Where have all the young men gone?

The Bevan Foundation’s Steffan Evans explores a surprising development in the latest ONS labour market data  

For months discussions on the labour market have focused on a perceived shortage of workers driven in part by a rise in over 50s leaving the labour market before hitting retirement age. A number of reasons have been given for the emergence of this “trend”. Lockdown and home working allowed some workers to build up their savings or pay down their mortgages, providing some with the financial flexibility to retire early. For others the lingering effects of long Covid combined with delays to medical treatments and procedures is said to have pushed them out of the labour market.

On October 11^th the ONS published their latest labour market statistics. Whilst the data provides further evidence of over 50s leaving the market at a UK level, a very different picture emerges when looking at the data for Wales. The data suggests that it is young men that are the primary group leaving the Welsh labour force. If the data is representative of the picture on the ground, it raises some extremely concerning questions for the Welsh economy.

The Welsh labour market in August

In the three months to August 2022 there were a total of 49,000 people unemployed in Wales aged 16 to 64, giving an unemployment rate of 3.4%. This is down from 63,000 people in the three months to August 2021, when the unemployment rate stood at 4.1%. Over the same period the total number of people that were in work in Wales also fell, from 1,410,000 in the three months to August 2021 to 1,379,000 in the three months to August 2022. This has seen the number of working age adults that are economically inactive in Wales (people that are neither in nor looking for work) increase by 52,000 in 12 months.

Who is becoming economically inactive?

Our expectation when exploring the latest Welsh labour market data was that the growth in economic inactivity would be predominantly driven by 50- to 64-year-olds. This is categorically not the case.

In the past twelve months the number of economically inactive 50- to 64-year-olds has increased by 4,000. The smallest increase in the number of people that are economically inactive for any age group bar 16- to 17-year-olds. Overall, the economic inactivity rate for 50- to 64-year-olds increased from 29.2% to 30%.

Contrary to expectations, the group that has seen the sharpest increase in both the number of people that are economically inactive in Wales and in the economic inactivity rate has been 25- to 34-year-olds. There are currently 25,000 more economically inactive 25- to 34-year-olds than there were 12 months ago, with the economic inactivity rate for the group now standing at 17.1%, up from 10.8%.

The increase in economic inactivity is not affecting all to 25- to 34-year-olds equally. Economic inactivity rates have historically been much higher among women than men. In three months to August 2021 the economic inactivity rate for women aged 25 to 34 stood at 15.5% compared with just 6.4% for men. By August 2022 this gap had almost vanished. Economic inactivity rates among women had increased further to 18.4%, but economic inactivity rates among men had more than doubled, standing at 16%. Of the 25,000 extra 25- to 34-year-olds that are now economically inactive the vast majority, 20,000 are men.

Why does this matter?

Caution is needed when looking at the data. Data on Wales is often volatile which can exaggerate changes within Welsh society. Indeed, the ONS itself does note that much of the recent data on men aged 25 to 34 in Wales is based on small sample sizes which makes them especially vulnerable to this effect.

If the ONS’s data has picked up on a genuine development within the Welsh labour force, then the implications are potentially significant. A reduction in workers of any age would have profound implications for the Welsh economy. It would hit tax receipts and affect the ability of business all over Wales to expand and develop. These effects are magnified when the reduction of the workforce is being driven by younger workers, with the risk that some never return to the workforce.

It appears imperative that anyone with an interest in the strength of the Welsh economy and public policy keep a close eye on the ONS’s data over the coming months to see whether October’s data forms part of a longer term trend.