Written by Nabil Chamra
In both August and September of this year, there were record numbers of Americans who left their jobs. 4.27 million people quit their jobs in August, a record at the time before it was broken by the revelation that 4.43 million people quit their jobs in September (Casselman). At face value, it is surprising to see so many Americans quitting their jobs during a pandemic that has produced nothing but uncertainty in the economy since it began. As such, it is important to understand why this is happening and the potential consequences it could have on the economy.
Why it is happening
The pandemic has had an enormous impact on people’s lives. It has changed the way we all live and what we value. UC Berkeley economist Ulrike Malmendier writes in a newly published paper that people’s pandemic experiences have led them to be more willing to quit their jobs to seek better opportunities (Rosalsky). She writes that specifically, negative economic shocks such as spikes in unemployment or a stock market crash can have far-reaching effects on people’s economic decision-making, especially in the short-term. For example, the strain of remote work could make someone much more likely to leave their job and unlikely to return until the pandemic subsides. She hypothesizes that not only will the negative effects of the pandemic affect people’s career decisions, but it could change their economic decision-making forever due to the mental effects of the pandemic
Another reason why people are quitting their jobs is simply that they are being overworked due to the ongoing labor shortage. “We are seeing big pickups in quits in the industries that are having the hardest time hiring right now,” said Nick Bunker, director of economic research for the job site Indeed (Casselman). Industries experiencing the worst understaffing such as restaurants and health care are putting more strain on their workers, causing even more people in these industries to quit their jobs. The labor shortage itself could also be causing more people to quit their jobs. Since there are many jobs available, people are seeking to better their working conditions now while they have increased opportunities to do so. The labor shortage has forced employers to raise wages and benefits in order to attract workers, and many people seem to be taking advantage of the hot labor market. Increased career opportunities and improved financial flexibility from pandemic savings have also contributed to the large amounts of people quitting. “People are rethinking their work, and they are sitting on an unprecedented amount of savings — people feel very comfortable that they can find a new job, and that’s what we think of when we think of a strong labor market,” said Liz Wilke, chief economist at Gusto (Liu). All in all, the pandemic’s effect on economic decisions, the labor shortage, and the surplus in personal savings have combined to result in record amounts of people leaving their jobs in August and September.
The Economic Consequences
The record amount of quits is going to adversely affect the economy. One consequence noted by Goldman Sachs is that two-thirds of the people who have left their jobs during the pandemic are over 55, and many of them are now retired and not coming back to work (Casselman). This has certainly contributed to the ongoing labor shortage as it has lowered the labor-force participation rate, a metric used to gauge what percentage of the working-age population is either employed or looking for a job. The labor-force participation rate is currently at 61.6% which is down from its pre-pandemic level of 63.3%, so this holds true.
As mentioned previously, employers have been forced to increase wages and benefits to attract workers due to the labor shortage. As a result, more people have gained the confidence to quit their jobs due to the increased opportunities available to them. As the labor shortage continues, wages and benefits are going to continue to improve, which will continue to drive the record amount of people leaving their jobs and further drag out the labor shortage. “You’re seeing an economy where leaders have rushed to adapt by raising wages,” Pollak says, “and followers slower to adapt, due to regulation or institutional arrangements, will be under enormous pressure to make changes to catch up. As they play catch-up, you’ll see more demand for workers, and exciting outside opportunities for workers who can quit (Liu).” This positive feedback mechanism is going to extend the labor shortage into 2022.As the world is potentially under threat for another wave of Covid-19 due to the Omicron variant, it could be a long time before the current labor shortage ends.
Americans are quitting their jobs at record rates, and now that we have an understanding as to why that is and what the consequences will be, the pandemics’ far-reaching effects on the economy are even more evident than ever before.
Works Cited
Casselman, Ben. “The Number of U.S. Workers Quitting Their Jobs in September Was the Highest on Record.” The New York Times, The New York Times, 12 Nov. 2021, https://www.nytimes.com/2021/11/12/business/economy/jobs-labor-openings-quit.html.
Liu, Jennifer. “A Record 4.4 Million People Quit in September as Great Resignation Shows No Signs of Stopping.” CNBC, CNBC, 12 Nov. 2021, https://www.cnbc.com/2021/11/12/a-record-4point4-million-people-quit-jobs-in-septemb er-great-resignation.html.
Rosalsky, Greg. “Why Are so Many Americans Quitting Their Jobs?” NPR, NPR, 19 Oct. 2021, https://www.npr.org/sections/money/2021/10/19/1047032996/why-are-so-many-american s-quitting-their-jobs.