The number of people off work due to long-term sickness in the UK has reached a record high. In its latest Labour Market Overview, published this week, the ONS reported the figure for January to March 2023 to be 2.55 million. This represents a huge brake on economic growth as well as taking a significant personal toll on those affected.
The UK’s GDP per capita is currently estimated to be around £36,600 (source: Statista) meaning, very crudely, that the economic opportunity cost of the 2.55 million people off work sick is £93 billion a year.
The economic effects of long-term sickness will also be profoundly felt at the micro level, in every household where someone has ceased to work.
Furthermore, what cannot be measured so easily is the impact of these people being unable to work on their own health – mental as well as physical – and that of their families, potentially compounding the original symptoms.
It is for this reason that every household should put in place an emergency fund to cover unforeseen events, including periods off work due to either sickness or unemployment. But Legal & General’s Deadline to Breadline 2022 report found that the average UK household has £2,431 in savings, with many over-estimating the length of time they could ‘survive’ without an income.
The same company’s research found that the number of individuals in the UK that have any form of insurance to protect their incomes remains low: only 1 in 10 workers own an income protection policy.
I think there are a number of reasons for this.
One may be a view that “it won’t happen to me” when it comes to long-term sickness. A quick check using LV=’s Risk Reality Calculator may serve as a wake-up call on this front: I have a 28% chance of being unable to work for two months or more between now and age 70, for example. Crikey!
The belief that the State will provide a safety net in the event of long-term illness may also contribute to the low level of take-up. But Statutory Sick Pay is currently set at £109.40 a week, and is payable for just 28 weeks, providing a total of just £3,063.20 before an individual would need to support themselves financially or claim other benefits.
Other causes of the modest take-up in income protection cover may be a lack of awareness of the product and its benefits, or a perception that income protection cover is expensive or “a waste of money”.
One of the hidden benefits of these plans is many insurance companies now offer rehabilitation and recovery services as part of the product, helping people to get back to work as quickly as possible. This represents a win-win-win for individuals, employers and insurers alike.
One step policymakers might take to reducing the numbers off work long-term due to ill-health is simply to raise awareness of the availability and benefits of income protection cover among employers and their employees alike.