in the UK appears to be driven by long-term ill health and disability.

For Scotland, recent estimates from the ONS Labour Force Survey suggest that the economic inactivity rate (ages 16-64) was 23.1% for the period April to June 2024, 0.3 percentage points down from the previous quarter.^[3] In terms of Scotland’s health among those in work, there is rising prevalence of heart conditions and mental health conditions in particular. In part, this will be due to an ageing population, but may also suggest conditions requiring particular policy focus in future.

Compared with 1998, younger workers in the UK (in their twenties) are now more likely to be economically inactive due to ill-health than workers in their forties – older workers are now actually less likely to be economically inactive due to ill health than they were in 1998.^[4] Between 2012 and 2019, two-thirds of those young people were economically inactive due to a mental health condition.^[5]

The impact of Long Covid on economic inactivity rates is unclear – the complexity of categorising a condition as Long Covid and the fact it often comes under ‘Other’ in health and employment surveys mean clear data is limited.^[6] However, given the UK saw similarly high infection rates during the Covid-19 pandemic as other countries that are now not experiencing the same rates of economic inactivity, the evidence base overall assumes that Long Covid is not a key driver here.^[7]

This paper is a rapid evidence review focusing on upstream prevention of economic inactivity, where those who are disabled or experiencing ill health could be supported to remain at work and stay economically active. It was carried out between November 2023 and January 2024. It aims to support consideration of employer and policy options to provide support to those who may be at risk of becoming economically inactive due to a range of chronic conditions.

Overarching Points

Responding to the development of longer-term health conditions and disability requires early intervention from employers, ensuring the employee feels supported from early on. Ideally there should be a proactive response from employers to an employee’s change of circumstances.

However, this may rely on disclosure from staff about their health and wellbeing. Open conversations and positive relationships between staff and managers were highlighted in the literature as key to keeping employees in work and well.

Support should be tailored to individuals and joined up across organisations e.g. NHS, third sector, DWP, allied health professionals, etc. People want to feel their condition is understood and the support offered is relevant to their life circumstances.

Engagement with employers by government is important – building links and relationships with employers across a range of sectors can better support the development of policies and processes to support employees that are meaningful and genuine. This can include sharing best practice across sectors and organisations.

Workplace adjustments

Workplace adjustments were highlighted by the literature as essential to ensuring those with long-term ill health and disabilities remain in work. Adjustments should be thought of in the widest possible sense: this may include specialist equipment, but also flexible working options, breaks within the day, reduced hours, flexible and compassionate absence management, and sick or special leave that takes into account the person’s health (and the potentially fluctuating nature of this).

Workplace adjustments should not be seen as a one-off offering, but as an ongoing process, which is reviewed and updated. They should be provided in a timely and consistent manner.

Access to Work^[8] is a useful UK-wide scheme that applies to Scotland for supporting businesses and staff around these adjustments – it can help to cover costs and support employees in making the case for relevant adjustments.

The role of discrimination

Cultures of discrimination around disability continue to exist. Disabled people felt this hindered support being offered by employers – including workplace adjustments, despite them being a right – as well as preventing career progression.

Some reports that included lived experience revealed highly discriminatory comments being made to individual employees, which were often combined with age discrimination for older workers, and/or gendered or racialised discrimination.

In-work support

In-work support programmes were found to have a range of positive outcomes, particularly on health, though also on employment outcomes. They were found to provide value for money, though again the extent of this depended on the type of intervention. Consistency of delivery was important to success.

In-work support programmes that provided one single access point, provided strongly tailored support, had knowledgeable practitioners, and offered more than one therapy to individuals (e.g. physiotherapy and counselling) were the most positively received by clients.

There are financial constraints to in-work support offered to employees, with Small and Medium-Sized Enterprises (SMEs) the least likely to provide support beyond basic health and safety advice. Centralised support programmes could target SMEs for this reason.

Quality, tailored, and knowledgeable Occupational Health services were recommended by much of the literature as a means to support employees. However, Occupational Health is a contracting sector and would need significant investment to alleviate the future risk to employees and employers of relying on increasingly thinly spread professionals.

Absence policies and return to work

Absence policies need to be more flexible and compassionate. Individuals with long-term ill health or disabilities may frequently trigger attendance monitoring thresholds and be subject to related processes, including disciplinary processes. These add unnecessary stress in what should be a predictable circumstance (i.e. that an individual may be off work for extended periods of time or frequent shorter periods in the case of a fluctuating condition).

Staff who did have to take time off because of their illness often faced poorly considered phased returns to work or were not offered phased returns at all. Respondents in empirical research felt that phased return would have helped them to get back into work in a more sustainable way.

Benefits and sick pay

Benefits and sick pay are frequently mentioned in the literature as levers by which to support staff with longer-term health conditions and disabilities to stay in work. The extent to which the Scottish Government may be able to act here will vary.

The evidence base around social security and sick pay argues that the payments provided are not enough and that they may help to keep people in poverty and outside of work. A report by the All-Party Parliamentary Group on Poverty found that the low level of benefits encourages ‘impossible decisions’ on what to pay for and what to forego.

Statutory Sick Pay (SSP) is lower in the UK than across the majority of the EU and has been found to be inadequate for many disabled people to live on and recover from ill-health while on sick leave.

Those who are economically inactive because of long-term ill-health and disability are more likely to have lower incomes and be less economically resilient than those economically inactive for other reasons.^[9] There is therefore a greater risk of falling into poverty for this group.

For those earning the least, SSP is not available: SSP is only paid to those earning on average at least £123 a week, meaning the most vulnerable are not supported should they require time off from work for health reasons.

There is also a lack of flexibility in the SSP system and time limits are in place. Currently SSP cannot be paid in combination with earnings, which means SSP cannot be used in conjunction with a phased return to work. SSP can also be paid only after four days of consecutive sick leave and only up to 28 weeks. This may not be helpful for those with fluctuating ill health, who may require sick pay over a much longer period or for many more shorter bouts over the year.

Mental health

Mental health conditions are rising as a reason for long-term ill health. This is particularly seen among younger workers. It should be a particular concern if younger people are out of the labour market for long periods of time: work scarring (the long-lasting effects that emerge from being unemployed) from being out of work at a young age is well documented in the literature and could therefore lead to longer-lasting trends for economic inactivity for particular cohorts.

In ‘Thriving at Work’^[10], Stevenson and Farmer recommended that every employer take forward a set of ‘mental health core standards’ to create an open workplace culture around mental health, and robust work policies and processes to support staff. Using, returning to and/or refreshing these may be helpful in a time of increasing mental health concerns. These are:

• Produce, implement and communicate a mental health at work plan;
• Develop mental health awareness among employees;
• Encourage open conversations about mental health and the support available when employees are struggling;
• Provide employees with good working conditions and ensure they have a healthy work-life balance and opportunities for development;
• Promote effective people management through line managers and supervisors;
• Routinely monitor employee mental health and wellbeing.

Overall the evidence suggests there is positive return on investment (RoI) for employers who invest in mental health support for staff and staff training. This evidence is robust, coming from a randomised control trial conducted by the Department for Work and Pensions on Individual Placement Support^[11], ongoing research into RoI in employee mental health support by Deloitte^[12], and evidence from another randomised control trial with the Australian Fire Service, published in the Lancet.^[13]

Skills, training, and socio-economic disadvantage

Those who are economically inactive due to ill-health have disproportionately high poverty rates and limited financial resilience.

Workers with low educational attainment and low skills are more likely to report having a chronic condition that limits their abilities; they are also more likely to report not being provided with workplace adjustments.

Those who have workplace adjustments (across demographics) are more likely to report better job quality than those without. They are also more likely to report better career progress than their counterparts who are not provided with appropriate adjustments. These findings suggest there are inequalities in who is experiencing ill-health, but also who is being better supported by their employer.

Training and retraining are suggested as support solutions for those with longer-term ill health and disability. This focus on skills and training can begin from an early age, particularly given the concerns of long-term scarring for younger people out of work for long periods of time.

The ONS found that around a quarter of older adults (26%) who had left the workforce since the Covid-19 pandemic feel they do not have the right skills to get a new job.^[14] To counteract this, and harness the health protection factor of good work, recommendations are to give older workers a right to a mid-life career and skills review, access to retraining where necessary, and to ensure in-work support is tailored to their circumstances.

Once in the workplace, investment in ongoing skills training (and, where appropriate, retraining) can support the closing of the skills gap for those with longer-term ill-health and disability.

Key target groups for in-work support and skills (re)training should be those with lower skills from more socio-economically deprived backgrounds who are in ill health or have a disability – whatever their age. This should ensure better retention of these workers on the basis of their skillset.

Practical considerations: transport and childcare

An important consideration for workforce retention is the access transport allows to employment opportunities. As a recent Public Health Scotland report on transport and health sets out, transport must be accessible, affordable, available, reliable, and safe.^[15]

Those with lower incomes are most likely to require public transport, as are older people and those with a disability. Given the crossover between these groups and those who are economically inactive due to a health condition there is a strong argument for ensuring transport meets the standards set out in the Public Health Scotland report to support access to work.

Examining the evidence about job prospects, transport, and accessibility: being closer to a city helps with job prospects across economic inactivity categories. This highlights the inequalities that exist between those in urban and rural environments, which will be exacerbated for those with existing health conditions and disabilities.

The cost of childcare can also be a barrier to work, particularly for those on low incomes. These costs are high for many parents, but for those with lower incomes (particularly single parents) such costs may mean a decision has to be made whether to continue to work or not – and this may mean children with chronically unwell parents lose out on quality childcare that can support their longer-term outcomes, increasing inequalities.

Where parents are already struggling to work due to ill-health, high childcare costs may act as a push factor to leave the workforce, while good quality, accessible, and affordable childcare can support parents to remain in work.

Job security

Disabled workers are more likely than non-disabled workers to be in insecure work at all levels of employment. This ‘disabled gap’ in insecure work was worse for women, minority ethnic communities, and those with autism and mental health conditions.

There is evidence that the impact of job insecurity can be as negative to health as actual unemployment. This will therefore disproportionately impact those with disabilities and chronic conditions who are already at greater risk of leaving the labour market, of being in lower paid occupations, and having less resilience to financial shocks than those who are not disabled or chronically unwell.

‘Good’ work

‘Good’ work is something that can be developed through positive discussions with managers, and through modern, flexible working policies that recognise the worker as an individual, understand their condition, and take a compassionate, non-punitive approach to managing it.

Governments can play a role here through legislation, but also through engagement with employers around meaningful policy change and best practice examples.

‘Good’ work is highly important to supporting those with a health condition to remain in work. Flexible work was mentioned across the literature, including working at home, working part-time, being able to work shorter hours or around caring responsibilities, and being able to take breaks during work.

Reasonable adjustments being put in place supports workers to stay well and to feel positive about their employer and workplace.

Transport that is accessible and of good quality helps individuals to access work, as does affordable childcare.

In summary, creating a ‘good’ work culture includes:

• Focusing on supportive managerial conversations
• Ensuring consistent, fair, timely, and ongoing workplace adjustments
• Working to minimise discrimination
• Reviewing, changing, and/or influencing the social security and sick pay systems
• Encouraging employers to introduce flexible, compassionate, and supportive absence and return to work policies.