Author Case Studies

A snapshot of the UK labour force in 2020 (Madouros, 2006)

The UK labour force is projected to grow continuously until 2020, albeit at a gradually declining rate. The number of economically active people aged 16 and over is projected to increase by 6.7 per cent between 2005 and 2020 and reach 32.1 million in 2020. Of these, 53.3 per cent (17.1 million) will be men and 46.7 per cent (15.0 million) will be women. This compares with 54.2 per cent and 45.8 per cent, respectively, in 2005.

The most notable demographic trend to 2020 reflects an ageing of the labour force. The prime age population (those between the ages of 25 and 49, who tend to have the highest rates of labour market participation) is forecast to decline over the decade to 2020, as the post-war ‘baby boom’ generation leaves this group, and make up a declining proportion of the labour force. The knock-on effect is an increase in the number of people aged 50 and over (equivalent to a 24.5 per cent increase from 2005 to 2020). The old-age dependency ratio – defined as the number of people aged 65 and over as a proportion of the prime-age group – is predicted to rise from 23.8 to 29.7 per cent from 2005 to 2020. Furthermore, the number of people aged between 16 and 24 is projected to fall from 6.9 million in 2005 to 6.6 million in 2020, equivalent to a fall of 4.9 per cent.

The economic activity rate for prime-age men is forecast to continue the decline evident since the 1980s. Conversely, the economic activity rate for prime-age women is set to continue the increase evident since the 1980s, albeit continuing the trend of slower growth since the mid-1990s.

One of the most interesting characteristics of the labour force in 2020 relates to the number of economically active people who have exceeded the age at which they are eligible for state pension. In particular, there are projected to be 775,000 economically active people above the age of 65 in 2020. This compares with 582,000 economically active people above the age of 65 in 2005 and represents an increase of around 33 per cent. This is a combined effect of the increasing number of people in older age groups due to demographic movements and the increasing trend in labour market participation of older people.

Questions

  1. What challenges do these labour force projections present for HRM over the next decade?
  2. How might firms respond to these anticipated labour market changes?