One of the ongoing puzzles of the pandemic economy is the ongoing labor shortage. Business owners continue struggling to find workers amid the so-called “Great Resignation.” However, this is not the first time the labor market has undergone a massive change, but the number of people quitting without taking another similar job is drastically different from previous workforce shifts both in magnitude and in nature.
Voluntary attrition has actually been on the rise for the past decade, accounting for an average of 54.6 percent of total “separations,” according to the U.S. Bureau of Labor Statistics. However, 2021 saw this number spike to 67 percent—the highest rate in the past decade.
People Now, Are Quitting For New Reasons
What’s causing this spike in attrition? There is no one conclusive answer to this question, however, there are a number of factors, that when combined, could be the cause of this current and unprecedented labor shortage.
Employees Want More Money
Wages have been on the rise as employers scramble to lure in workers, but after five decades of declining wages, it may be more of a wage shortage and employees are simply looking for positions that offer more compensation.
Worker pay was already on the rise before the pandemic, as companies struggled to hire enough workers—particularly in blue-collar industries. Many retailers and fast food chains, for example, were raising their minimum wages. But when the pandemic hit and consumer demand skyrocketed, more employers piled on the wage hikes, extra pandemic pay and sign-on bonuses.
According to the Bureau of Labor Statistics, average hourly earnings have ticked up by 4.8% from November 2020. In traditionally low-paying leisure and hospitality, wages have soared by 12.3%.
Employees Are Unhappy At Work
According to an Indeed survey of about 1,000 people who “voluntarily resigned from at least two jobs since March 2020,” most of them (92%) said “the pandemic made them feel life is too short to stay in a job they weren’t passionate about.”
People Are Stressed and Burned Out
In addition to demanding higher pay and rethinking what they want out of a job, some workers are resigning because of burnout, putting added stress on employers and the remaining employees. Workers are taking on extra duties as companies struggle to fill positions, leading these workers to also feel burned out.
Millions of Americans are actually struggling with long-term symptoms after contracting COVID-19, with many of them unable to work due to chronic health issues. Katie Bach, a nonresident senior fellow at the Brookings Institution, said she was “floored” when she started crunching the numbers on the ranks of workers who have stepped out of the job market due to long COVID.
Her analysis found that an equivalent of 1.6 million people are missing from the full-time workforce because of the disease, which can leave people incapacitated for months with persistent symptoms including fatigue, brain fog, headaches, memory loss, and heart palpitations.
Workers Want Flexibility
According to one survey of 10,000 knowledge workers from Future Forum, workers want flexibility in both location and schedule. The Future Forum Pulse shows that flexibility now ranks second only to compensation in determining job satisfaction: 93% of knowledge workers want a flexible schedule, while 76% want flexibility in where they work.
Childcare and Caregiving Issues
Some working parents have exited the labor force completely — meaning they’re not working or actively looking for work — because they don’t have access to daycare, or had to take on extra caretaking responsibilities during the pandemic that resulted in them making the decision to leave the labor force. A GOBankingRates survey found that 27% of women say that the biggest career obstacle is taking time off for caregiving and lack of affordable child care.
More Workers Than Usual Retired
A number of workers retired during the pandemic, and it’s looking like we shouldn’t expect the majority of them to return. Goldman Sachs said that 2.5 million of the 5 million workers missing from the labor force are retirees, and 1.5 million of them are early retirees. An analysis from the Federal Bank of St. Louis found that over 3 million “likely retired earlier than they would have otherwise” during the pandemic.
One group of people that could help ease the pain of the labor shortage in industries like construction could be immigrants. But Joseph Lavorgna, Natixis’ Americas chief economist, told Axios that “immigration to the US has slowed” and is “exacerbating the labor shortage problem.”
“There are about 1.2 million adult foreign workers or work-eligible immigrants who are just not here because of the restrictions that have been imposed during the pandemic,” David Bier from Cato Institute told NPR in October. “And so that’s about a quarter of the increase in job openings.”
The Gap Between Open Jobs and Job Seekers
Yes, there’s a whole lot of open jobs — but that doesn’t mean they’re automatically the perfect job for job seekers. That’s what economists call mismatches, and they’ve been dragging on for months regarding skills, location, and pay expectations. It’s why some job seekers are sending in hundreds of applications without getting any bites, or being ghosted outright altogether. And 48% of job seekers surveyed by FlexJob said that they’re frustrated with the job search, because they weren’t finding the right positions — and the ones that are open pay too low.
Employers Need To Adjust Their Requirements
Roughly 70 million workers don’t have a college degree, but are known as “STARS” — Skilled Through Alternative Routes. They account for two-thirds of American workers, but many may be filtered out because of educational requirements. This results in degree-less employees having to work harder than their traditionally educated colleagues — and for significantly less pay.
More People Are Now Working For Themselves
Workers have decided to go to work for themselves. According to Bloomberg‘s reporting on business applications from the Census Bureau, there have been a record number of applicants in the first nine months of 2021 compared to the first nine months in previous years.
The US reached its highest number of unincorporated self-employed workers during the pandemic so far in July 2021 — also the highest number since the last big crisis to hit our country in 2008. And although the number of self-employed workers in November isn’t as high as July, it’s still higher than the number of self-employed workers before the pandemic.
What Are The Implications of This Exodus?
Historically, increases in voluntary employee attrition often signaled labor inflation, a war for talent, or other forms of “reshuffling” between employers. Even if many employees changed jobs for a promotion or better pay, the net effect on the labor supply was minimal because they were simply moving between employers. The long-term impact and severity of this labor shortage will depend less on the amount of attrition and more on the proportion of people who leave the workforce entirely or switch to very different kinds of work.
If this labor shortage continues, there will be rising wages, inflation, and supply chain issues in the short term. In the long term, it could halt GDP growth, induce a recession, and cripple the future expansion of sectors dominated by blue-collar and manual workers.
Read part two in this series: How To Retain and Hire Employees During the Great Resignation