Workers of the World…quit?

US workers are leaving their jobs in record numbers. Are they newly empowered? Or just taking a break from reality?

US workers of all ages and occupations have been voluntarily quitting their jobs in record numbers. In April 2021, the Bureau of Labor Statistics recorded a giant surge in the number of people who left their jobs, with just under 4 million workers quitting voluntarily. Then, in July even more people left their job, and in August the quitters hit another record. In August alone, nearly 7 percent of employees in the “accommodations and food services” sector quit their jobs, meaning one in 14 people working at jobs like hotel clerks, restaurant servers and bartenders quit in a single month. 2021 will likely record the largest number of resignations the US has ever seen.

Even before the “Great Resignation,” as it is being called, employment was down due to massive pandemic layoffs, especially in low-paying occupations. Employment in nursing homes is down 15.2 percent from pre-pandemic levels, in child care 10.4 percent, the temporary help sector 8.7 percent, and restaurant employment is down 7.6 percent. By comparison, overall employment in the private sector is down by just 3.0 percent, which nevertheless translates into five million jobs fewer than before the pre-pandemic.

Normally the resignation rate of volunteer quitters is not so high. From December 2000 to the beginning of the COVID-19 pandemic in 2020, the US rate never surpassed 2.4% of the total workforce. During periods of high unemployment, resignation rates tend to decrease as people see fewer job opportunities. During the Great Recession of 2008-9, the US resignation rate decreased from 2.0% to 1.3%, and the COVID-19 pandemic initially followed this pattern, as layoffs soared and the resignation rate fell to a seven-year low of 1.6%.

The question that everyone is wrestling with is: why this Great Resignation?

But as vaccination rates climbed and the economy reopened, workers have been rehired across occupations and industries, and consumer demand has increased. The unemployment rate has fallen dramatically from a pandemic high of 14.8% to the current 4.6%. Labor shortages and unfilled positions are everywhere, yet rather than workers changing jobs in search of higher wages or better working condition, many are simply quitting their jobs. Some have even dropped out of the labor force entirely. The question that everyone is wrestling with is: why this Great Resignation?

Almost no two experts agree, but there are lots of theories. The answer depends to some degree on the occupation, with low wage workers having different reasons than highly paid tech workers from Silicon Valley.

  1. Pandemic support from federal and state governments. In a short experiment with unofficial “guaranteed basic income,” most Americans have received several pandemic-relief stimulus checks, enhanced unemployment benefits, and have benefited from a rent moratorium (both home and business) and temporary student-loan forgiveness. So a lot of people, especially low income workers, suddenly had their own private safety net and more freedom to not return to jobs they hated.
  2. Healthcare portability. The Affordable Care Act, otherwise known as Obamacare, has allowed millions of workers to access portable healthcare benefits, even for the unemployed, decreasing the numbers of people stuck in “job lock” where they fear leaving their employment because they would lose their health care.
  3. COVID-related absences. In September 2021, 1.6 million people – just over 1.0 percent of the workforce, 960,000 of them women – reported that they were not working or looking for work because they were either caring for someone who was sick, were sick themselves or fear transmitting COVID to a vulnerable family member. Some also have been caring for home-schooled children. The pandemic has laid bare the disproportionate burden many women shoulder in care-giving responsibilities.
  4. Rising wages, savings rate and stock prices. Acute labor shortages have forced many employers to increase wages, especially for low-income and essential workers. Consequently, wages are rising at their fastest rate since the Great Recession. Over the past six months, wages of leisure and hospitality workers have risen at an annual rate of 18 percent, and they are now well above their prepandemic trend. Over the past 12 months, average hourly wages for all private sector employees rose by 4.9%. Meanwhile, higher income workers are emboldened by their soaring stock portfolios and padded bank accounts. Indeed, with higher wages and pandemic relief subsidies, stay-at-home Americans saw an unprecedented surge in their savings rate that was nearly twice as high as before the pandemic.
  5. Worker fatigue. The US is known as the “no-vacation nation” because it offers far less time off than other advanced countries like Germany. A new report, “Women in the Workplace,” by the consulting firm McKinsey & Co. found that “Women are even more burned out now than they were a year ago, and the gap in burnout between women and men has nearly doubled,” with 42% of women saying they feel burned out. But some people have taken advantage of more flexible work hours to spend more time with their families. With rising vaccination rates and a recovering job market, they are in no rush to go back to their lousy, pre-pandemic jobs as they try to shift their work-life balance.

All of these factors combined have caused more workers to feel like they can roll the dice and quit their jobs, particularly with so many “Help Wanted” ads beckoning to them.

Worker power ascendant – or illusory?

Some labor advocates have portrayed these trends as a sign that worker power is finally recovering after decades of stagnant pay and gutted labor law. Former Secretary of Labor Robert Reich crowed, “For the first time in decades, American workers are standing up and demanding better wages and improved working conditions,” giving them more bargaining leverage. He went so far as calling it “an unofficial general strike.” Certainly with many sectors facing severe labor shortages, workers can more easily find new jobs, whether in high tech or restaurants and trucking companies. The pandemic also has created many more remote jobs, and expanded the number of companies willing to hire remotely outside of big, coastal cities, creating still more opportunities.

So maybe Reich has a point. But there also is evidence that it could be a grand illusion, based on a statistical fluke. For example, the overall annual quits total plunged during the pandemic by about 500,000, suggesting that a lot of people clung to a job they didn’t like instead of quitting out of fear of not finding new employment. Are they now making up for lost time by quitting in larger numbers, and the levels will eventually even out? Also, if the 1.6 million people not in the labor force due to COVID-related issues (see number three above) were added back in, it would reduce by more than one-third the falloff in labor force participation since the start of the pandemic .

It’s possible that many workers have been lulled into a false sense of opportunity

What makes this so puzzling is that not that many Americans can actually afford to quit their jobs, even a hated one. But they are doing it anyway. It’s possible that many workers have been lulled into a false sense of opportunity by their higher savings and government support during the pandemic. Post-pandemic, the number of workers doing gigs for employment has increased dramatically (with one major exception being Uber drivers, many of whom have not returned to their crappy taxi jobs). This trend has occurred alongside a substantial increase in the number of remote workers (previously I wrote about these “distributed workers” for Mitbestimmungsportal).  Business Insider reports that one study sponsored by Upwork, a global gig economy company, found that 24% of workers started freelancing and doing gig work during the pandemic. Many of these were people who lost their jobs and took up solo self-employment.

So a significant number of workers seem ready to accept the risk of trying something different — a new gig job, a new employer, some retiring early despite barely adequate savings. Some younger workers have been inspired by watching a handful of their lucky peers get rich by gambling on cryptocurrencies. More workers entertain fantasies that working freelance and grey market jobs might provide sufficient income.

Is this tantamount to taking a vacation on a credit card? Perhaps.

“A whole lot of this is a mirage,” says Adam Ozimek, the chief economist at Upwork. We have seen examples of this short-lived euphoria in the past, with the hype that first championed the gig economy. ’The work will come to you, and you will be able to set your own hours and wages,’ proclaimed the evangelists of Silicon Valley. But in many cases the joy of flexibility is short lived and over-romanticized. After a while these workers become worn out running on the hamster wheel from job to job, never knowing how much income they can rely on from month to month.  Is it possible that these workers of the Great Resignation will end up back in regular jobs once they have spent down their savings?

If this moment does not result in a gain of labor union power, its benefits are likely to be fleeting.

A number of labor experts think so. They warn that workers’ newfound bargaining power will not last. “As the pandemic’s extraordinary circumstances are resolved, I think that source of worker leverage will also fade,” says Heidi Shierholz, former chief economist of the U.S. Division of Labor within the Obama administration. Other labor experts say that the ‘Great Resignation’ will soon be replaced by a wave of what they call „boomerang employees“ who will want their old jobs back for a variety of reasons.  Not the least of those reasons, says Shierholz, is that under current law the deck is still stacked against workers. Anti-worker and anti-union laws, including “right to work” laws in 28 out of 50 states which forbid unions from requiring nonmembers in a unionized workplace to pay fees for the benefits they gain from collective bargaining, continue to tilt the playing field. If this moment does not result in a gain of labor union power, and of more workers covered by strong labor contracts, its benefits are likely to be fleeting.

Great Resignation in Europe and Germany?

Oftentimes trends in Europe and Germany lag the US by a few years, such as in the adoption of new science, technology and social policy. Are these job resignation tremors being felt in Europe?

The answer appears to be yes -- kind of. In the UK, job vacancies soared to an all-time high in July, with available posts surpassing one million for the first time. One business survey found that 46% of UK and 42% of Irish workers plan on quitting their jobs in the next year, doubling the numbers from 2019. Politico Europe noted that in the 38 member countries of the OECD, 14 million out of the 20 million fewer people in the workforce are classified as ‘not working’ and ‘not looking for work.’ Young people also have been impacted in hard to define ways, with 3 million more young people not in employment, education or training, compared to 2019.

Tremors of the Great Resignation are keenly felt in Germany, where employees had the most COVID-19-related resignations in Europe – 6% of workers left their jobs. That’s followed by the UK with 4.7%, the Netherlands with 2.9%, and France with 2.3%. More than a third of all German companies have reported a scarcity of skilled workers, according to an Ifo institute survey.

Christoph Hardt, co-founder of Berlin-based business consultancy COMATCH, says that Germany is becoming a pressure cooker of demand – both consumer and labor market – that was largely suppressed for 18 months. Now it is poised to explode as economies recover. Demand is outpacing the job market’s supply, causing a record number of vacancies in Germany. But Hardt believes the current demand for workers will subside over the next year as more and more people get hired.

The implication of these trends is that this worker shortage forms a major obstacle to economic recovery

Bas van de Haterd, a Dutch tech and labor market consultant, sees two major reasons why Europe will not follow in US footsteps. “A permanent contract still has some value in Europe, while in the US, indefinite contracts are generally worthless — so the leap isn’t quite as big,” he says. Business consultant Wim Davidse thinks Europe will see a larger increase of people quitting, due to Covid and “Zoom tiredness,” but nothing as large-scale as in the US. A Great Resignation like in the US, he says, “would seem very un-European to me.” Also, with more family supports like day care and paid sick leave more widely available in various EU member states than in the US, women in the EU are not as employment-limited by their care-giving responsibilities.

The implication of these trends is that this worker shortage forms a major obstacle to economic recovery. For now, many workers remain more choosy, hoping for higher wages and an improvement in working conditions, especially work-time flexibility. But how long can these workers hold out, draining down their savings, waiting for that dream job? As the old labor union slogan used to chime, “One day longer than the boss.” 

Yet already the tide may be shifting, especially for women. The most recent US employment figures reported some healthy job gains, with nearly 57% of the jobs going to women. Just like other parts of the pandemic economy, the employment markets will remain in flux for the foreseeable future.