The Great Resignation Didn’t Start with the Pandemic

The Great Resignation Didn’t Start with the Pandemic

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Covid-19 spurred on the Great Resignation of 2021, during which record numbers of employees voluntarily quit their jobs. But what we are living through is not just short-term turbulence provoked by the pandemic. Instead, it’s the continuation of a trend of rising quit rates that began more than a decade ago. Five main factors are at play in this trend: retirement, relocation, reconsideration, reshuffling, and reluctance. All of these factors, the authors argue, are here to stay. They explore each in turn and encourage leaders to examine which of them are contributing most to turnover in their organizations, so that they can adapt appropriately as they move into the future.

The numbers are sobering.

In 2021, according to the U.S. Bureau of Labor Statistics, over 47 million Americans voluntarily quit their jobs — an unprecedented mass exit from the workforce, spurred on by Covid-19, that is now widely being called the Great Resignation. Worker shortages are apparent everywhere: Gas stations and dentists offices alike have reduced their hours of operation because they can’t find new employees to replace those who have quit. The Great Resignation, we’re told, has upended the relationship between workers and the labor market.

But such talk is overblown. A record number of workers did quit their jobs in 2021, it’s true. However, if you consider that number in the context of total employment during the past dozen years, as illustrated in Figure 1, you can see that what we are living through is not just short-term turbulence provoked by the pandemic but rather the continuation of a long-term trend.

The figure — and the numbers — tell a clear story. From 2009 to 2019, the average monthly quit rate increased by 0.10 percentage points each year. Then, in 2020, because of the uncertainty brought on by the Covid-19 pandemic, the resignation rate slowed as workers held on to their jobs in greater numbers. That pause was short-lived. In 2021, as stimulus checks were sent out and some of the uncertainty abated, a record number of workers quit their jobs, creating the so-called Great Resignation. But that number included many workers who might otherwise have quit in 2020 had there been no pandemic. We’re now back in line with the pre-pandemic trend, which is one that American employers are likely to be contending with for years to come.

In our view, five factors, exacerbated by the pandemic, have combined to yield the changes that we’re living through in today’s labor market. We call these factors the Five Rs: retirementrelocationreconsideration, reshuffling, and reluctance. Workers are retiring in greater numbers but aren’t relocating in large numbers; they’re reconsidering their work-life balance and care roles; they’re making localized switches among industries, or reshuffling, rather than exiting the labor market entirely; and, because of pandemic-related fears, they’re demonstrating a reluctance to return to in-person jobs.

By looking at how each of these factors has contributed to the Great Resignation, we can gain a helpful understanding of the forces that are shaping worker behavior today — and will do so for the foreseeable future.

Retirement

Academic studies and online surveys alike have consistently found that the Great Resignation might better be thought of as the Great Retirement. In 2021, older workers left their jobs at an accelerated rate, and they did so at younger ages. They made these decisions out of a desire to spend more time with loved ones and to focus on priorities beyond work; they made their moves with confidence thanks to surging stock markets and buoyant residential property values; and a significant older cohort also left because of their greater susceptibility to serious Covid health risks.

This pattern is quite different from the last big crisis. During the Great Recession, between 2007 and 2009, there was a 1.0% increase in workforce participation among workers 55 years and older, whereas during the Great Resignation there was a 1.9% decline.

Relocation

Stories about highly skilled knowledge workers abandoning the Bay Area in favor of scenic resorts in the Rockies make for interesting articles, but relocation has not played a material part in the Great Resignation. The overall movement rate in 2021 was the lowest on record for more than 70 years. Rates of relocation have been declining steadily since the 1980s, and Covid has not reversed that trend. Moreover, those people who did move disproportionately stayed local. Moving within one’s county of residence has remained the most frequent from of relocation; moving to a different state has remained the least frequent.

Reconsideration

Observers have suggested that the many deaths and instances of serious illness brought about by the pandemic have caused people to reconsider the role of work in their lives. That shift in perspective is likely to have motivated some workers to quit, especially those who were burning out in demanding jobs that intruded on their ability to care for their families. Women have been affected more than men, and younger age groups more than older ones.

Burnout has occurred notably among frontline workers, parents and caregivers, and organizational leaders. Turnover is a natural consequence. Because care obligations fall disproportionately on women, industries such as hospitality, where women comprise the majority for hourly workers, have seen larger numbers of quits. A 2021 Women in the Workplace report found that one in three women are considering leaving the workforce, switching jobs, or cutting work hours. This is often a forced choice — many women have no option other than leaving to meet caregiving obligations.

In white-collar industries, such as consulting and finance, junior personnel have also experienced notable levels of burnout. Such industries have had robust demand during the pandemic, obliging staff to work extremely hard without benefiting from the training, mentorship, and client interaction that previously made such jobs rewarding. Those experiences may have changed young workers’ tolerance for the demands of such workplaces.

Reshuffling

Bharat Ramamurti, the deputy director of the National Economic Council, recently coined the phrase the Great Upgrade to refer to the pattern of higher quit rates in lower-wage industries. Accommodation and food services and leisure and hospitality had the highest quit rates; retail trade and non-durable manufacturing experienced the greatest growth in their rates. Such spikes in turnover have not been limited to industries with a large percentage of low-wage workers. Professional and business services also registered a high quit rate and considerable growth in that rate.

But not all of these workers are leaving the labor market. There is evidence that many are “reshuffling” — that is, moving among different jobs in the same sector, or even between sectors. According to an analysis of BLS data conducted by the Economic Policy Institute in November of 2021, hiring rates are exceeding quit rates across many sectors, which suggests that high wage growth is attracting new applicants to open positions — and that many workers are both able and willing to accept jobs that are sufficiently attractive.

Having recognized this, some companies are taking action. An analysis by the Brookings Institution revealed that employers in industries with the highest quit rates have responded by raising wages sharply in an effort to rebuild their staffs. In 2021, McDonalds increased hourly wages for current employees by an average of 10% and raised entry-level wages between $11 and $17 an hour. The company also improved its benefits packages (including emergency childcare, paid time off, and tuition reimbursement). As a result, it successfully expanded its headcount in 2021, ending the year with higher staffing levels than it had at the beginning.  At the same time, Walmart has announced a $1 billion Live Better U program, which during the next five years will pay 100% of the cost of college tuition and books for the company’s associates. That investment, the company hopes, will not only attract workers but improve retention.

Reluctance

Fear of contracting Covid in the workplace has made many workers reluctant to return to the office. In a recent Pew Research Center survey of 5,858 working adults, 64% of workers reported feeling uncomfortable returning to the office, and 57% reported choosing to work from home due to concern over exposure to Covid. Research reported in the Harvard Business Review indicates that many workers are prepared to quit if their employer does not offer a hybrid-work option: In a survey of over 10,000 Americans conducted in the summer of 2021, 36% of workers said that if not given a hybrid or remote option, they would search for an alternative, and 6% reported being willing to quit outright, even without a new position in hand.

. . .

The Great Resignation did not appear out of nowhere. Spurred on by the pandemic, it was a natural consequence of the five factors we’ve discussed in this article: retirement, relocation, reconsideration, reshuffling, and reluctance. Business leaders across sectors and industries will benefit from understanding which of these factors are contributing to turnover in their organizations, and from developing specific responses to stem that tide as Covid evolves from a pandemic to an endemic disease. As that happens, companies that have the vision and resources to offer flexibility to their employees are the most likely to maintain a stable and competitive workforce. And the companies best able to attract and retain talent will be those offering benefits that address the changing needs of workers. Similarly, companies that demonstrate a commitment to improving their employees long-term career prospects by offering training and tuition reimbursements will garner greater loyalty and gain in stature with prospective employees. The Great Resignation was no anomaly; the forces underlying it are here to stay.

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