Alexis Loh, Archive, Domestic Affairs
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The Great Resignation: Are workers finally fighting back?

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By Alexis Loh

Something phenomenal is happening in the American labor market. In 2021, 47 million workers in America resigned from their job – 3% of the nation’s total workforce per month. The staggering number of workers quitting have led some to dub this period the “Great Resignation”. Resignation is sometimes seen as an indicator of workers’ optimism of growing economic opportunity, but what makes the Great Resignation so remarkable is that it is happening at a moment of great economic uncertainty. Inflation is steadily creeping up, while the government’s Covid stimulus will soon run dry. So the question remains: why are employees so insistent on leaving their jobs, and has it really made things better for them? 
The pandemic has been a time of great hardship, prompting many Americans to take a critical relook at their current employment. Many employees face increased pressure as they battle pay cuts and staff shortages, building to an unsustainable level of burnout. The sectors worst hit by the pandemic, such as healthcare and retail, experience high rates of attrition, but it is also worth noting that worker resignation has also affected white-collar jobs to the same extent. Even within industries, resignation rates between companies also vary vastly. Surprisingly, companies with notoriously high turnover rates, such as Tesla and Goldman Sachs, also offer highly competitive compensation, indicating that workers are looking beyond their paycheck in deciding their career paths.

Figure 1: Average attrition rate by industry from April to September 2021. Industries with a high percentage of blue-collar workers are in light blue. (Source)

So what are employees looking for? The short answer to that question is a sense of self. The pandemic has left workers feeling unappreciated and replaceable, and the move to work from home exposed the inefficiencies of many companies. The wave of tragedy that Covid brought and the inability to grieve while balancing work commitments has also been a major catalyst for many to question their current priorities. Employees are starting to put their own needs in the forefront.  A recent study of 1.4 million Glassdoor reviews indicated that employees dissatisfaction with wages only ranked 16th out of reasons why they left their jobs. Instead of money, workers care more about “toxic corporate culture” and “failure to recognize employee performance”. It is also telling that the greatest increase in resignation rates came from workers aged 30 to 45, most likely mid-level employees seeking a change in career paths.

Figure 2: Different reasons workers cite for leaving their job compared to poor compensation, i.e. toxic corporate culture is mentioned 10.4 times more than compensation. (Source)

In addition to the massive rate of resignation, when the pandemic upended the American economy, 2 million Americans left the labor force entirely. Some were older workers afraid of infection, and others were unable or unwilling to return to their jobs in daycare or schools. The result is an overwhelming shortage of labor. In December 2021 there were almost 11 million job vacancies, or nearly twice the number of unemployed workers. The labor crunch has put an upward pressure on wages, which climbed 4.7% year over year in 2021. Employers are also offering signing bonuses and flexible working options in a bid to attract more employees, but thus far they have been ineffective in dampening high turnover rates.
But despite the opportunity to explore new career paths and the wage increases brought about by the wave of resignations, the situation has not improved for many. The increase in wages, combined with massive Covid-time government injections into the economy and supply chain shortages, have placed immense upward pressure on inflation. The inflation rate between 2021 to 2022 was 7.5%, the highest annual increase since 1982. This means that despite gains in wage rates, real wages fell by 2.4% in 2021. If anything, wages have not increased enough.

Figure 3: Annual Percentage Change of Average Hourly Earnings. (Source)

And though the jobs market is currently seeing an unprecedented level of unfilled roles, many workers are still unsuccessful in their job search. On one hand, this could be due to workers’ expectations of higher wages, increased flexibility and more benefits. On the other hand, many employers still remain highly selective, holding out for candidates that have greater experience, better availability and preference for in-person work, even amidst the massive labor crunch. Around 90% of major companies used computerized screening of resumes which automatically reject “problematic” resumes, such as those with long breaks between jobs, or insufficient years of experience. Nearly half of employers surveyed by a Harvard Business School study said they would immediately reject any candidate who was “long-term unemployed”, or unemployed for at least six months, even though in December 2021, there were 2 million such Americans

The shake-up in the jobs market as a result of the pandemic has given workers a much-needed opportunity for change, but has also left others at the end of their rope. While workers’ demands and backgrounds have changed drastically in the past few years, many employers have yet to adapt their expectations, merely raising wages in a bid to find the perfect fit. While employees anticipate companies caving in to their demands due to labor shortages, employers are hoping that the decline in Covid-related government subsidies will make employees too desperate to maintain higher expectations. It is difficult to say which side will give in first, but the current push back from workers could have the potential to shape what employment looks like in the long-term. The question is whether employers are willing to budge. □

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