The phenomenon being referred to as “The Great Resignation” continues to be a trend in the US labor market as a record number of Americans are quitting their jobs. While the movement lost steam in October, according to a report released on December 8 by the US Bureau of Labor, the number of quitters is currently at 4.16 million. This is a 4.7% decrease from September when the number of resignations hit 4.36 million. Even with the percentage decrease, the level of people quitting is still 24% above where it was only a year ago. The result is an unprecedented number of job openings with seemingly no one to fill them.
Professor Anthony Klotz at Texas A&M, predicted the phenomenon and coined the phrase “The Great Resignation” in an interview with Bloomberg back in May 2021. He predicted pandemic related realizations paired with pent up frustration would lead to a spike in the number of people leaving their jobs once the height of the pandemic passed. This explains why the number of people voluntarily quitting their jobs first hit 4 million in July when the vaccination rate of the eligible population was about 65%. The number of Americans quitting has now exceeded pre-pandemic highs for seven straight months.
The job turnover rate is highest among mid-career employees between the ages of 30 and 45 years old according to the Harvard Business Review, but the Great Resignation also includes CEOs. A study from recruiting firm Heidrick & Struggles found that CEO turnover spiked in the first half of 2021, as company leaders felt the exhaustion and burnout caused by the transition to a virtual work environment. Just like for other employees, the stressful workplace paired with the global pandemic, led to a complete upending of many people’s identities. The identity of many Americans is so interwoven with their careers that the disruption in the workplace disrupted their sense of self. This meant a change in how people think about their life, their work, and the relationship between the two.
Although the resignation rate remains high, the hiring rate remains unchanged at 4.4%. The number of job openings also increased to 11 million on the last business day in October which is a big increase from the record of 7.5 million available jobs prior to the pandemic. These two statistics taken together, reflect both the difficulty employers have had filling positions, as well as the selectiveness of those searching for new jobs. Many workers are not willing to put up with the same conditions for the same wage that they did pre-pandemic. Not surprisingly, workers in the services and healthcare industries in particular, have the highest resignation rate and level of burnout overall.
One strategy employers are using to attract workers is increasing wages. Given the absolute need for labor of many businesses that had previously laid off or fired most workers prior to their reopening, many are offering greatly increased salaries and even signing bonuses. According to the Employment Cost Index released by the Labor Department at the end of October, wages and salaries increased by 1.5% in the previous quarter alone. Wages and salaries increased 4.2% for the year ending in September 2021— in comparison, these increased only 2.5% the previous year. There is speculation that increased pay may be feeding into the inflation facing the country right now. However, overall pay has kept pace with the rising prices.
For the first time in decades, the labor force controls the job market and their demands are causing serious change. Wages steadily declined for the past five decades when compared to inflation. Now, minimum wage is no longer as acceptable to new employees as it once was. Moreover, the switch in recent years to a more gig based economy means a reduction or possibly, elimination for many workers of the already limited benefits or insurance their jobs offer. 35% of CEOs surveyed by Fortune said they have expanded benefits in the past year to increase the retention of workers.
The full extent of just how much the experience of the pandemic and shift to remote work will shape the economy in the future is yet to be seen. In a recent paper by Ulrike Malmendier, she explores how both personal and generational experiences can influence economic behavior. She concludes that macroeconomic events such as the Great Depression (or the pandemic) can have long term effects on people’s attitudes and choices. This conclusion seems logical, but she goes so far as to cite neuroscience research that suggests experiences can essentially rewire our brains. Use-dependent brain development theorizes that “the brain forms stronger connections between neurons that are used more frequently, while those that have not been used in a while eventually die.” She claims this is why people are so reactive to recent major events, but also hold on to those emotions for such a long period of time. For example, those who lived through the Great Depression were found to be more financially risk averse and distrustful of the stock market than others for their whole lives.
Although the long term effects of the pandemic are yet to be seen, one thing is for certain: the Great Resignation is quantifiable proof that the status quo prior to the pandemic is no longer acceptable for many people. Better working conditions, compensation, and benefits are simply a starting point – where they lead remains to be seen.
