IoD Wales Economic inactivity
IoD Wales is embarking on a series of thought leadership papers on topics that are critical to our members and the Welsh economy. The purpose of these papers is to create a space for discussion and stimulate ideas on how we can harness the opportunities that exist in Wales, tackle some of the key challenges facing our economy and society, and present tangible policy solutions.
This paper on economic inactivity discusses some of the challenges facing Wales in this space, and some potential interventions that could bridge this gap.
About IoD Wales
IoD Wales has a membership of over 400 directors and senior leaders, drawn from private, public and third sector across all regions in Wales. The IoD has always spoken out, without fear or favour, on behalf of its members. We advance the case for business in government, parliament, the media and other influential forums.
Most of our members are from the SME sector, and we also have a growing community from the public sector, third sector and larger corporates. The IoD was granted a Royal Charter in 1906, instructing it to “represent the interests of members and of the business community to government and in the public arena, and to encourage and foster a climate favourable to entrepreneurial activity and wealth creation.”
The Charter also tasks the Institute with promoting “for the public benefit high levels of skill, knowledge, professional competence and integrity on the part of directors”, which the IoD seeks to achieve through its training courses and publications on corporate governance.
IoD Wales operates across the four regions, South Wales, South West Wales, mid Wales and North Wales.
Economic Inactivity
Economic inactivity includes individuals who are unemployed, not actively seeking work and those who are long-term sick, students, homemakers, and early retirees.
In Wales, long-term sickness is the leading cause of economic inactivity, a problem worsened by the COVID-19 pandemic, which increased health and mental health issues.
Wales’ economic inactivity rate currently stands at 25.6%, which is higher than the UK average of 21.6%, making Wales the second highest among UK nations after Northern Ireland (ONS). Coupled with economic inactivity, the latest quarterly figures also showed that Wales had the lowest employment rate of working age adults of any UK nation or region at just 69.9%, compared to a UK average of 75% (ONS).
Economic inactivity takes shape in a variety of socio-economic factors but long term illness and health are typically some of the key factors that contribute to economic inactivity. Five of the UK’s ten local authorities with the highest rates of inactivity due to illness are in Wales, including Blaenau Gwent and Merthyr Tydfil (SOW Get Wales Working).
One of the groups with the highest levels of economic inactivity is in the 16–19-year-old category. This is a particular concern as developing the next generation of leaders, talent and opportunities will be focused on some in this cohort.
Addressing the scale of economic inactivity caused by long-term illness in Wales will require additional, intensive effort and resources. Pilots such as the Wales Trailblazer Programme is the type of intervention that is required, given its focus on local needs and the requirements needed in specific areas across Wales.
Economic inactivity is increasingly intertwined with productivity in Wales. Flintshire and Wrexham show the highest productivity growth (25% since 2008), while areas like Powys and the Valleys lag behind. These disparities are being borne out in skills, infrastructure, business investment, and health outcomes. No local area in Wales has productivity levels as high as the UK average, illustrating the consistent pattern of low productivity in Wales. (TPI Regional Productivity). Making productivity gains in the public sector can also be a mechanism for better health outcomes and alleviating some of the issues that currently face those economically inactive.
Interventions and Solutions
IoD Wales and our members are passionate about making Wales a more prosperous and dynamic economy for future generations. The Wellbeing of Future Generations Act 2015 aims to improve ESG and cultural wellbeing of Wales for current and future generations.
We recognise that addressing economic inactivity is a multi-sectoral approach, and public, private and third sector all have a key role to play in this. Both UK Government and Welsh Government have a critical role to play here and demonstrate meaningful collaboration to address these challenges.
Economic inactivity is a growing threat in Wales for the current generation and future generations, therefore we hope to see a continuation of some of the positive work to date to address this (such as the economic inactivity trailblazer) and consideration of some of our policy interventions laid out below.
- Partner with employers to offer “earn while you learn” schemes that combine income with skill-building.
- A continuation of the Welsh Governments “Economic Trailblazer” and a rollout of this programme across Wales.
- Offer digital literacy training to improve employability and reduce exclusion.
- Introduce wage subsidies or tax breaks for employers hiring young people from economically inactive backgrounds.
- Provide transport bursaries for those entering the world of work from an economically challenging situation.
- Establish an independent Productivity/Economic Inactivity Forum to look at best practices from across the globe that Wales can learn from.
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