The good work effect

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The UK labour market has not fully recovered since Covid-19. Our economic activity rate has continued to lag behind the best-performing economies. We remain the only G7 economy where the employment rate has still not returned to its pre-pandemic level. Job vacancies are at a five-year low, and have a worrying place-based distribution: a large proportion of people on welfare benefits are in labour markets with very few vacancies.

The most disadvantaged people, and the most disadvantaged local communities, have suffered worse from this situation, with the ongoing Milburn Review highlighting that if action is not taken, the number of 16‒25-year-olds not in education, employment, or training (Neet) in the UK – already the second-highest in Europe, after Romania – will increase to 1.25 million within five years.

The inactivity problem is not exclusively one facing young people: wider economic inactivity has risen sharply in recent years, particularly among working-age adults with health conditions (Figure 1). As the Mayfield Review highlighted, it now stands at over one in five of the working-age population – much higher than leading countries such as the Netherlands (14.5%). If the government met its target to increase the employment rate to 80%, there would be 2 million more people in employment.

To date, much of the debate about why the UK’s post-Covid recovery has been so weak has focused on worsening population health, NHS waiting lists, and shifts in preferences of workers (such as early retirement). In this report, we don’t challenge the validity of these arguments in offering a partial explanation of what has happened.

Instead, we shift the debate in a different direction by asking how the nature of work itself – such as more precarious and lower-quality jobs – might be contributing to exits from employment. We suggest that the ability of workers to be well-supported by their employers during disruptions to their working life – such as an economic shock like Covid, or periods of ill health – is a critical and underexplored part of the story on economic inactivity.

To investigate this question, we use a mixed methods approach. Most of our analysis is based on longitudinal survey data from the large-scale UK household survey (Understanding Society), which is representative of people in paid employment and covers the period 2012‒25. We measure workers’ job quality using a multidimensional UK Quality of Work index, which captures the quality of workers’ jobs on 20 different indicators – including job security, flexibility, earnings, and workplace health and safety. We published an accompanying supplementary report alongside this one, which provides a more comprehensive overview of the methodology underpinning this work.

Alongside this, we carried out qualitative interviews with 10 people with direct experience of leaving paid employment and/​or claiming out-of-work benefits in recent years. Participants were recruited through MIS Group and were remunerated for their participation. All interviews were conducted on a semi-structured basis. The findings from these interviews tended to corroborate the quantitative analysis; we quote from them extensively throughout this report. The names and genders of all participants quoted in this report have been changed to protect their identity.

We found that poor job quality is strongly associated with the likelihood of leaving work, with workers with lower job quality when interviewed in the prior wave (Wave T) much more likely to leave employment when interviewed in the wave after (Wave T+1). The rate of exit rose markedly during the pandemic, with the nature of the relationship also changing towards different forms of non-employment and affecting those in different-quality jobs to varying degrees. These patterns remain robust even when accounting for individual characteristics, suggesting that the nature of work itself may play an important role.

We then examined which specific job quality indicators might be driving this relationship between poor job quality and job exit. We found evidence that autonomy and voice in the workplace are particularly important: jobs that enable workers to adjust hours, modify tasks, or take time off when needed are more likely to support continued employment. By contrast, roles that are rigid, insecure, or lacking in managerial support often leave workers with little option but to leave when their health deteriorates. Qualitative evidence highlights how exits are frequently the result of cumulative pressures, rather than single shocks, and how small differences in job design can determine whether individuals remain in work.

We also found that these risks are concentrated in more precarious forms of employment, including self-employment and zero-hours contracts. While often presented as flexible, these roles frequently lack the protections and stability needed to support workers through periods of ill health. This suggests that the rise in the level and variety of precarious employment may make the labour market increasingly vulnerable to rises in inactivity in the future.

Taken together, the findings point to the fact that rising non-employment is also shaped by changes in the quality and design of available work. Policy responses therefore need to go beyond supporting individuals, and instead focus on how jobs themselves can better accommodate changing health and circumstances.

From this analysis, we suggest that the government’s twin goals of raising job quality and employment participation may be mutually reinforcing, under the right conditions:

• Lower-quality jobs are linked to higher exit rates: Workers in the lowest-quality fifth of jobs are significantly more likely to leave employment (1.6‒3.4 times, depending on the model used), particularly following changes in their health. Low job quality overall is associated with greater risk of exit from work, with some potential evidence of a quasi-causal relationship.
• The Covid-19 pandemic created new vulnerabilities for workers in non-standard employment relationships, especially the self-employed, and in certain sectors of the economy. Previous UK governments were able to achieve rises in the employment rate in part due to rises in self-employment. Our analysis suggests this trend exposed these workers to greater risks during Covid-19. When the pandemic hit, it left a large proportion of workers vulnerable – with few support mechanisms to retain work when experiencing an episode of ill health. This poses a challenge for the current government in choosing how to recover the labour market.
• A combination of ​“healthy job” characteristics is particularly protective for workers. Supporting existing qualitative literature on this topic, and reinforcing the findings of previous studies usi[x] this report presents quantitative evidence of a set of characteristics strongly associated with lower risks of non-employment. Perhaps unsurprisingly, this includes job security, but factors such as worker-oriented flexibility, autonomy, and protections arising from continuous employment are also associated with it.
• There is evidence that ​“healthy jobs” are especially protective for workers who experience a worsening of mental health, or who develop a long-term health condition, between waves. Healthy jobs ‒ defined here as jobs with greater levels of autonomy, job security, and other features – were disproportionately more protective in helping prevent labour market exit for workers who experienced a worsening of mental or long-term health than workers who did not. This suggests these characteristics are especially important in keeping those who experience a health-related shock in work. They may, for example, reflect having better in-work protections to help them manage a transition while working.
• Investing in ​“good work” is therefore vital to meeting the government’s employment targets, as well as being a desirable objective in itself. Without a drive for a good-jobs-led economic recovery, the government will struggle to achieve a sustained higher employment rate. Those in employment will continue to be vulnerable to ill-health-related economic shocks, as they were in previous crises. The risk will only continue as our society ages, because increasing numbers of people in the workforce will have to manage health conditions alongside paid work.

We end the report with an outline of proposals to improve accessibility to good work for workers with long-term health conditions, which build on the vital safeguards introduced in the Employment Rights Act 2025. We propose the following:

• The government should expressly commit to a good-jobs-led economic recovery, rebuilding the labour market back to a better state than it was before the pandemic to build resilience from future shocks. The incoming Prime Minister has made encouraging statements about the role of high-quality work as part of his drive to deliver. There should be explicit recognition that without a drive to improve job quality, workers at the bottom of the labour market will remain vulnerable to future disruptions, as they were during the pandemic. NEF will be setting out a good-jobs-led economic strategy in forthcoming research; a key element must be strengthening rights for self-employed workers and enhancing labour market opportunities available to young people.
• The government should develop a formal ​“work what you can” framework to allow individuals with health limitations to work part-time and variable hours within an agreed range. This model would guarantee a minimum core of hours while building in flexibility as capacity changes, with clear review points to assess progress. This would adopt the partial work or phased reintegration system used in other countries, particularly Denmark’s Flexi-jobs scheme: maintaining labour market attachment without requiring full recovery before return.
• The government should introduce a specific financial incentive for employers who hire workers in lower conditionality groups who have been on benefits for a continuous period, such as a discount or exemption on employer national insurance contributions. This could be integrated within both the partial work scheme and the existing system of employer incentives for young people through the Youth Jobs Guarantee and Youth Jobs Grant, although we suggest this financial incentive should be for all adults and not exclusive to the young.

The full methodology paper for this report, Analysing the effect of job quality on non-employment with longitudinal data, is available to read here.