Unemployment in the UK could be three times higher than shown by official government figures, according to a report exposing a stark north-south divide in the number of people out of work because of long-term sickness.
Suggesting an army of people are in “hidden unemployment”, the Centre for Cities thinktank said more than 3 million working-age adults could be added to the official jobless figures compiled by government statisticians.
The study found that more than 3 million people are missing from the headline unemployment rate because they report themselves as economically inactive to government labour force surveys.
It follows a dramatic rise in economic inactivity rates since the start of the Covid pandemic, fuelled by older workers quitting the jobs market and a sharp increase in long-term ill health among working-age adults.
Rather than an official unemployment rate of 3.7%, the lowest level since the mid-1970s, the report said the figure could be as high as 12.1% when including three million economically inactive people who could work if they had enough support.
This is because the official rate only measures those who are actively looking for employment and does not include people who are neither in work nor looking for a job because of circumstances outside of their control.
Almost 9 million people in the UK are classified as “economically inactive” in official labour market estimates, including students, adults with caring responsibilities, people in retirement, and those experiencing ill health.
The thinktank said about 3 million could be considered “involuntarily” inactive because they had stopped looking for work because they felt there was a lack of good job opportunities, or because they had health conditions.
Economists including Andy Haldane, a former chief economist at the Bank of England, have warned that the declining health of the UK population is preventing growing numbers of people from working, while suggesting that a lack of investment in healthcare and other public services could be partly responsible.
It comes as Mel Stride, the work and pensions secretary, considers options for boosting workforce participation amid concern at the heart of government over the rise in inactivity rates and chronic lack of staff hitting employers nationwide.
Highlighting a stark north-south divide, the Centre for Cities report found nine out of 10 places with the highest hidden unemployment rates were in the north of England, while one was in Wales. Meanwhile, eight of the 10 urban areas with the lowest rates are in the south.
In Blackburn and Middlesbrough, involuntary inactivity figures push the total unemployment rate up from just under 6% to more than 20%. This strongly contrasts to cities like Gloucester and Reading where the hidden unemployment rate is about 8%.
The report said that to tackle inactivity, efforts to boost the number of good jobs on offer in struggling towns and cities was required. It said this required the “levelling up agenda” to focus on improving the availability of jobs and skills in places outside of London and the south-east of England.
Andrew Carter, the chief executive of the Centre for Cities, said: “With the UK now likely to enter a recession, the government must address its insufficient action on levelling up so far and act swiftly to create more opportunities to get people back into the labour force.
“This will require setting out and implementing an agenda that delivers much-needed investments in skills and public services, while supporting job creation in struggling places.”
A government spokesperson said it was committed to spreading opportunity across the whole of the UK. “We recognise one of our biggest challenges is how to support people who are economically inactive which is why we are working on measures to increase workforce participation,” they said.
“There are a record number of vacancies across the UK and our network of jobcentres work daily to help match jobseekers with these roles, tailoring support to the needs of the local jobs market.”
