It is almost certain that the actual working population will (as is currently the case) be smaller than the potential working population.

Activity rates vary by gender, by age, and by region.

Gender

Over the 1990s, male activity rates have, with the exception of the over 50s, fallen. In contrast, the activity rates for females over 25 have increased.

For both men and women, however, activity rates for the over 50s remain well below those for the 25 to 49 age group.

Table 11.2: Table Economic Activity by Age and Gender shows national activity rates by gender and by age, comparing the current situation with that of 1993.

Recent trends raise a number of questions about the future. In particular, given that the activity rate for women aged 25-34 has now exceeds 75% (and for women aged 35-49 is even higher), and given the conventional division of family responsibilities in many households, how much more can female participation rates realistically be expected to rise?

The 16-24 age group

At the younger end of the working-age population, activity levels have declined sharply since 1993 in both the 16-17 and the 18-24 age groups.

With the Government aiming for a 50% participation rate in higher education, the implication is that economic activity rates could fall further as the proportion of young people entering higher education increases.

The 50-64 age group

At the other end of the spectrum, activity rates among older workers (men aged 50-64 and women aged 50-59) have edged up over the past decade, especially women.

With current levels of pension saving widely considered to be inadequate (the oft-quoted ‘savings gap’), it is possible that financial constraints will emerge as a factor to push activity rates higher. Indeed, the state pension age for women is already scheduled to rise from 60 to 65, in order to conform to EU equality directives, a change due to be phased in between 2010 and 2020.

Offsetting all this, however, is the fact that early retirement remains an attractive prospect (if it can be afforded) for many people.

The growth in the number of single person households is a factor that has probably increased activity rates, simply by increasing the need to work.

While families can afford one half of the partnership staying at home, single person households do not generally have this option.

A flexible labour market is one where it is easy and inexpensive for firms to vary their use of labour.

There is some evidence that greater flexibility tends to be associated with stronger growth rates and lower unemployment.

Opponents, however, argue that this gives too much power to employers, who may be able to ‘hire and fire’ at will, and leaves workers vulnerable and insecure.

The adoption by the UK of the EU’s ‘Social Chapter’ means that UK employers have had to cope with increased employment regulation.

Although not as restrictive as many continental European systems, new regulations are already prescribing extended employee rights in terms of maternity (and paternity) benefits, holiday entitlements, and entitlement to flexible working arrangements.

Regulations have also been imposed restricting the maximum number of hours that employees may work (the Working Time Directive).

Employment regulations for workers on temporary contracts have been the subject of EU-level discussions, including proposals that temporary workers to be given the same rights and benefits as permanent staff after a fairly short qualifying period (which could be as little as six weeks).

Business groups warned this could adversely affect job prospects in the UK, where temporary contracts are far more common than in the rest of the EU.