“The mass of men lead lives of quiet desperation. What is called resignation is confirmed desperation.”
— Henry David Thoreau
“Please accept my resignation. I don’t care to belong to any club that will have me as a member.”
— Groucho Marx
“The evil which one suffers patiently as inevitable seems insupportable as soon as he conceives the idea of escaping from it.”
— Alexis de Tocqueville
“A desk is a dangerous place from which to view the world.”
— John le Carre
“Most people will choose unhappiness over uncertainty.”
— Tim Ferriss, Four-Hour Work Week
“Work without love is slavery.”
— Mother Teresa
“Your days are numbered. Use them to throw open the windows of your soul to the sun. If you do not, the sun will soon set, and you with it.”
— Marcus Aurelius
“I think the person who takes a job in order to live — that is to say, for the money – has turned himself into a slave.”
— Joseph Campbell
Although The Great Resignation happening has been overtaken lately by the Ukraine-Russia conflict and rampant inflation, there are still quite a few stories about it – based on the Bureau of Labor Statistics (BLS) monthly “Job Quits” report.
These are typically based on still record-high monthly quit rates – as high as 4.5% of the labor force. Over a year, if sustained, that is more than 50% of the workforce quitting. Catastrophe? Not really …
The high BLS Quits rate is only half the story
Oren Barzilai in VentureBeat notes that: “The Great Resignation is a myth: Meet the Great Reprioritization”
“A recent survey by Bankrate.com found that 55% of Americans plan to seek new jobs in the coming year. And Deloitte revealed that over 50% of CEOs cite talent recruitment and retention as the most significant challenges going into 2022. What’s more, they’re worried that failing to stop the ‘bleeding’ of lost employees will be a major barrier to progress in the next year.”
The key figure here is that 55% of employed workers plan to seek new jobs in the near future. This probably means that most are actively job-hunting right now. Given the high number of current job openings and the trend of increased wages and better working conditions by employers, a good many of these folks will simply job-switch – a quit-plus-hire process – during the next year or so.
The Myth: The record number of job quits reflects The Great Resignation of those who feel underpaid, unvalued, or other negative in their now-former jobs. As noted above, if this were the whole story, then – yes, catastrophe.
However, the other half of the jobs story is much more positive
Derek Thompson, staff writer for The Atlantic, tells the real story: “Three Myths of the Great Resignation”
“Myth 1: The Great Resignation is about quitting. But that’s what’s happening in the broader economy. The increase in quits is mostly about low-wage workers switching to better jobs in industries that are raising wages to grab new employees as fast as possible. From the quitter’s perspective, that’s a job hop. The low-wage service-sector economy is experiencing the equivalent of “free agency” in a professional sports league. That makes it more like the Big Switch than the Big Quit.”
“Let’s zoom in on one sector: the accommodations and food-services industry. Mostly composed of restaurants and hotels, this sector has seen more quits than any other part of the economy. But it’s not bleeding jobs. Quite the opposite: Accommodation and food services added 2 million employees in 2021, more than any other subsector I could identify.”
The Reality: Hires greatly exceed the number of Quits. The BLS, which tracks these sorts of things, reports: “Job Openings and Labor Turnover Summary [Tuesday, March 29, 2022]”
“Hires. In February, the number of hires edged up to 6.7 million (+263,000). The hires rate was little changed at 4.4 percent. Hires increased in construction (+75,000). Hires decreased in information (-29,000). The number of hires was little changed in all four regions. “
“Separations. Total separations includes quits, layoffs and discharges, and other separations. Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. Layoffs and discharges are involuntary separations initiated by the employer. Other separations includes separations due to retirement, death, disability, and transfers to other locations of the same firm.”
“In February, the number and rate of total separations were little changed at 6.1 million and 4.1 percent, respectively. Total separations decreased in information (-45,000) and in finance and insurance (-41,000). The number of total separations was little changed in all four regions.”
“Quits. In February, the number and rate of quits were little changed at 4.4 million and 2.9 percent, respectively. Quits increased in retail trade (+74,000); durable goods manufacturing (+22,000); and state and local government education (+14,000). Quits decreased in finance and insurance (-30,000). The number of quits was little changed in all four regions.”
“Layoffs and Discharges. In February, the number of layoffs and discharges was little changed at 1.4 million. The rate was unchanged at 0.9 percent. Layoffs and discharges decreased in information (-60,000). The number of layoffs and discharges was little changed in all four regions.”
Hires at 6.7 million – Quits at 4.4 million
To me, this seems like some pretty good news. Especially compared to all of the other, mostly bad, news these days. Still way more job openings – 11.3 million in February 2022 according to the BLS – than hires at 6.7 million, which looks more like a relatively strong overall job market.
So, the Great Resignation is only one-half of the full story – making it nowhere near as great as claimed. A better description might be The Great Hiring or the Great Job Transition, as I argued in a couple of earlier posts (here and here).
Well, maybe not such a good story after all – for employers
High quits mean high recruiting costs for employers. According to recruiter Zippia, the average cost per hire is $4,425. The median in this steeply skewed cost curve is just $1,633 for non-executives (the bulk of new hires). For executives, the average cost per hire is $14,936.
Using the overall average of $4,425, a 4.4 million annual quits level adds up to roughly a $20 billion annual hiring direct cost. Zippia also notes the hidden costs of turnover, including:
- Average productivity rates for new employees hoover around 25% during the first 30 days of employment.
- It takes 12 weeks for an employee to become fully productive.
- A bad hire could cost a company up to 300% of the employee’s salary.
- Companies can lose $15,000 or more on hiring an employee who leaves after one year or less.
These figures probably reflect “normal times”, which have become obsolete since 2020. Today’s costs must be substantially higher.
Changing jobs is painful and difficult for most people
It generally takes a great deal of motivation for a typical employee to begin job-hunting. That motivation is mostly generated by things like bad working conditions, bad job design, inadequate compensation for work required, and management deficiencies. The actual list is likely much longer.
Jake Wilder in Medium.com has yet another take on what might be going on: “The Great Resignation is in Response to a Broken System”:
“Looking for a new job is awful. Sane people wouldn’t subject themselves to sending their resume into a black hole and dealing with fickle hiring managers unless it’s better than the alternative of staying where they are. They don’t feel appreciated or don’t see a future where they’ll continue to grow and advance. They don’t believe in the mission. They don’t feel a connection to their manager and coworkers.”
Wilder also offers an interesting idea on what management should focus on to reduce turnover:
“If you have high turnover, it naturally causes you to start thinking about how to reduce that turnover. Which brings you to think about how you can keep the people that left. But that’s a flawed model. Your focus shouldn’t be on keeping the people who left. It should be on keeping the people you still have. The highest priority should be meeting their needs.”
“This is the group that’s keeping everything together. They’re the ones working more hours and putting in more effort to make up for the increased attrition. They’re the ones putting in more time and energy to train a new batch of recruits. They’re overworked and underappreciated and if companies don’t stop taking them for granted, they’re likely to leave as well and further exacerbate the problem.”
“They also represent the best opportunity to get to the root of the problem — creating better jobs.”
How bad jobs factors get fixed
Bad jobs factors, as noted above, include bad working conditions, bad job design, inadequate compensation for work required, and management deficiencies. The full list is almost certainly much longer. How can such negative jobs factors have persisted for so long?
The answer, it seems, is that there were few alternatives for most workers. You simply took the best job you could find among bad alternatives and made do. Without any great range of alternatives, turnover was comparatively low.
The Quits Rate chart shown below taken from the St. Louis Fed shows twenty years of Quits monthly data. Until 2020, the non-recessionary period rate was in the 1.8% to 2.4% (of total non-farm labor force) range. At the moment (March 2022), we are around a 3.0% quits rate, up from 2.2 pre-COVID%. Something happened in 2020 that caused the quit rate to jump so suddenly and substantially.
COVID? I don’t think so. What really changed was lockdowns, work from home, and hybrid work. COVID simply pulled the trigger on this fundamental work and workplace change that was occurring, but slowly, during normal times. Today, workers have a far greater choice of working arrangements and worker shortages are driving up wages and job openings.
Many of these work and workplace changes will not be reversible. They are here to stay, and will continue to evolve in favor of the worker.
Workers rather than employers are much more likely to be in charge
Almost forever, work and workplace power was firmly in the hands of employers. There were usually more workers available than jobs. Given that most workers are addicted to eating regularly and having a roof over their heads, they mostly took whatever was available.
The changes wrought, and still being wrought, by COVID gave many workers a chance to be largely on their own. Work-life balances became not just important but generally addressable to a great degree by workers. Smart employers are responding effectively and quickly.
Employers who persist in now-obsolete work practices and workplaces – like everyone back to the office – are going to be introduced to Charles Darwin shortly. Adapt or die was one of his important messages.
Worse yet, your most-capable and self-confident employees may leave
You will not be surprised to hear my theory that it is your best employees – those brimming with self-confidence, capabilities, and experience – who are most likely to leave. The rest may not be willing to face a job hunt and possibly an uncertain future as a self-employed or freelance worker. This may occur no matter how much you try to adapt your work and workplace.
Some of these may well become your next new competitors.
Wolf Richter in his WolfStreet.com blog wrote early in 2022 about new business formations: “A Factor in the Bizarre ‘Great Resignation’ & ‘Labor Shortage’ Phenomenon: The Huge Surge of Americans Starting Businesses”:
“New business formations in December, based on applications for an Employer Identification Number (EIN) with the IRS, jumped another 20% from the already high December last year, and by 34% from December 2019, according to the Census Bureau.”
“The explosion of business applications began in June 2020 when stimulus checks, extra unemployment benefits, PPP loans, and other government moneys washed over the land – and when millions of jobs just vanished. And it continued through December 2021. But the spike has been losing some steam in recent months:”
“These huge numbers of new business formations every month since June 2020 are a piece of the bizarre puzzle of labor shortages, combined with huge record numbers of people who quit their jobs – a record 4.31 million workers ‘quit’ in the private sector in November, up 30.6% from November 2019 – mostly to take a job with better pay as companies got aggressive in recruiting by offering higher compensation and better working conditions.”
“But some of them quit for other reasons, including because they’ve had it, and they’ve come up with a plan, and they’ve got the resources, and they struck out on their own and started a new business – not some gig, for which they can just use their Social Security number, but a new business for which they filed an EIN application with the IRS.”
How many of these might become strong competitors to their former employers?
Note that the chart shows EIN business applications of around 500,000 per month! At this rate, there will be around 6 million new business formations over the next year. Plus a huge number of unincorporated businesses and freelancers.
Bottom line:
The Great Resignation seems to be largely one of quitting a job that sucks and finding a new job that sucks at least somewhat less. Relatively few quits seem to be going into self-employment or gig life – too much uncertainty and major income variations. Plus, hustling for work 24/7 is not a happy thought for many folks.
In this post, I had a deeper look into what the Great Resignation may actually be and where things might be heading. Findings indicated that the Great Resignation is not really all that great and that the full picture is fairly bright for employees. But not so much for employers.
Related Reading
Derek Thompson wrote in The Atlantic that: “The Great Resignation Is Accelerating”:
“’Quits,’ as the Bureau of Labor Statistics calls them, are rising in almost every industry. For those in leisure and hospitality, especially, the workplace must feel like one giant revolving door. Nearly 7 percent of employees in the ‘accommodations and food services’ sector left their job in August. That means one in 14 hotel clerks, restaurant servers, and barbacks said sayonara in a single month. Thanks to several pandemic-relief checks, a rent moratorium, and student-loan forgiveness, everybody, particularly if they are young and have a low income, has more freedom to quit jobs they hate and hop to something else.”
“As I wrote in the spring, quitting is a concept typically associated with losers and loafers. But this level of quitting is really an expression of optimism that says, We can do better. You may have heard the story that in the golden age of American labor, 20th-century workers stayed in one job for 40 years and retired with a gold watch. But that’s a total myth. The truth is people in the 1960s and ’70s quit their jobs more often than they have in the past 20 years, and the economy was better off for it. Since the 1980s, Americans have quit less, and many have clung to crappy jobs for fear that the safety net wouldn’t support them while they looked for a new one. But Americans seem to be done with sticking it out. And they’re being rewarded for their lack of patience: Wages for low-income workers are rising at their fastest rate since the Great Recession. The Great Resignation is, literally, great.”
“But we may instead look back to the pandemic as a crucial inflection point in something more fundamental: Americans’ attitudes toward work. Since early last year, many workers have had to reconsider the boundaries between boss and worker, family time and work time, home and office.”
A Pew Research Center survey has some interesting data on why workers quite their jobs: “Majority of workers who quit a job in 2021 cite low pay, no opportunities for advancement, feeling disrespected”
“About four-in-ten adults who quit a job last year (39%) say a reason was that they were working too many hours, while three-in-ten cite working too few hours. About a third (35%) cite wanting to relocate to a different area, while relatively few (18%) cite their employer requiring a COVID-19 vaccine as a reason.”
“When asked separately whether their reasons for quitting a job were related to the coronavirus outbreak, 31% say they were. Those without a four-year college degree (34%) are more likely than those with a bachelor’s degree or more education (21%) to say the pandemic played a role in their decision.”
“For the most part, men and women offer similar reasons for having quit a job in the past year. But there are significant differences by educational attainment.”
“A majority of those who quit a job in 2021 and are not retired say they are now employed, either full-time (55%) or part-time (23%). Of those, 61% say it was at least somewhat easy for them to find their current job, with 33% saying it was very easy. One-in-five say it was very or somewhat difficult, and 19% say it was neither easy nor difficult.”
“For the most part, workers who quit a job last year and are now employed somewhere else see their current work situation as an improvement over their most recent job. At least half of these workers say that compared with their last job, they are now earning more money (56%), have more opportunities for advancement (53%), have an easier time balancing work and family responsibilities (53%) and have more flexibility to choose when they put in their work hours (50%).”
Career counselling firm Ivy Exec has an interesting take on the Great Resignation for business leaders: “8 Great Resignation Myths That Leaders Should Ignore”:
“You’ve seen the headlines. The Great Resignation has, since the spring of 2021 and its signaling of widespread COVID vaccine access, marked a wave of historic employee turnover. And it’s not over yet. With one in four employees having voluntarily left a job in 2021 already, there’s reason to think this ratio will increase even further before year’s end.”
“But for all the commotion — and flat-out fear in employers — that talk of the Great Resignation has inspired, it’s also given way to its share of myths and misconceptions. Below, we heard from leaders in HR and other experts about the eight Great Resignation myths that need to be retired ASAP — including the idea it’s a new phenomenon in the first place.” “1. For workers who are part of the Great Resignation, it’s all about the money. This is perhaps the most widespread misconception about the Great Resignation — and it’s also ‘the most dangerous,’ Dan Close, CEO of We Buy Houses in Kentucky, said. ‘The truth is that a higher income alone may not be enough to keep staff on board; instead, these people are searching for more freedom, better treatment and more complete benefits,’ Close said. ‘This may appear to be a more difficult challenge to tackle, but in reality, you can meet these objectives without causing a significant financial hit to your company — which benefits both you and your staff.’”
