A record number of people are dropping out of the labour market, according to official figures yesterday that marred a fall in unemployment to a fresh, 29-year low.
Almost 7.9 million people are economically inactive, of whom more than 5.8 million say they do not want a job, government statisticians said yesterday.
It means 21.5 per cent of the working age population - or more than one in five of every person between 16 and 65 - do not want a job or are not looking for work.
The figures overshadowed the fall in the number of those claiming unemployment benefit to 830,200 in August, which is the lowest number since July 1975. Labour market experts said the Government needed to tackle inactivity, which had been hidden by a rise in immigration needed to fill job vacancies.
The Chartered Institute of Personnel and Development (CIPD), an independent think tank, called on Alan Johnson, the new Work and Pensions Secretary, to tackle the problem.
John Philpott, the CIPD's chief economist, said: "These results highlight the urgency for tougher policy action to free up the supply side of the UK jobs market. This must not be overlooked despite a welcome reduction in the unemployment count." He said those who were inactive included lone parents with childcare problems; people who faced discrimination because of age or disability; those who had given up any hope of getting a job; and people who lived too far away from potential employers.
The record number of inactivity comes at a time when there are 660,000 unfilled vacancies, which is close to a three-year high according to the Office for National Statistics.
Mr Philpott said: "A combination of more economically inactive people and rising numbers of job vacancies signals a mismatch between labour demand and supply that might trigger higher wage inflation. Increased hiring of immigrant workers is helping to ease the pressure but this safety valve could soon blow."
He said the Government should combine tougher benefits sanctions with measures to overcome the barriers preventing inactive people from filling job vacancies.
His warning came as the National Audit Office said up to one million of the 2.7 million older people who were not working wanted to find jobs but were held back by health problems, discrimination, low confidence and out-of-date skills.
The Department for Work and Pensions defended its policies. Jane Kennedy, the Work minister, said: "The last year has seen fewer lone parents on benefit, as well as a fall in unemployment. In addition, the number claiming incapacity benefit has peaked after decades of growth."
A spokeswoman said the Department for Work and Pensions had started seven pilots of its Pathways to Work scheme, which encourages people off incapacity benefit (IB) and back into work.
"IB is part of the welfare state and it is there for a very good reason," she said. "It makes us civilised and makes sure we don't have people starving or slipping into poverty."
Ms Kennedy welcomed figures showing the number in work rose 1,000 in July to a new record of 28.3 million. Unemployment fell 16,000 to 1.41 million, pushing the rate to a record low of 4.7 per cent.
Statistics also showthe average working week has fallen to a record low of 37.1, almost two hours below the peak of 38.9 in 1994. The main factor behind this was a fall of about a million in those working more than 45 hours a week. Analysts said it showed the impact of the Working Time Directive.
Nick Isles, the associate director of the Work Foundation, said that full employment had given workers much more bargaining power. "It also shows the emphasis on a work-life balance is being taken seriously by employers."
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