America just set a new record for how many people are quitting their jobs. According to the US Bureau of Labour Statistics, 4.3 million people quit in August 2021 (2.9% of America’s working population), the highest number on record for the latest 20 years. Quits are more concentrated in food & accommodation services, retail and wholesale trades, but the departures are happening across the board.
There are more jobs available now than ever before in US history. Many businesses are suffering from a major shortage of workers with 10.4 million jobs open, employers are scrambling to find help.
Some months ago, a Microsoft survey made headlines, revealing that 41% of the global workforce is considering leaving their employer in the coming 12 months. While being just a survey, and knowing that expressed intentions aren’t the same as the actual act of quitting, it’s reasonable to expect a further increase in people quitting than what we have been used to.
The term of the “great resignation” was originally coined by Anthony Klotz, an American psychologist. He calls this trend a pandemic epiphany, not too distant from the hot new trend some millennials are reportedly partaking in these days: “lying flat”. This basically amounts to doing the bare minimum to get by and striving for nothing more than what is absolutely essential for one’s survival. It represents the mindset of lying down instead of being a productive member of society. Rather than striving to study hard, buy a home, or even start a family, a subsection of society is rejecting it all to lie flat.
So, the question is why are so many people quitting their jobs? The pandemic has given people a multitude of reasons to quit their job. Looking for better pay, better working conditions and more flexible working arrangements.
In the US, the pandemic abruptly severed the relationship between employers and employees. That’s in contrast with European countries, where millions of workers were furloughed rather than fired and therefore had a job to come back to. But similar trends are at play in Europe as well. In Germany, a third of companies are short of skilled workers with currently at least 400.000 skilled job vacancies. According to the OECD, in 38 member countries, at least 20 million workers have not returned to work since the coronavirus struck. Of these, 14 million have exited the labour market and are classified as ‘not working’ and ‘not looking for work.’
Emergency unemployment benefits expired in the US on September 6th, yet the monthly gain in payrolls continuously defied predictions. The contradictory data points speak of a labour market that has been profoundly disrupted by the Covid crisis and may remain so for some time.
Some people are feeling burnt out after working through a period that posed so many challenges. Some are still fearful for their health and the risk of contagion. During lockdown, many of us worked from home, cooked at home, cared for kids at home, entertained ourselves at home and even schooled our kids at home. By eliminating the office as a physical presence in many families’ lives, the pandemic may have downgraded work as the centrepiece of their identity. A new vision of work-life balance could be the elephant in the room.
For many people, the pandemic was a time of reflection, forcing people to see the unpredictability of life, offering an opportunity to think about changing careers and to learn new skills. Even more broadly, the pandemic also forced people to reconsider how they wanted to spend their entire lives and what really matters to them. Re-imaging their lives, many locked up their location to move to suburbs, not waiting for retirement to seek out greener pastures. Many began freelancing or start-ups and have no appetite for a full-time contract anymore. Many also began trading full-time, just observing the meme stocks saga around Reddit, crypto, non-fungible tokens and SPACs. Others subscribed to early retirement, supported by the fact that stock market all-time highs inflated retirement accounts.
Obviously, most people won’t or can’t leave their jobs. These quitters are still a very small minority. But those quitters are having a broader impact. A workers revolution as legacy of the pandemic. With so many workers willing to leave their jobs, companies are forced to make the jobs more appealing. A power shift is at play, with workers gaining the upper hand. While working from home and flexible adjustments is a white-collar concern, blue-collar claims are also visible. According to Cornell University Labor Action Tracker, the number of worker strikes in the US exploded higher in 2021, reaching healthcare workers, factory workers, university workers and many more, invigorating the feeling of a gripped economy. The current employment dynamics give workers the capacity to demand what they are worth after years of stagnant wages.
Unsurprisingly, social media platforms are also at play. Reddit and Twitter screenshots of angry resignation text messages and confrontational conversations of employees with their bosses are going viral, with many users questioning the traditional eight-hour, five-day workweek, fighting for a liveable minimal wage and speaking out against labour exploitation.
Running a company requires people and parts. With parts missing and people quitting, businesses are struggling. Funnily, we could be wondering to what extend self-service business models will be extended.
What are companies doing to retain their talent? Some are offering higher wages and benefits; others are giving collective holidays and flexible conditions. But if a company is to survive this great resignation, it must deep dive into an employee’s mind and see what they really want and give them a reason to return every Monday, making their employees feel valued.
That marks a break from recent historical work trends. For five decades, wages have been at best stagnating. In lower-end jobs, earnings have not matched the pace of inflation, while the increasing switch over to an independent contractor model and gig work leave many in a more precarious situation.
The lingering question is how long the Great Resignation will stick around. The fact is that the labour market is tighter than it has been for years and competition for workers has grown fierce. What we take for granted is that while pandemic, lockdown and Covid were the most used words of 2020, supply chain frictions and inflation are clearly the most popular words of 2021. Not long ago economists obsessively checked the latest statistics on Covid-19 cases. Now they are doing the same with the inflation numbers and to an extent weekly jobless claims.
Reports say wages for low paid workers in developed countries are rising at the fastest rate since the great recession. A rise in the labour share, or the proportion of GDP paid to workers, is a welcome development. But to get a sense of this on inflation risk, we need to get a sense of how productivity growth will develop. The pandemic has had a large, abrupt, and measurable impact on the global economy and business models. But its effects on productivity growth, possibly highly significant, will take longer to judge. Currently, wage growth is outpacing productivity, and may do so for some time if workers don’t re-enter the workforce in more meaningful numbers.
Every big event in history leaves a mark on society. Women entered factories to keep them running during World War I. World War II saw major advances in medical technology including the mass production of penicillin. Then came the pandemic, it gave people another reality check on life, and saw them reevaluate life as something way too precious to compromise.
For some workers, the pandemic precipitated a shift in priorities, encouraging them to pursue a ‘dream job’, or transition to being a stay-at-home parent. But for many others, the decision to leave came because of the way their employer treated, or didn’t treat them, them during the pandemic.
Our takeaway is that our society is awakening to the idea that people are not machines, that it’s becoming compulsory for companies to make serious investments in their employees’ wages, opportunities, and overall wellbeing. Companies that don’t invest in their people will fall behind. Could it be that the Anglo-Saxon world is slowly opening-up to some sort of social contract?
 The next great disruption is hybrid work – Are you ready? Microsoft WorkLab March 22, 2021
November 21, 2023News
What’s taking the wind from the renew...
The Copernicus Climate Change service reports that October 2023 was the warmest October on record. The same can be said for July, August, and September...
November 13, 2023News
US consumer sentiment slips amid Midd...
The usual weekly newsletter had already “gone to print” last Friday before the release of the University of Michigan’s US consumer sentiment index, so a...
October 17, 2023Bilboard
BILBoard October 2023 – Entry p...
Written as at 13/10/23 Economic Overview Globally speaking, growth continues to slow as the impact of tighter financial conditions becomes apparent. That said, the...
September 22, 2023Bilboard
BILBoard September 2023: Peak rates i...
While central banks could still make some final tweaks, most market participants now believe that we are at (or inches away from) the top when...
August 2, 2023Bilboard
BILBoard August 2023 – Challenging re...
The idea that central banks might be finished hiking rates is gaining prominence. In the US, the Federal Reserve has now hiked rates eleven times,...