The Great Resignation: The Tidal Wave Will Subside

Data from the Bureau of Labor Statistics has shown conclusively that an average of 4 million employees per month have been voluntarily leaving their jobs. This has created an extreme shortage of workers, forcing employers to raise wages and rethink their employment practices.

We don’t believe this “great resignation” will become a permanent fixture of the U.S. economy. It is not an organized movement or even a spontaneous confluence of events. Rather, it is an outgrowth of pent-up demand and host of other factors likely precipitated by the pandemic.

Consider first that not all industries are experiencing very high “quit” rates. The sectors hit the hardest have been hospitality, food services, healthcare, education and specific segments of retail and manufacturing. Most of these employ lower-paid workers (hospitality, food services and retail) or have been hard hit by the pandemic-imposed burnout like health care and education. Largely office-based industries like finance and investment did experience talent crunches but not the widespread resignations of these other sectors.

The rather sudden outburst of inflation is largely seen as a primary motivator of low-paid hourly workers to seek higher wages.

Mid-Level Millennials Seek Advancement

Studies have indicated that mid-level employees—many millennials-are not hesitating to move on as they look for jobs with greater advancement opportunity.

“It’s also possible that many of these mid-level employees may have delayed transitioning out of their roles due to the uncertainty caused by the pandemic, meaning that the boost we’ve seen over the last several months could be the result of more than a year’s worth of pent-up resignations,” according to a study reported in the Harvard Business Review, “Who is Driving the Great Resignation.”

Wages and flexibles schedules are the two main drivers of the great resignation, according to Richard Wahlquist, CEO of the American Staffing Association. Employees who had gotten a taste of remote work during the pandemic, are demanding, and in many cases, receiving “work from anywhere” benefits.

“I think part of it reflects concerns about COVID and exposure to COVID, especially in jobs that involve public facing activities,” said Treasury Secretary Janet Yellen. Yellen commented that childcare workers and educators are in short supply, which also tends to suppress labor supply, especially among women. “When we really get control of the pandemic, I think the labor supply will go back to normal.”

Our take is that the hot, high growth economy, fueled by the emerging demand for all kinds of goods and services is a big reason for current talent shortages. As the economy cools, perhaps as a result of the Fed starting to raise interest rates, these huge turnover reports will subside.

It’s important to note that the U.S., economy driven by innovation, will have talented employees continuously seek advancement and new jobs or careers. How should employers respond?

First, don’t over promise in the hiring process and raise potentially unfulfilled expectations. Make sure salaries are competitive within industry and job category classifications. Have managers conduct comprehensive “exit interviews” to learn the “real” reason employees are quitting.

Finally maintain an equitable and flexible work environment. According to a MIT Sloan Management Review study, toxic culture is a primary reason for turnover. It includes “failure to promote diversity, equity, and inclusion; workers feeling disrespected; and unethical behavior.”