I long and welcome to the 23rd meeting of the Covid-19 recovery committee in 2022. This morning we will begin our inquiry into the impact of the pandemic on the Scottish Labour market. I would like to welcome to the meeting Dr Hannah Randolph, the Economic and Policy Analyst for the Fraser of Allander Institute, Professor Steve Fordigill, Centre for Regional Economic and Social Research, Sheffield-Hellam University and National director of industrial communities alliance, who joined us in person. Welcome. Tony Wilson, director of the Institute for Employment Studies. David Freeman, who is the head of labour market and households of the Office for National Statistics, and Louise Murphy, economist for the resolution foundation. Thank you very much for giving us your time this morning and for all your written submissions. We estimate this session should run up to about 10.30 this morning, and each member should have approximately 14 minutes to speak to the panel and ask their questions, but just catch my ear if you want to come in at any time. For those witnesses who are attending remotely this morning, if you would like to respond to an issue being discussed, please type R in the chat box, and we'll bring you in. I'm keen to ensure that everyone gets an opportunity to speak, and I must apologise in advance, therefore, if time runs on too much and may have to interrupt members or the witnesses in the interests of brevity. Can I invite the witnesses to briefly introduce yourselves? Shall we start with Professor Steve Fothergill? Yes, I'm Steve Fothergill from Sheffield Hallam University, and I've done a great deal of research over the years on issues around incapacity benefit and economic inactivity. Dr Hannah Randolph Hi, I'm Hannah Randolph. I am a research associate at the Fraser of Allander Institute for the University of Strathfide, and I do research on the labour market and poverty. Tony Wilson Hi there, I'm Tony Wilson. I'm the director at the Institute for Employment Studies, and we deliver research analysis and consulting on things to do with the labour market, employment, education and skills, and have had a particular interest in the impacts of the pandemic on the labour market. David Freeman Hi, I'm David Freeman. I head up the labour market and households team at the Office of National Statistics, and that team includes the people who produce the monthly labour market statistics for the UK, plus also the annual surveys around employment and earnings. Thank you, and Louise Murphy, please. My name is Louise Murphy. I'm an economist at the Resolution Foundation. We do research on the labour market and wider research around living standards for people on low-to-middle incomes in the UK. Thank you very much, and welcome everybody. I'll now turn to questions. If I may begin by asking the first question. As I said, thank you for all your written submissions, and there's a lot of evidence for us to look through in these papers. I think that one common theme throughout the submissions has been that the depth analysis of the impact of the pandemic on specifically the Scottish labour market has been difficult given the lack of Scottish-specific data available. Can I ask what you think the Scottish Government could do to improve the level of data available in the Scottish labour market specifically? Can I start with you, Professor Snapeful Bill? Yes, and good morning, colleagues. Actually, I think the data out there is a lot better than your indicating. There are really two big sets of data which you can bring to bear on this issue. One is the labour force survey, which I think most of the researchers in this field tend to gravitate towards, and I know Tony from Institute for Employment Studies has used it extensively and continues to use it. That's based on the sample survey of households. Because of any sample survey, the small geographical area that you want to look at, the iffy of the data. At the level of Scotland, it's pretty good, but for local areas within Scotland, it becomes more problematic. That's only one set of data that you can look at. In the context of long-term sickness, the other great set of data, which isn't mined so much, but which we use, is the benefit data sets that is held by the Department for Work and Pensions on a website called StatExplore. That's phenomenally good, actually, because it's based on administrative data, so you can actually count the number of people who are out of work on employment and support allowance or universal credit for whatever reason. You can count these numbers accurately, not only for Scotland but also for individual local authorities within Scotland, and you can drill down and look at issues of age, gender, et cetera. I think it's a much more mixed picture. There is actually pretty good data out there. Okay, thank you very much. Do you think there's anything that could be improved? Short of a much larger sample size for the Labour force survey, possibly not. No, I think you can actually get a good handle on these issues with what's out there, but it does require looking beyond just the Labour force survey, I've got to say. I mean, one or two of the other witnesses may have slightly subtly different views from mine, but the LFS is not the be-all and end-all of data on these issues. Okay, thank you. That's helpful. Can I bring in Tony, please? Thank you. David may want to say more about the Labour force survey and also the transformation that the ONS is leading on labour market statistics, which I think will be hugely beneficial for understanding what's going on from the survey data. I'll just pick up Steve's point on the administrative data, a couple of quick points. One thing you could really do would be to press the Department for Work and Pensions to better disaggregate what's happening with universal credit data and, in particular, how that compares with the legacy benefits universal credit has replaced and also what's happening with flows and durations, so I'll unpack that in just a second, but on the legacy benefit, the benefits universal credit has replaced, the claimant count has been and that the measures of people on benefit has been significantly effective because there's been a transition of people from other benefits into universal credit and it's hard to make comparisons over time, so I actually completely agree with what Steve said. I think we can make much more use particularly for doing comparisons between places using administrative data and Steve's done brilliant work on that. I think where it is a bit harder is understanding the pre and post, pre-pandemic and post, because it's so effective by this migration of universal credit. I don't think it's impossible, but I do think the Department could do better on that. The second issue would be around HMRC pay-as-you-earn administrative data on employee numbers. Again, this is effective because there's been this quite significant shift from self-employment to employee jobs, which makes it hard to disaggregate what's actually, what's the kind of underlying true picture, if you like, on employee employment. Again, no, it's really good. It's big data that we could use a lot more, I think we could make better and more, more useful. Again, it's really supportive of making those comparative comparisons between areas. I just have a kind of query, I suppose, about the extent to which you can how far it's a true measure given what's happened with self-employment. I just mentioned about flows and durations on universal credit as well. Here, the data is terrible. The Department only measures the time somebody has been on universal credit in total. During their time on universal credit, they may move in and out of work and in and out of different regimes, if you like. It'd be really good if the Department could unpack more how long people are spending out of work, how many are flowing out of work and back into work, and how people move around between economic and activity, so not looking for work, employment and unemployment. Thank you. Thank you, Tony. That's helpful. Can I bring David in, please? Yeah, good morning. Thank you. I'd just say thank you to two panel members for being up to some of the interesting issues around the data. Just to expand a bit on the LFS, I probably just to point out that the Scottish Government do actually fund a boost to the LFS. The sample size in Scotland is actually bigger than it would normally be if we just did the normal sample, so the data is probably slightly better quality than it would be for other areas of the UK. There is also what we call the annual population surveys. This is based on the LFS, which we do then add some more interviews to. The data isn't as time leaks. It's only for averages over a year, but it does allow a little bit more granularity at the Scottish level. Picking up Tony's point on the page you earn real-time data for HMRC, this is something we've been working with HMRC to expand what's available, so you can actually get data down to local authority level, and we've started doing cross tabulations by country and region of the UK, so you can get country by age and country by industry as well. You say what could be done to improve the quality, and Tony alluded to the transformation with doing of the labour force survey at the moment. We're doing two things. It's moving to an online first version, so instead of doing face-to-face interviews, we go to one people online to do an online survey. If they can't or don't want to do that, we then follow it with a telephone survey, and we're just about to introduce a knock-to-nudge face-to-face element as well. The advantage of going to doing an online survey means that we can have a much bigger initial sample, so the initial sample for the transformed LFS will be not quite double what the current LFS is, but pretty close, about 60 to 80 per cent bigger. That will give us much more detail to produce more granular data for places like Scotland, regions of England, Wales and so on. We're expecting to bring that in sometime towards the end of next year. Thank you very much, David. I'm going to move on to Murdo. Thank you. Good morning to the panel. I've got a couple of issues that I'd like to try and pursue if time will permit this morning. First of all, I'm quite interested in trying to understand, to what extent, the issues that we're seeing in the labour market, particularly with economic activity, are Scotland-specific or whether they're in line with what's happening elsewhere, either in other parts of the UK or internationally, or whether there's any Scotland-specific aspects that we need to be interested in. I appreciate everything that you've just said about the data, so there might be gaps in the data, but I'm interested to get some views on this. Maybe I could start with Dr Hannah Randolph from the Fraser of Allander Institute to see if Hannah, you have any thoughts on this issue. One thing I would say is that we can see differences in trends in inactivity between Scotland and the UK as a whole. We know that the UK had pretty steadily declining inactivity up until just prior to the pandemic, but Scotland, the decline ends earlier in 2015 or 2016, and inactivity started to rise after that. One thing that we can say from that is that there's likely something else going on in Scotland that's causing that inactivity other than the pandemic, and we know that during the pandemic itself, inactivity overall in Scotland didn't change quite as much as it did in the rest of the UK, and so there are some longer-term trends that play, certainly, and maybe some of the other panelliners can concede to some of those as well. So I think we're just having a bit of difficulty there, I think there's a bit of interference with your microphone. Yes, well maybe we can move on, I could maybe ask David Freeman from the ONS, the same question. Yes, as Hannah said, prior to the pandemic you see slightly different trends in activity, Scotland historically has had slightly higher in activity than the UK. I know the pandemic while UK inactivity rose, Scottish inactivity was relatively stable just above the UK level. What's perhaps quite interesting is comparing Scotland to the UK is what age group the inactivity is coming from. At the start of the pandemic, a lot of young people moved into inactivity, for people who perhaps were working alongside their studies who weren't able to do that during lockdown, and that happened both in Scotland and the UK as a whole. However, as we moved through towards the end of the pandemic, in Scotland, the number inactive young people 1624 actually fell, and it's now below where it was pre-pandemic. What's been similar in both Scotland and the UK is the increase in inactive 50-plus people, but there's driving the inactivity both in Scotland and the UK. Just to follow up, is it possible to draw any comparisons internationally, or do we not just have the data that allows us to do that? We don't have as much data around inactivity. The UK, in terms of employment, is about middling in terms of the G7 countries. In terms of inactivity, we're probably slightly higher than some other countries, but we can mic to the committee with some more detail later, doing those international comparisons. I've got another question, but before I move on, do any other members of the panel want to contribute to that? Could I make a very general point here, which I think is central to the argument really that I want to try and get across this morning? I can see that the focus of the committee is on what has happened during the pandemic and immediately afterwards, but it is crucially important to remember that the phenomenon of high levels of economic inactivity and particularly very large numbers of people out of the labour market because of long-term sickness, mostly on benefits as well, that's not a new phenomenon. What the pandemic has actually done is really only tweak that phenomenon a little bit higher. We have had in the UK as a whole something around about two and a half million adults of working age out of the labour market on incapacity-related benefits since the beginning of this century. Now, it wasn't always at that level. If you go back further in time, at the end of the 1970s, we only had about three quarters of a million out of the labour market on these benefits, but there was a major shift in the 80s and the 90s, and the numbers have really stayed very high since, fell away a little, not very much a few hundred thousand, and they've come back up a couple of hundred thousand or so during the pandemic. But to try to understand this phenomenon of why we've got people in Scotland or indeed in Britain out of the labour market on sickness and disability benefits, you've really got to take the long view and not just ask the question, well, what's happened during the pandemic to create this phenomenon? It's not a phenomenon of the pandemic, it's much, much longer established. That's a very interesting reply because it leads me very neatly on to the second question I was going to ask, which is picking up what was in your written paper about the impacts of long-term sickness and the particular long Covid and what impact that's had on the labour market, because you suggest in your paper that you're quite sceptical as to the idea that long Covid's a major factor in an increase in economic inactivity. The big numbers in economic inactivity were there before the pandemic started. Long Covid may contribute to the modest increases that we've seen during and after the pandemic. I think you would need to talk to one or two of the other witnesses on the specifics of long Covid. I don't pretend to be an expert on that, but actually I also log that there's been evidence from the Institute for Fiscal Studies on long Covid, which suggests that those people who are suffering from it are not so much moving into economic inactivity, but they're actually still in work but gone on the sick for the moment, and so they would not be boosting the inactivity numbers, nor indeed the benefit numbers, not the benefit numbers for those on UC because of limitations on ability to work, et cetera. Yes, I am sceptical. I think you have to look to much deeper-rooted processes going on within the labour market. Also, to take account of the fact that this phenomenon of large numbers of people out of the labour market on sickness and disability benefits is very geographically valuable. It's not spread evenly everywhere. It's not spread evenly within Scotland. It's certain places, and in those places, the numbers, the claimant rate can be three, four times the claimant rate that it is in the most prosperous parts of Britain. Okay, thank you very much. I'm going to go to David Freeman again, I think, because in your paper from the ONS you do say that the data suggests some of the increased inactivity could be due to long Covid. We suggest you might take a slightly different view from Professor Fothergill. I think it's a similar view that long Covid does appear to be contributing to that increase in long-term sick, but as Professor said, there already had been a large number of people who were inactive because of long-term sick prior to the pandemic. We're just seeing us a bit more of an increase during the pandemic period. If you look at, we did some investigations of the people who had long Covid and where they were in the labour market, and as a proportion of the people inactive, we've found about five per cent of people inactive had long Covid, but there are also a proportion of people who are unemployed, about three and a half per cent of those had long Covid, 3.3 per cent of people who were employed, 2.9 per cent of people who retired and 1.7 per cent of students. That does seem to back up that while long Covid might be contributing to that increase in activity, there are people in long Covid who are doing other things in the labour market, as Professor alluded to, still working, maybe on sick leave, or actually out there looking for work that will fit around their symptoms. Can I just bring in Brian Whittle, please? Thank you. Good morning, panel. I'm just on that thinking in terms of the impact of long Covid on the economics of the labour market. It's very difficult, when you agree, that it's very difficult for the statistics to highlight those with long Covid who don't come into the office, who work part-time from home or are still potentially partially active. There's suggestion that there are 80,000 plus people with long Covid, and that certainly has limitations. How do you look at the statistics and plug that into our thinking? I'll ask David Freeman, again, since it's you that brought this up. This will probably come up again. We're probably slightly limited by the sample size. The way we find out about the people's employment prospects after the labour force survey, as by going to interview them, asking a series of questions, one of which is whether they have a limiting illnesses and whether that limits the work that they do, and then you can link that to whether they're working part-time, the industries they're in, the occupations they're in. However, as we said in the answer to the first question, that will be limited by a number of people. As you said, there's a relatively small number of people compared to the total population, so we might not have enough to give us definitive answers around that. Thank you. Can I bring in Louise Murphy, please? Hi, again, just a few points following on from what's been said. I think I agree that we should see long Covid as part of the story, but definitely not all of it. One other reason to think of it that way is that, when we look at the types of health problems that people give—we've got that in the data—we're not just seeing a clustering of symptoms that relate to long Covid. We're also seeing increases in people noting cardiovascular problems and mental health problems, which again is a continuation of those longer-term trends. I think that the other thing to say about health is that there's also some indication that now NHS waiting lists and waits for treatment are also having an impact. There's been recent work by the ONS to survey people over 50 who have left the workforce. When asked, just under a fifth, so 18 per cent of those who are over 50 and have left the workforce have sort of stated that they are on an NHS waiting list waiting for treatment, which is higher than those who remain in work. Tony Wilson, I think you wanted to come in. Thank you. I very much agree with the comments made by Louise and David. I'll just add a couple of points. One is that there are different ways that this could be affecting the labour market. The first is that it may well be—I think Steve's point about people being in work and off sick—probably an important driver of this. It may well be somewhere that might be worth considering where the people are more likely in the UK to drop out of the labour force entirely when they have a condition and may find it harder to get back into work than other countries. Going back to the point about international comparisons, one thing that is striking is that the UK is one of the only developed economies in the entire world where employment is lower than it was before the pandemic, literally across the developed world, with the exception of the US and Latvia, Switzerland and Iceland. Every other country has seen employment not just recover but go higher than it was before the pandemic. If long Covid is uniquely holding back, significantly holding back the labour force growth in the UK, that is not affecting other countries to the same extent. Part of that might be because of the nature of employment protection and regulation and people dropping out of the labour force and finding it harder to get back. Part of that might be more likely to be because of the other factors and other health conditions. We have seen significant growth in people who have been out of work for a long time, reporting long-term ill health, which I suspect means that people who had health conditions have not been able to get back to work to the extent that they would have done previously. We have also seen significant growth in a number of people who have been out of work for relatively short periods and have health conditions too, which could be those people who have left work. That appears to be more likely to be amongst younger people and older people. There are quite a lot of things going on here. I think that our health conditions could be affecting people. We have been very focused throughout the pandemic on how health conditions may be leading to people leaving work. I think that now is a good time to think as well about how a health condition may make it harder for people to return to work because of the lack of support, how we protect employment and understandably as well. I think that people's nervousness and concerns if you have a chronic condition about coming back to work when there is a pandemic, and there are very little protective measures being taken in workplaces where people might be vulnerable to the virus. I begin with Dr Randloff. In the paper for the Fraser Island Institute, you say that, unsurprisingly, there have been sectorial differences in employment trends during the pandemic. Is there specific action that Government should be looking at? Is there specific sectors that need more support in terms of recovery? What is that impact? In terms of education and skills, is our economy, our education system, our skills system geared up to be able to cope with the changes that are taking place? During the pandemic, we know that certain sectors were more impacted and we have seen a lot of that employment come back in 2022. We have seen a shift that is part of a longer term shift away from field trades, services, elementary occupations, where the proportion of employment in those sectors has shrunk during the pandemic and still has not come back to the pre-pandemic level, but that is also part of a longer term trend and it is possible that that share will never fully return to what it was prior to the pandemic. Those sectors may be areas in which upscaling or jobs training is needed for workers to transition into different sectors and different types of work. As for whether or not the current state of education and skills in Scotland is geared up to make that transition, I am not sure if that is something that I could look into and get back to you in writing. Can I come to that same question with Professor Father Gill? I remember that I come from a mining community. My dad was a miner on strike 84-85. I was just saying to Jim that, after the miner strike, most of the miners that came out did not sign up for an employment benefit. They went on to some kind of disability benefits and the Government seemed quite happy to keep the unemployment figures down, so I get that trend. Is our education and training systems geared to shift to whatever the new economy looks like or are we failing in those areas? Why is it that people with the lowest skills cannot find employment? There are several things in what you have said there. Just on the issue of mining areas, I know the issues very well. The riddle of what was happening in the mining areas that drew myself and colleagues into looking at the whole phenomenon of people dropping out of the labour market and going on disability and sickness benefits, I think it was in validity benefit initially then in capacity benefit and so on. There was a riddle there that the pits had shut, yet unemployment was slightly lower than where the pits had been working now. What had happened here? It was a phenomenon of diverting people out of the labour market in difficult places where there were jobs to go to, diverting people out of the labour market on to sickness and disability benefits. Of course, the ex-miners and the ex-steal workers who were affected by this phenomenon in the 80s and the 90s, particularly have largely dropped out of the figures now. However, in the places where the balance in the labour market has not been fully restored, it has been the people with health problems and disabilities in the generation beyond the miners and the steel workers and the heavy engineering workers and so on that have found themselves marginalised where there is competition for jobs. Employers go for the fit and healthy apart from going also for the better trained, they certainly go for the fit and healthy. If you are getting on a bit in yours and have health problems, you are not going to find it easy to find work even if you look hard.  That has been the big phenomenon that has happened in Britain and it has happened much more so in some places than in others. It has happened in the mining communities of Fife. It has happened in the South Wales and in the Ayrshire Coalfields. It has happened in parts of Clydeside. Where the economy is prosperous, people can generally get back into work again. Maybe not exactly the sort of work that they like but where the economy is very strong, people who drop out of the labour market get back into the labour market again but not in the more difficult areas. This is at the root of understanding why we went from three quarters of a million on sickness and disability benefits of working age in the late 1970s to two and a half million. It is a mining area phenomenon writ large across the country. Look at the geography now in Scotland in terms of where the high numbers on sickness and disability benefits are. It is the Inverclyde, the Western Bartonshire, the North Ayrshire and the difficult local economies. Aberdeenshire is much lower, not quite as low as in parts of South East England but much lower. In terms of looking at sectorial data, are there specific sectors that have been much more impacted by Covid and are struggling to recover? Are there steps that Governments should do across sectors or not? I do not know if anybody wants to come in on that, David Freeman. I can give you a bit of an idea of which sectors are. I cannot really comment on government policy. I will leave that to the other panel members. The areas have been most affected, probably the ones that you might expect. Looking back to pre-Covid within Scotland, the areas have been the biggest hit is arts, entertainment, recreation. The number of jobs in that sector is down over a quarter, down by 29,000 compared to at the end of 2019 at the moment. Other areas have seen large falls, the accommodation and food services and hospitality and other service activities. Agriculture, forestry and fishing have all seen a number to be large falls in the jobs available. Being partially upset by increases in other industries, so human health and social work, as you might expect, has come up 33,000 and admin support services. Public administration and defence, so central government, has also increased. These are areas that are also struggling to attract people. If you are looking at number of vacancies, we have not got vacancies by sector for Scotland across the UK. Health and social work is the biggest demand area, but that has always been quite high, where we have seen increases in wholesale and retail and accommodation of food, so these are areas where they have lost a lot of jobs. The demand is there to replace them, but the supply is not coming through at the moment. On a Scottish basis, we have some experimental data where we look at online job adverts. While the UK is the whole of which the ONS is showing that the number of vacancies has just started to fall from a record peak, the online vacancies in Scotland seem to be at a steady level, if maybe even slightly trending upwards, so showing that perhaps the demand for Scotland is being maintained at quite a high level, as opposed to the UK. Tony Walson I was going to make a similar kind of related point. The issue at the moment really is that we do not have enough workers to fill the jobs that are being created. There have definitely been significant challenges in some industries. We intuitively know which many of those are on the data backs this up. It is actually the growth in employment, particularly often in relatively higher-skilled and professional jobs. That has been most stark for me anyway that stood out most in what has happened on the demand side over the last couple of years. That is where, again, internationally, I was on a panel for the House of Lords last week with Werner Eichhorst from the Institute in Germany. He was saying that in Germany, for example, the single biggest issue that they have got is filling all of those jobs and how they are supporting those transitions to higher-skilled work. For us, because we are so held back on labour supply, because we have fewer people due to lower migration and people leaving due to ill health, we are struggling to fill those jobs. There are risks. There are industries that have been significantly affected, but I do believe that if we can work better on how we support reallocation and help people to move jobs, we can also meet growing demands and support a stronger economy in the future. Tony, on that question, to what extent does pay terms and conditions become a factor? For example, in social care, that is in Scotland where we are really struggling, but within the private provision, the terms, paying conditions are so much poorer. To what extent are those factors? I think that this is a really important point. It comes out a bit more broadly than the specific impacts of the pandemic. When we are looking at what is happening on labour demands, we are seeing significant growth in nominal pay. Inflation is wrecking pay full stop, but nominal pay in the private sector is growing really strongly, partly because there is such competition for jobs, but in the public sector and in social care as well, which is public and private, pay growth is really weak, like 2 to 2.5 per cent year on year. Partly what is driving really high vacancy demands in the public sector is that people are simply leaving jobs and people are not taking up new jobs because the private sector is offering better terms. That is a really fundamental challenge that we will face in the next few years. Firstly, it is a cost of living impact on public sector workers, which are going to be at the moment phenomenally greater than they are on private sector workers because of the pay position. Secondly, vacancies are continuing to grow in many public sector industries because pay is being held down. I finally go to Louise Murphy and ask Louise in terms of Covid and the impacts of Covid. Are we seeing major increases in mental health? You talked about the weight and less and the impact to that. Is there data that we would be able to say that there is a clear increase in mental health or a clear increase in people being coming out? Is that data available? What would your view be on the impact? We have data on different health problems. As has been mentioned, we have both the survey data and the rich department for work and pensions data that gives information about people on disability benefits, including those with mental health problems. Primarily, due to the timing, it is hard to draw a clear link and say how the direct impact of the pandemic is. We can definitely see that, since 2010, there has been a gradual increase in the proportion of the population overall with mental health problems. Although, in the inquiry, we are thinking about those who have dropped out of the labour force and who are economically inactive, we are also seeing that among people who are in work as well. We have seen quite a dramatic increase in the proportion of people who are in employment with mental health problems, such as depression or anxiety. That has had quite a big impact on the disability employment rate. We can definitely see a trend in increasing mental health problems. Again, to broaden out, although a lot of the recent metrics have been around older workers, we are also seeing an increase in economic inactivity due to mental health problems among younger people. For example, since 2006, we have seen the number of young men aged 18 to 24 who are inactive due to mental health problems double and, again, that predates Covid. It is certainly a problem, but it is not all due to the pandemic. There is just a very quick supplementary to that. Hannah and Tony, you might be best placed to answer this. We have talked about employment churn, workforce churn, where people have stopped working for a period of time and then thought, actually, you know what, that lifestyle doesn't suit me any more. Agriculture, hospitality and the care sector. Hannah, you talked about people being encouraged to re-enter the labour market if they see a healthy, buoyant jobs market. You could walk into any pub, club or care home anywhere in the country right now and they will offer you a job because they are crying out for people. How do we square that up? There are people who are desperate for workers, but there are people who are in the inactivity grouping that we are talking about in this inquiry. How do we square that up? Hannah, I will go to you first. I will think language from some of the publications that the Scottish Government has put out in their employment policies, which is to say that we should focus on the right job at the right time for individuals. It is true that there are very high vacancies right now and a demand for workers is very high, but if those are not the right jobs, then it is difficult to get people into work. We know that there are priority groups in particular that face additional barriers to work, such as disabled people, single parents and so on. These people will likely always need some additional support to enter the labour market, so it is true that there are jobs out there, but it needs to be the right job at the right time. Tony, do you want to add anything to that? Is that to me? Yes, Tony, yes. Now, I very much agree with that. I think what I would add is that there are issues around how effectively we are reaching people who are out of work, certainly thinking about job centre plus. Where do you go if you are out of work and you want to find help to work if you are not claiming the right bit of benefit? We do not really have a public employment service in that sense, so there are many people who are so-called economically inactive but say that they want to work. In fact, there are more people economically inactive who say that they want to work than there are people unemployed, but they are generally not able to go into job centres to access employment support. I do not think that their particular priority or ability to access other local support, including in Scotland, are often not able to. So, to how we can reach people is a first point, so that we can help people to find the jobs that they may want to do and understand what sorts of jobs are available. I think related to that, a lot of people have simply drifted into long-term economic inactivity following furlough, as you said, and I think it is very hard to get people back. I think it was a mistake looking back now that we did not provide more structured and active support to people who are long-term on furlough. I think we are seeing really clearly in the data people moving through furlough and becoming longer and longer-term economically inactive, in particular with the growth of people saying that they are retired, which has primarily been a post-furlough phenomenon rather than a post-term, rather than an immediate post-pandemic one. The third aspect to it, I think, though, is also about what employers do. I think employers have been able to rely on increasing labour supply for a number of factors, like a growing population, more older people working, more women in work and higher migration. That has been the case for 30 years. The labour force has grown. Changes in demand and higher demand have been met by higher supply for three decades in a consistent pattern, and that has gone into reverse in the pandemic. Employers have to think differently about how you design, not just about how you recruit and where you advertise in the language you use, but about how you design jobs, about how you do induction training, about how you understand your local labour markets. They have to talk more to local partners, to local employability partnerships, for example, and to Job Center Plus about how we can reach people and how we can work together. We also have to think about how we support people better at work, and we have more flexibility at work in particular, and the particular issues that Hannah mentioned, including in particular childcare, transport and health. This is really difficult. It is going to be a permanent feature, certainly a feature for the next five or more years, of a smaller labour force, higher demand and a need to think much more creatively about how we engage and bring people back into work, who currently just do not go into job centres and tend not to engage with employment support. I have to say that that slightly concerns me for areas of industrial hospitality and the care service, because creating flexibility in those kind of jobs is going to be particularly difficult given the fact that they actually have to be there. Louise, do you want to come in on that point? I agree absolutely with what Tony and Hannah have said. The one supplementary point is that, when we are thinking about this group of economically inactive people who are thinking about those questions of could they possibly fail vacancies, we need to be clear in our heads that although there are some economically inactive people, as Tony said, who would like to work but for whatever reason are not looking for work, there is also a chunk of people who are inactive and do not want to work and probably will never work. We should not really be wasting our time thinking what more support can we give them or what policy should focus on encouraging those people to work when the reality is, especially for example, older people. If you are someone who is in your mid-60s and the pandemic has happened, you are furloughed, you have now retired early. The majority of those people who own their homes outright are in a fairly all-right financial situation. There is little to nothing that the Government could do to encourage those people back to work, and that is not really where we should be focusing our energy. We should not lump together economically inactive people overall, and we should think about those people who are economically inactive and who, with some support, could enter the workforce. That is an interesting take, and I will regurgitate that at a later date. Steve, do you want to come in on this as well? Yes, could I just come in very briefly to make four points in relation to what I have just said and the questions that have been asked? I do not think that it is so much an issue that certain sectors have declined in the pandemic, but more, if you look at the figures, you will see that self-employment, above all, has not bounced back to pre-pandemic levels. The number of people who are in work as employees has got back to the pre-pandemic levels, but not the number of self-employed, which, last time I looked, was a good half a million across Britain as a whole, lower than it was previously. I do not understand what is going on there. I will be honest, but that is what the statistics are saying. Second point on vacancies. We should not think that all vacancies are hard-to-fill vacancies, even though there are quite a lot of them out there. What a lot of the vacancy statistics tell us is the speed of turnover in the local labour market, because if somebody moves from a job that they have already got into another job, then their employer has to advertise to fill that job, and when they fill that job, if they are filling it with somebody else who is moving from an existing job, you are creating a vacancy chain. It is the turnover in the labour market. The labour market went into deep freeze during the depths of the lockdowns, and it came back to life with some vigor again. As part of that phenomenon there was a lot of turnover, which inevitably means a lot of advertised vacancies. Now, I am not saying that they are hard-to-fill vacancies, but you have to be careful in interpreting the vacancy data. Third point. Can I just say before we go on to your third point? That is a really important point, because then it is the sectors within the economy that need to do the work to re-attract people to them, because hospitality, you could fill your job pretty rapidly. Now you cannot because they have moved. There might not be out of the labour market, but that sector is suffering. The rate of turnover varies from sector to sector in normal times. There has always been a high rate of turnover of staff in the hospitality and catering industry. When people start moving again from job to job, that in itself creates vacancies, even if the vacancies necessarily are not inherently hard-to-fill vacancies. There are inherently hard-to-fill vacancies, I would accept that. I think that the health and social care sector in particular fits that particular model. A lot of the time it is people moving from job to job that in itself creates a vacancy. They move, their employer has to recruit to fill the job, they fill the job with somebody else who has moved from another job, that job then has to be advertised. That is partly what we are observing with the numbers of vacancies at any given point in time. However, there is an issue—this is my third point—about the fit between what is out there in terms of jobs and what some of the people without jobs would like in terms of employment, or indeed are capable of doing. Especially once we are on about people with some health problems or disabilities, and quite a large chunk of the workforce has health problems or disabilities, mental or physical, then the mesh between what is there and what people can do is far from perfect. The ones—this is my fourth point—and the ones who really find it hard to fit back in again, after a point in time, they do give up looking. They despair. I would wholeheartedly agree with Louise's comment that it is not everybody out of the labour market in capacity benefits, sickness and disability benefits or economic inactivity, if you like, that we should necessarily be pursuing. Even our estimates in the Sheffield-Hallam team suggest that probably no more than about 30% of all of those people who are on sickness and disability benefits would be in employment if we had a genuinely fully employed economy everywhere. The other 70% would be out of the labour market anyway. You cannot get everybody back in again. Right. Okay. One very final small point. Louise, it kind of comes back to yourself. You might want to jump in on this one. The loss of the over 50s in the inactivity, that to me feels like a huge amount of experience that the workforce is losing if these people have dropped out in the marketplace, but are not coming back in. Louise, you are saying that let us not bother chasing them. I would counter that by saying that that is decades of experience that we are losing to the workforce, so should we not be trying to get them back in the labour market? Louise, I will start with you. Sure. I think that it is a toxic valid point. The more nuanced take would be let us just look at that group H50 to 65 and acknowledge that there will be huge variation within that. Let us not focus on those H64s, but if you are someone who is H50 and that person wants to work, that is the group who is more likely to re-enter the labour force as time goes on. I think that it is quite early to say, but there is at least some idea that the cost of living crisis might have an impact, so there has been some recent survey data of people saying that if their finances get worse, they would consider re-entring the labour force. Again, there is a huge degree of uncertainty just on how the next 12 months go, but that might have an impact. People who during a pandemic thought that they might be able to, for example, retire early, but they reassessed their finances, that might not be an option. There is definitely potential that some people might choose to re-enter and work over the coming years. I would just say that employers probably need to adjust their expectations a little. This is not just about what does the individual want, but it is also what the employer expects of people. For many years, employers in certain sectors have been able to recruit fit and healthy young workers—often, I have to say, migrant workers from Central and Eastern Europe. That may not always be possible in the future, and I think that they need to recognise that there are people out there who are getting on a little bit in years, perhaps, who do have lots of skills that they can offer, but they maybe cannot run around at high speed in warehouses like the 25-year-olds are able to do. It is not just about what people want to do, it is about what employers expect as well. There is a lot in here to follow up on. Can I go back to the data and clarifying—maybe this is for the ONS, Mr Freeman—this term inactivity and economic inactivity. I understand it correctly that if somebody is economically active, they might only be working one hour a week or they might be working 35 hours a week, so they are all going to lump together. Is that correct? The international definition of employment that we use is a minimum of one hour paid work in the measurements week when we go out and interview them. However, very few people actually work at a small number of hours. We do not actually count the number of people who work one hour, there is not enough of them to give us a statistically sound estimate, but only around 5 per cent of people work fewer than six hours a week or less. Most people are working more than five hours. The average is around just over 30 hours, that is about 36 hours at full time and around 16 hours for part time. That is helpful. It struck me that when we are looking at students, some students might only be working a very few hours a week and some are not, but some are being counted as inactive and some are counted as active. We had evidence from the or a submission from the Institute for Fiscal Studies and they were talking about the effective workforce, and I would take that as meaning, well that might be interesting to hear what other people think about that, but that is somebody who is really doing probably a full time job. The other angle in this is that some people have definitely reassessed their whole lifestyle and their work-life balance. A lot of us would say, well that is a good thing, spend a bit more time with your family and so on. I heard one guy in the radio musician last week who said he never took breaks and now he is taking breaks, so that is good in a sense, but it is probably contributing less to the economy. I am struggling a wee bit here to ask a specific question, but I am just wondering, is there an issue here that people are doing less hours, that they have a better work-life balance but that is actually damaging the economy? I am not sure who I am. Yes, on you go. I have quite many answers, I think Tony wants to come in after me. There is no evidence that people work on average fewer hours. If you look at the total number of hours being worked across the UK, it is slightly below where we were pre-pandemic, but that is actually being caused because we have got slightly fewer people in employment. Average hours for part-timers is actually slightly above where we were pre-pandemic for full-timers. It is very, very slightly below, so it does not matter what each individual work is doing, it is back to where we were. However, it is just that gap in employment that means we are not getting the total hours back to where we were pre-pandemic. Okay, Mr Wilson. No, David, you made my point for me. I would just say part-time employment, strangely, is lower than it was before the pandemic. This is partly explained by lower self-employment overall, but it is mainly explained by far fewer women working part-time as employees than they were before the pandemic. Part-time employment for men has increased a bit. Part-time employment for women has fallen hugely. It has fallen by about half a million. It is counter-intuitive, really, but I think it may reflect, I mean, it is a bit speculation, but I think it may reflect people being able to work a bit more flexibly because of some of the changes we have had in the pandemic. It may also reflect some people in things such as social care and health, which are sort of female-dominated industries having to work longer hours during the pandemic and so on, but it is quite interesting. The story analysis is much more nuanced than it feels like because I agree with you. What we do here and what we have seen is people often shifting down and changing their jobs. I do worry, though, that some of this may be storing up some issues because we are starting to see a fall in the number of people—sorry, a rise, beg your pardon—a rise in the number of people who are outside their labour force, economically inactive, and looking after family or home, looking after children. That is predominantly mothers of younger kids. We are seeing the lone-parent employment rate starting to fall for the first time really ever, the first time about 30 years. I do worry, actually, that things like access to childcare, lack of flexibility at work and unwinding of some of the benefits of flexible and hybrid working that we saw during the pandemic may be starting to make it a bit harder now for people to keep coming back to work or to stay in work, in particular to stay in work if circumstances change. I think that we need to capture the benefits of some of the flexibility that we have had. I personally do not view it as a threat. I think that it is an opportunity for us to think differently about how we can balance work and bring more work and life and bring more people into the labour force. Have we reached a settled state at the moment? I am thinking specifically about city centres and town centres. We do not really know if they are going to recover and eventually people will go back or whatever. Do you want to expand on no? Who knows? This really is crystal ballgating. We did quite a bit of work with employers and employer bodies as well as more public policy-facing research. I think that a lot of employers are really struggling with this. What is the right balance? What is the balance between hard-and-fast policies versus using a set of principles? Should we encourage people back to work and, if so, how do we do that? I think that there are going to be permanent changes in how we use city centres. I think that we are simply not going to go back to people working predominantly in full-time in offices. I know that we have really significant impacts on transport, in particular on public transport. We have seen this in every major city, but particularly in London. That tends to get a lot of national coverage. Certainly in England about things like bus routes closing down in London and not using them. The massive funding problems transport for London are facing. Those are important changes. We cannot really hold back the tide on this, though. These are just adjustments that we are going to have to deal with, as we will have to deal with how office space and how other space is used in town centres. We are seeing an increase in office occupancy and people returning to work and spending less time working from home. However, I do not know where that will settle. I really do not, because firms are still struggling with getting that balance right. Many may well struggle to recruit in the tight-legged market if their competitors are offering more flexibility, particularly in professional knowledge economy jobs, which do not much require physical attendance in the office. That is helpful. I am not sure if anyone else wants to come in at the stage, but I will link to that. I am interested in where we are going forward. In your paper, you suggest that, in some areas, there is no point in investing or boosting the economy more because there is already full employment. We should be targeting more our support at areas where there is not full employment and which are presumably the needier areas. That is correct. I do not see how you can raise the employment rate much further in substantial prosperous parts of southern England, for example. There are probably one or two areas even within Scotland that fit that model. If you are really trying to raise the overall employment rate, you have to focus on the places where the employment rate remains low and where economic inactivity remains high and where large numbers of people are out of the labour market on sickness and disability benefits, and some of them might be brought back in. The key to raising employment is, dare I say, levelling up policy. Levelling up is the term that the present government in Westminster uses, of course, but it has been around for donkey's ears as urban and regional economic development, trying to bring the less prosperous places up to the standards of prosperity of the more prosperous parts of the country. I do not see how you can go much further in large parts of southern England in particular. Possibly dare I say it even in the Edinburgh economy, which always looks rather like southern England in terms of many of its economic indicators. Obviously, you are involved in the cross-party group on industrial communities, so your suggestion would be that the Scottish Government have money that we should be focusing on the needier areas, the old industrial areas? Yes, I think that is probably correct. I would not say that it is exclusively old industrial areas. It is the predominant largest single group of areas with difficulties across Britain and probably also in Scotland. It is the places with the weaker local economies. These are the ones that have labour market slack within them still, even after all the years of trying to rebuild their economies. We have made progress but there is still a long way to go in those places. If you cannot raise the number of jobs where there is full employment, you have to raise the number of jobs in other areas. Okay, thanks. Another area that I just wanted to touch on was long Covid, because we are going to be doing a separate investigation on that, so we are not going into huge depth on that just now. There was suggestion from one of the trade unions that some people are afraid of disclosing long Covid to their employers. There was a suggestion somewhere else that perhaps some employers are more sympathetic to staff who might have long Covid than others. Can anyone comment on that or have any experience of that? I do not know, Louise Murphy. Is that something you could have any thoughts on? I guess not something that we have done detailed work on, but when you look at long Covid, it is a new phenomenon by nature. We did not know about Covid two or three years ago. I think that it is natural that there will be a period of adjustment just for employers to think about how they respond to it for people with long Covid to think about how to speak about it. I think that some of that is to be expected and we should just see it as an adjustment period. For example, at the moment, long Covid is not classed as a disability, but there is some debate about whether, over time, it will be seen as being classed as a disability under the Equalities Act. That might be a reason why it will be treated slightly differently by an employer, because it is not officially a disability like some other conditions might be. Others might have more detailed answers than I do. I do not have specific knowledge of what people's experience has been deciding whether or not to report long Covid to their employers. Professor Fathergill emphasised earlier that in areas where you have some workers who are healthy and some that have poorer health, the ones that are healthier are going to have an easier time finding jobs. I can certainly see why people would be concerned about disclosing long Covid, particularly if it is not protected as a disability. I think that that is something that warrants further attention from the Government and further monitoring, although it is difficult because long Covid is somewhat difficult to identify. Right now, we are relying on people to self-report, which is likely to under-measure, but the alternatives are also likely to under-measure the extent of long Covid just because it is not well understood medically right now. Okay, thank you. If I could touch on another area and go back perhaps to Mr Freeman from ONS, you mentioned ethnic minorities in your report towards the end. Can you say anything about the impact on ethnic minorities and how they are coping? I cannot give you a page, but it is the second-last page in my opinion. I was just reminding myself. The ethnic minority probably looks at a slightly more positive picture that the ethnic minority has decreased in Scotland since pre-pandemic, so that is still bucking the trend of the overall picture. The lower economic activity rates for the people than the UK average as a whole. There has not been a specific impact on that particular group as part of the Covid pandemic. We talked about immigration. That is probably where we have seen perhaps the changes over the pandemic period, where people come from. In terms of ethnic groups, it does not look like there has been any adverse effect or more adverse effect than other groups. Okay, that is very helpful. Thank you. That is me. I can just move on to Brian Whittle, please. Thank you, convener. I think that it is very interesting listening to conversation this morning, making my questions more complicated as we go along. I wanted to touch on the impact on early retirement, mainly on Tony Wilson, who brought up fur law as almost a driver of early retirement. I wondered that there are certainly industries with a higher age demographic. For instance, as a friend of mine, one is a haulage company where many of the employers are 50-plus, or, as Professor Forger said, are from Eastern Europe, especially from Poland, strangely enough. During fur law, a lot of those Eastern Europeans went home and then did not come back because there is a shortage of drivers in Eastern Europe, so they have to pay more. A lot of the drivers over 50 decided that, during fur law, their work-life balance was better, so they did not come back or only come back for a couple of shifts a week, which means that the wages have exponentially grown in that industry. I will start with you, Tony, since you raised it. Have you done any work around industry-specific around early retirement that has had a significant impact on those industries? Unfortunately, I am afraid that, on the specific points about industries, we have not done any analysis on that, particularly in relation to early retirement. I would say that there is something interesting—the O&S has done some really good analysis looking at, published back in March and then, in September, looking at, for example, older people who have left a labour market by their previous earnings, for example, on occupations. Just to paraphrase that, what that shows, which I think is quite interesting, is that people have left from relatively high-paid jobs as well as relatively low-paid jobs, from high-skilled jobs to relatively low-skilled jobs. However, there appear to be some differences between men and women, for example. It does look like there have been quite a few that people who have been leaving relatively high-paid jobs have tended to be men in more senior roles, as one might expect. I suspect that you even see this in the headline data when you look at changes in employment by occupation. The number of people in the highest occupational group tends to be chief executives, company owners and directors. Overall, the number of people in those sorts of jobs has fallen since the pandemic on the annual population survey, which I think may well reflect older men, in particular, selling businesses, taking the self-employed income support money, self-employed people generally leaving a labour force, as Steve said. However, when you look at people who have left from lower-paid and lower-skilled jobs, it is men and women. To give an example of that, we have seen really significant falls in a number of people working in cleaning, for example, in domestic cleaning. We have seen rises in industrial cleaning, as you would expect, but falls in domestic cleaning. That is predominantly a female workforce, and it is predominantly older people, too. There are definitely quite important differences. There are people who have retired on relatively decent pensions. We may not be as much as they might have hoped it would, given what is happening now with inflation. However, there are a lot of people who will have left into far lower incomes and who have left from lower-skilled jobs, and we will struggle to come back. I wonder if I could ask Louise Murphy if he has done any work around this area. Likewise, we have not done detailed work on differences in activity rates by previous industry or occupation. I agree with everything that Tony said to think about differences by pay and gender. One point to follow up with is the idea of making people reassess their work-life balance, which is important. One reason to think about that is when we compare trends in economic inactivity over the recent years, since the Covid pandemic to those in the financial crisis or the aftermath of the financial crisis, they look very different. For example, after the financial crisis, after 2008, we saw an increase in participation among older workers aged 55 and above, whereas now we are seeing the opposite. There is another reason to think that there has been something unique about Covid, be it far and low, or people being able to save more during the pandemic and choose to leave the workforce. I do not know if anybody else has laid to come in there, Professor. Could I just say briefly that I think deep in the papers that circulated to this meeting, there are some way of the views on this issue that were put forward by Age Scotland, who make six points in terms of why people may be dropping out into early retirements. With that, having done any detailed research on that issue, I have to say that those six points of Age Scotland make seem eminently sensible and a very good assessment of what is likely to be going on there. One other point that I would say, or one other area that I am interested in, is that taking that further, the attitudes to work and that work-life balance and changing working patterns, hybrid working, the impact that is having on city centre workforce, obviously, is being significant. I think that we have touched on that before. Are we saying here that we are going to have to redesign what city centres are like? If we look at this meeting, four are hybrid and there is one person in the room. Normally, when you have a business meeting, you are in a coffee shop somewhere, or you are having a lunch or whatever, and that is not happening as much anymore. We are going to have to rethink the way in which we employ people in the city centre. I will go to Dr Randolph, if I could. I do not have any particularly detailed thoughts on this, except to say that, yes, probably as the pattern of work changes, then we will have to rethink a little bit how cities are organised, as someone has already mentioned. Rethinking the transport system and making sure that that is set up in a way that works for the way that people are currently working and living their lives. Those sorts of systems will need to pay attention to them as time goes on and adjust them as needed to respond to what is happening in the labour market and in society more generally. With that question in mind, I was going to go to David Freeman and add in the potential here of having significant city centre offices lying empty. In my head, I am thinking that we are going to end up people moving back into city centres to live rather than to work. I do not know if you have any thoughts on that. Probably a couple of things to think about. You talked about the change in working patterns. The pattern of home working has changed quite drastically since the start of the pandemic. In particular in Scotland, it was around 15 per cent of people were doing some sort of home working prior to the pandemic. That is just over 40 per cent now, so a lot more people spending at least some of their time away from office space working at home, working remotely. Perhaps going back to the discussion that we had earlier around what would tempt the older workers, the 50 pluses, back into the workforce, we have done a couple of surveys of that particular age group. By far the biggest thing that they will be looking for will be flexible working, so flexible hours around their lifestyle. The third biggest reason would be home working. It appears to be that, firstly, the people in work, their attitudes are changing into where they work. However, if you are trying to get this group of the 50 pluses back into the workforce, what would tempt them back in is flexible working, but also having that home working option. So it looks like there might be a longer term trend away from office working. I don't know if there's anybody else who wants to come in, because that's my last question, continue on. Okay, is anyone else going to come in? Okay, thank you. Is any members, witnesses, would like to make any final comments? No? Okay, that's great. Thank you very much. It's, sorry, Redo, did you? First of all, I got to open his mouth there. I thought he was going to say something. If you're at the stage of final comments, could I just say three things that you need to keep in mind all the time in looking at these issues? One is take the long view. Second one is do not ignore the geography of what we're looking at. Thirdly, don't forget the demand side in the labour market. This is not all just about labour supply. It's about what employers want and are willing to take and how many jobs there are out there as well. That's all. Just the three points. Long view, geography, demand. Great. Thank you very much. Thank you to all the witnesses today. It's been very informative and a really engaging start to the beginning of this inquiry. I'd like to thank you all for your evidence and giving us your time this morning. We intend to continue taking evidence in November before we hear from the Deputy First Minister at our meeting on 8 December. If witnesses would like to raise any further evidence with the committee, they can do so in writing and the clerks will be happy to liaise with you on how to do that. The committee's next meeting will be on 10 November, when we will continue our inquiry by looking at the drivers behind long-term illness into greater depth. That concludes the public part of our meeting this morning, and I suspend the meeting to allow the witnesses to leave for the meeting to move into private. Thank you.