What is ‘The Great Resignation’?

Written by: Vincenzo Testa, CPA

It has been almost two years since the entire world shut down. We all remember March 2020; when our places of work sent us home for the day. We did not know what to expect. Who would have known two years later we would still be dealing with the headwinds of COVID-19? We went from hearing about this unfamiliar disease in China, Coronavirus, to it hitting our home in the United States in only a few short weeks. COVID-19 took the world by storm causing businesses across the world to “close up shop” causing employment vacancies across the globe. Even though we are still dealing with COVID, almost all businesses are back open. Why are we still seeing so many help wanted signs and why are businesses closing temporarily due to lack of staff? This is because workers are leaving their jobs in record numbers. This is being referred to as “The Great Resignation”.

This article will answer:

• Why are so many workers leaving their jobs?
• What do the numbers show?
• What should you expect in the future?

Why Are So Many Workers Leaving Their Jobs?

The pandemic has proved that hybrid and remote work isn’t only realistic within almost all companies, but it is also desirable. A study provided by the Wall Street Journal indicated that more than two-thirds of employees prefer working from home. Many workers are leaving positions that did not continue to give them the availability to work from home after the start of the pandemic. Working from home is now considered a necessary perk across the labor markets by most employees.

The Baby Boomer generation makes up a significant portion of the U.S. population. That same generation is reaching retirement age and we are seeing a mass retirement from that demographic of the population. Many younger Baby Boomers are deciding to retire early as well. These events are adding to the mass resignation numbers that we are seeing in this country.

Due to the pandemic, citizens that “took life for granted” had a sudden change of heart. Many workers are also leaving their positions as employees to start businesses and work towards objectives that they are passionate about. COVID-19 forced workers to realize that life is short and that they should not waste at a company with differing values.

The Numbers

In 2021, over 38 million workers quit their jobs. In the past seven months, workers have left their positions at all-time high levels. The industries that are leading the way are hospitality, retail and leisure. Many economists are expecting quitting rates to continue. Although, some economists think this phenomenon is in its waning stages.

In November 2021, the labor participation rate was 61.6%, which is slightly below its pre-pandemic level. We are now starting to see an increase in labor participation and this metric is a significant driver in the Fed’s decision making arsenal to potentially raise rates.

In October 2021, wages rose 4.9% year over year. This indicates that the bargaining power of workers has increased and employers are paying higher wages. The rise in wages is also correlated to the abnormally high inflation that the U.S. economy has seen in 2021. The consumer price index elevated 7% in 2021, which is the largest 12-month gain since June 1982. This naturally has caused a rise in wages across the country.

What To Expect

There is no doubt that COVID-19 has changed the dynamic of the American workforce forever. Although, the mass resignation that we are seeing is an event that only a scarce group of economists could have predicted. This abnormal dynamic that we are seeing in the labor force is the effect of an array of economic, social and psychological factors in the American worker. No economist has a crystal ball and there will always be differing opinions regarding the subject matter. Only time will tell if “The Great Resignation” will be longer lasting than solely the year 2021.

If you have any questions regarding “The Great Resignation”, please feel free to contact us to set up a meeting.

Resources:

 What to Do When All Your Employees Want to Leave – WSJ

2021 Was the Year of Quits, With Over 38 Million Workers Leaving – Business Insider

 

Bouchey Financial Group is a fee-only, fiduciary, financial advisory firm with locations in Saratoga Springs & Troy, NY.