OECD Employment Outlook 2025: United Kingdom
Table of contents
These country notes provide an overview of the labour market situation in each country based on data from OECD Employment Outlook 2025. This edition has a special focus on how population and workforce ageing will affect the labour market and workers’ jobs.
The OECD unemployment rate remains at 4.9% in May 2025 – the same as one year ago. However, there are signs of weakening, with employment growth decelerating and labour market tightness falling back to pre‑COVID‑19 levels in many countries. Labour market tightness has returned to pre‑COVID‑19 levels in many OECD countries, as has the efficiency of matching between employers and jobseekers. But labour markets remain tight for a number of structural reasons.
The unemployment rate in the United Kingdom, at 4.6% in March 2025, has increased by 0.2 percentage points over the last year. Nevertheless, it is still comparably low, and is 0.3 percentage points below the OECD average. But the labour market is easing, and in Q1 2025 there were only 0.49 vacancies per unemployed person, a fall of 23% since before the pandemic (0.63 in Q4 2019).
After a fall in 2023, the labour market participation rate (78.6%) has risen 0.7 percentage points in the year to Q1 2025 and sits 2.1 percentage points above the OECD average. However, this is still some way below the highest performing OECD countries (the top five averaging participation rates of 84.8%). The employment rate of 75.0% in Q1 2025 was 0.5 percentage points higher than one year earlier, though had not quite recovered its level from two years earlier (75.3%). Inactivity, at 21.4%, is still almost 1 percentage point above its pre‑pandemic level (20.6% in Q4 2019).
The OECD projects GDP growth in the United Kingdom will pick up to 1.3% in 2025, before headwinds from heightened trade tensions, and uncertainty on business sentiment and consumer confidence slow it to 1.0% in 2026. Unemployment is predicted to increase moderately to 4.6% in 2026 as these effects work and the labour market loosens. Implementing pro-work reforms to the welfare state and continuing childcare reforms will be important to support labour supply.
To address recent concerns with increases to post-pandemic inactivity rates, the government released its “Get Britain Working” white paper in November 2024. The white paper aims to reduce economic inactivity and targets an employment rate of 80%. To achieve this, the strategy includes measures to integrate employment advisors in health services and careers advice in jobcentres, expand mental health support, and support young people with a new youth guarantee.
Real wages are growing in virtually all OECD countries, but in half of them, they are still below the levels of early 2021 – just before the inflation surge that followed the pandemic.
Real wages have increased in the United Kingdom by 2.9% since the start of the pandemic and are up by 4.4% since their nadir in Q4 2022 (see figure on real wages). This compares to a 0.1% fall in real wages for the median OECD country since the pandemic started. In the year to Q1 2025 nominal hourly wages were up by 5.6% and real hourly wages by 1.9%, as inflation remains above target. Real minimum wages (at 61.1% of median wages in 2024) are also 11.1% above their level at the start of the pandemic, increasing more than twice as fast as the median increase in the OECD (4.7%).
People around the world are living longer and healthier lives than ever before. This remarkable achievement has been accompanied by declining fertility, leading to significant demographic shifts. The number of old-age people per working-age person will rise to 53% by 2060 across the OECD. The share of people employed in the population will fall unless policies change, slowing down annual GDP per capita growth by 0.4 percentage points.
The United Kingdom has been relatively well insulated to changes in the dependency ratio over recent decades (its dependency ratio having risen only 6.5 percentage points between 1980 and 2023), helped somewhat by the migration of working-age Europeans after EU enlargement. However, like other OECD countries, its dependency ratio will continue to rise and by 2060 is expected to be 49%, placing pressure on per capita GDP growth.
A natural corollary of an increase in the old-age dependency ratio is pressure on the total employment rate (the proportion of employed persons relative to overall population). In the United Kingdom, the employment rate is expected to fall by 1.46 percentage points in 2060 relative to its level in 2023 (this is slightly better than the projected fall across the OECD of 1.93 percentage points) (see figure on projected employment rates).
Getting more jobs for older workers and promoting gender equality at work could stabilise employment-to-population ratios in most OECD countries. However, GDP per capita growth will still slow in many countries. Only by boosting productivity growth can countries maintain a growth level close to past levels.
In the United Kingdom, an ageing population will contribute to slower annual GDP per capita growth. At current productivity growth rates, projected annual GDP per capita growth between 2024 and 2060 is only 0.41%, some 40% lower than its growth rate between 2006 and 2019.
Scenario analysis shows that raising older workers’ employment rates could mitigate the growth slowdown and add 0.26 percentage points to per capita GDP growth. This is some 50% more than the impact raising older workers employment could make across the OECD (0.18 percentage points).
When considering a holistic strategy to mobilising labour resources across countries – including gender employment gaps, older worker employment, and migration – the United Kingdom is marked by the striking contribution that improving older worker employment could make. Only three OECD countries have a higher proportion of their total potential increases to employment rates that are explained by older workers than in the United Kingdom (where 69.4% of all possible employment rate improvements is due to older workers).
Employment of both men and women drops sharply after age 60 in most countries. Promoting lifelong learning, healthy workplaces, flexible retirement, and inclusive employer practices is essential to boost older workers’ employability and extend working lives.
In the United Kingdom, the employment rate of those aged 60‑64 was only 58.2% in 2024, despite being above the OECD average (55.9%). In addition to this the United Kingdom has amongst the largest difference between the normal retirement age and actual retirement age in the OECD, for both men and women. On average women retire 3.2 years before normal retirement age, and men 2.8 years (see figure on retirement ages). This leaves room for improvement in employment rates to support GDP per capita, without having to make changes to normal retirement ages.
Encouraging older workers to stay in the job market is important, and one aspect of this is ensuring good quality jobs. The United Kingdom has one of the highest rates of “strained workers” aged 55‑64 across 25 European OECD countries analysed (15%). This is defined as where job demands are greater than job resources for workers. Improving job quality can be an important aspect to better retention of older workers in the labour market. But the United Kingdom has high annual non-formal training participation of older workers (44% for 55‑ to 65‑year‑olds, compared to 35% for nine OECD countries with data in the 2023 Survey of Adult Skills). This provides good opportunities to ensure individuals’ skills stay relevant and jobs make full use of the productive potential of their older workers.
Part of the government’s new measures set out the Get Britain Working white paper aim to help those with a heath condition stay in employment, which often affect older workers more acutely. Alongside this, the digital “Midlife MOT” tool is designed to help people in mid-life to make plans for their job, health and finances, and shape their future at work.
Contact
Stewart BUTLER (✉ stewart.butler@oecd.org)
Glenda QUINTINI (✉ glenda.quintini@oecd.org)
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The full book is available in English: OECD (2025), OECD Employment Outlook 2025: Can We Get Through the Demographic Crunch?, OECD Publishing, Paris, https://doi.org/10.1787/194a947b-en.
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