Mental health and chronic pain are having the most significant impact on economic inactivity rates in Scotland, according to a new report from the Scottish Parliament’s Covid-19 Recovery Committee.

Its latest report considered the impact of the pandemic on Scotland’s labour market, looking specifically at long-term illness and early retirement as drivers of economic inactivity.

The committee found that although the pandemic has not significantly impacted economic inactivity in Scotland, it has clearly highlighted the extent to which a healthy working-age population is required to sustain a healthy economy.

MSPs heard that implementing remote and/or flexible working practices may improve employees’ wellbeing, bring more people into the labour market – including disabled people and people with chronic or mental illness – and support older workers to remain in the labour market for longer.

However, evidence from employers highlighted that many employers, particularly small and medium-sized enterprises (SMEs), require additional support to implement flexible working and improve reasonable adjustment policies.

Additionally, the committee noted that best practices from wrap-around employability services, like the Fair Start Scotland programme, which provides tailored support to get working-aged people who are disengaged from the labour market back into employment, should be shared across all of Scotland’s local authorities.

Responding to the report, Dr Liz Cameron CBE, Chief Executive, of the Scottish Chambers of Commerce, said:

“The committee has rightly noted that the aftereffects of COVID-19 on the economy and society are still being felt today and will continue for years to come.

“Long-term sickness, including long COVID, has invariably played a key part in discouraging people, particularly older workers, to stay in the labour market. This has been a large driver in the rise in economic inactivity over the past two years, along with those taking early retirement.

“As Scottish businesses face acute labour shortages across the board, it has never been more important to work together to support people of all ages to develop their knowledge and skills to fill gaps in the labour market. It is welcome that the committee’s report has recommended this, particularly with its focus on supporting older workers back into the workforce.

“It is also welcome to see that the report highlights the need to step up efforts to support women, disabled and minority ethnic groups. These communities were among the most impacted by the pandemic and we have called for additional targeted support to help these groups, which will increase the skills and talent available to Scotland’s businesses. The business community stands ready to work together with government, agencies and partners to ensure everyone can play their full part in the workforce.”

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