Asking the tough questions and planning
“The Great Resignation” is a new term that has appeared among economic discourses within and outside the US. Quite simply, many people voluntarily or involuntarily left their jobs during the COVID-19 pandemic. There are not enough people to replace them now that the economy is still recovering from lockdown measures. This phenomenon has created acute labor shortages with mass resignations and many workers seeking new positions and even new industries.
Motivations for changing and moving on
There are many reasons for the great resignation. For example, many workers are looking for higher pay, better benefits, job stability, and the opportunity for flexible working or even working from home. Yet, some industries have traditionally relied on low-paid semi-skilled and unskilled labor that was expected to be physically present at work.
Estimates indicate that in 2021, over 47 million workers left their jobs. This was a record number with specific vulnerabilities in retail and logistics, which lost 11 million workers. The lack of staff is making it difficult for businesses to remain open. The skeleton crews that remain operational are barely keeping up with demand, and some businesses have decided to close because they are not getting the staff they need.
General impacts beyond worker preferences
These mass resignations and job changes may seem like a seller’s market for employees who have choices to exercise. The downside is business owners that are struggling to remain afloat. The impacts go beyond the immediate worker-employee relationship because they cumulatively dampen economic activity. One area that is likely to suffer most is the American supply chain.
It is pertinent to understand the “what,” “why,” and “how” of the great resignation to deal with the problem. Many of the answers are highly individualized, and a generic or summative answer may not be the right one. However, the Pew Research Center survey has identified certain trends and similarities that cannot be ignored:
- 63% of respondents cited low pay
- 63% cited limited advancement opportunities
- 57% cited disrespect in the workplace
- 48% cited childcare challenges
- 45% cited a lack of flexibility in the workplace
- 43% cited poor benefits
Other variables that might come into play
When surveyed, some workers indicated that they were inspired to join the mass resignation because they had been over-scheduled or under-scheduled by their employer. As a result, some employees decided to quit when employers imposed COVID-19 vaccination mandates. Whereas these may appear to be straightforward industrial relations issues that can be resolved with some effort, many additional problems might consequently arise. For example, businesses must make tough decisions about prioritizing stability, efficiency, and profitability. Many of them can only choose one of those three issues to address in their operational priorities.
One of the critical challenges is the fact that many modern businesses are built on models that are not sustainable overall. For example, many contemporary businesses will choose efficiency and profitability over stability. This is particularly important when it comes to making decisions about labor. For example, employers in industries that primarily employ low-skilled labor are not concerned with retention and yet the indicators are that they should.
The Genesis and progress of resignations
Whereas some businesses have rationalized that high turnover rates among entry-level jobs save money to support their bottom line, this approach is catching up with them. A case in point is the assumption that getting rid of staff quickly before their second anniversary of work saves any bonuses and wage increases that would accrue due to extended service. Some even try to get people to resign just before the probationary period is over. That means that the job market for low-skilled labor is a revolving door that many of these businesses leverage to survive.
The other side of the coin is employees that are no longer interested or willing to languish in jobs offering no security and refuse to pay a living wage. Inflation is hitting the consumer market, with some estimates showing that an extra $52,00 is to be added to American annual bills in 2022. Thankless and static jobs are not an attractive option for workers in this economy. Fast-food restaurants were some of the first sectors to experience this phenomenon, with plenty of closed-down signs alleging “staffing issues.” Now it has become a broad problem that can impact the entire economy.
An immediate staffing crisis point is reached
The end of the supply chain suffers from poor recruitment and training patterns. However, that hurt moves to other parts of the chain. For example, we know that at least 20% of resignations in 2021 were in retail, wholesale, logistics, and transportation. That already indicates problems with meeting the demands of the consumer market. The trucking industry is also adding to the woes with its issues of driver shortages running upwards of 80,000 vacancies.
Experienced drivers are retiring, and few suitable candidates want to replace them. The unfillable vacancy trend in trucking will likely worsen in the near term. One of the solutions that had been proposed is the use of autonomous electric trucks. However, the prototypes for this technology are not yet ready for mass production. Yet these sectors have offered nearly 2 million jobs unfilled.
The supply chain continues to challenge the economy
The cost of living is rising, and supply chain problems are likely only to worsen. Last year, inflation was 7%, which is higher than in the previous 40 years. Many necessities like food are becoming unbearably costly for the average American. The working class is disproportionately affected by the inflationary pressures on the economy. Yet, the corporate class continues to survive and thrive. For example, corporate pre-tax profits increased by 25% and stood at $2.81 trillion.
If taxes are excluded, that increase in corporate profits is 37%, the largest increase since the first Federal Reserve records of 1948. The long-term consequences of the great resignation may not be entirely predictable in these initial phases, but it does not mean that they will not occur. Emerging trends suggest a picture that should be concerning to economists and policy formulators. Inflation is affecting the economy in significant and far-reaching ways. For example, gas prices stood at more than $4 per gall in May 2022. They are expected to continue beating that ceiling, at least in the short term.
Global events and local consequences
One of the causal explanations for the rising prices is global events like the much-criticized Russian invasion of Ukraine. Whereas the crisis indeed threatens the supply chain and world peace, it is not the only variable in inflation today. Food prices continue to rise. The logistics sector has many unfilled and possibly unfillable vacancies. The shortages in the rural areas are even worse. The so-called “food deserts” which do not produce their food are likely to suffer even more.
Some people who engaged in the great resignation may want to return but cannot do so because of unforeseen or newly intense challenges such as childcare commitments. The opportunities may exist; yet, the affected people may still opt not to return to work in the same guise as before. Others quit at the heart of the COVID-19 restrictions but are still unable to re-enter the workforce, certainly not on a full-time basis.
How can this problem be fixed?
There is no easily implemented answer to the great resignation. Whereas some answers are straightforward, such as increasing wages or making work more flexible, they cost resources, which some employers can ill-afford. Even those that attempt, may not be able to implement these solutions quickly enough. Inflation means that $15 per hour is no longer a living wage even in the least expensive state. Nevertheless, employers should start thinking about improving their benefits for employees to attract them back to work.
A flexible working arrangement can be attractive. If working from home is not entirely possible, hybrid alternatives should be offered. The workplaces should be more collaborative and supportive than exploitative. Emotional intelligence can help employers understand what is required of them in specific situations. A case in point is the possibility of providing psycho-social support and mental health services to employees.
During the COVID-19 pandemic, many Americans left their jobs. Some did it because they were forced to by the restrictions. However, now that the restrictions have gone, many are unwilling or unable to return. This means that the economy will suffer staff shortages until an appropriate solution is identified and implemented to improve working conditions to attract workers.