A new media narrative for job quits – empowered workers

The latest government data shows the number of people quitting their jobs surged to a new record in August. Nearly 4.3 million people quit – that’s 2.9% of the workforce.  The previous record was in April at 2.8%, almost 4 million people. 

At that time, the business media labeled the phenomenon the Great Resignation and attributed it to the COVID-19 pandemic.  The hours spent locked down at home and working remotely, inspired many employees to think deeply about their career choices, consider the time spent laboring in the office – away from family, and reimagine a new work-life balance.    

It’s an appealing explanation that fit neatly into a larger narrative about the pandemic’s emotional costs and the unprecedented social and economic disruptions.  It also seemed to satisfy the business community that was surprised and puzzled by the rise in job quits.  Businesses could now concentrate resources to help employees navigate the uncertainties.  After all, businesses could not afford to lose additional workers.   

Testing the explanations

In June, iLevel’s Road Scholar published an article that examined these claims.  While some job quits may have been motivated by an unsettling pandemic experience, the evidence was largely anecdotal and often dramatic.  Typical media stories included personal interviews that recounted poignant moments when employees realized their jobs/careers were unsatisfying.  Hunkered down at home, isolated from the workplace, millions of workers seemed to have the same epiphany that life was passing them by, and it was time to change.    

Yet there was no systematic evidence presented.  No evidence showed the pandemic had changed long-standing labor market incentives.  

It’s important to get this right.  Businesses needed to respond to job quits.  And that response would be shaped by what people believed caused the resignations.     

iLevel assumed the most logical cause was a tight labor market.  Job openings in April had reached historically high levels.  This meant workers enjoyed enormous leverage as they pursued better opportunities.  

Using available Federal Reserve data, our statistical model demonstrated that job quits were strongly predicted by job openings.  Pandemic-induced revelations notwithstanding, the quit numbers reflect the options workers find in the labor market.  People quit when job openings are plentiful and stay when they are not.  At the height of the coronavirus crisis, for example, job openings dropped dramatically, and job quits fell as well – to a seven-year low of 1.8%.  People are rational.  

Rationality makes a comeback

Today, several months later the news media’s narrative has evolved.  A recent Washington Post headline signaled a shift toward the conventional labor market logic:  A record number of workers are quitting their jobs, empowered by new leverage.  Similarly, USA Today, noted, “There are now about 50% more job openings than there were before the pandemic…There are more attractive alternatives.”  At CNN, it’s a ‘Golden Age’ for workers.  At Time, it’s ‘A Workers’ Market’.  

Articles are increasingly identifying job market realities (job openings) and connecting them to employees’ behaviors.  Workers are now considered empowered and willing to exploit their historical bargaining power.  This is of course the story that fits the data and squares with basic economic theory.  

Bottom Line

Moving forward, targeted efforts to mitigate employees’ pandemic-induced stresses will undoubtedly play an important role.  However, predictable consequences of a tight labor market are wage increases and signing bonuses.  These inducements remain fundamental to attracting and retaining employees.        

Finally, identifying the actual causes of resignations allows businesses to offer the proper incentives to compete in a highly competitive labor market.  The pandemic-angst narrative simply confused matters.  Colorful anecdotes are not evidence.  And we should be careful not to treat them that way.   

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