Great Resignation? No, what matters is the Great Reckoning as the low-paid demand a boost

Four million Americans quit their jobs in April this year, breaking a 20-year record. That was only the beginning of the Big Quit: in August, another 4.3 million – about 2.9% of the workforce- left their jobs. Then, in September 4.4 million resigned despite there being a record number of job openings and a hardening of employment benefits. 

This extraordinary mis-match between the supply of labour and the rising demand for employees is a phenomenon which US academic Anthony Klotz has coined The Great Resignation, or as others have gone on to label the trend, the Big Quit. 

Whatever the causes – and we will come to those later – it’s a phenomenon which is being seen around the world, including here in the UK. It’s a paradox born out again by the latest ONS figures which showed we have a record 1.3 million of job vacancies – 388,000 more than the pre-Covid level. 

More than one million people switched from one job to another in the three months to September. Yet unemployment is still remarkably low, despite the ending of the highly successful furlough scheme which protected more than a million workers throughout the last 18 months of on-off lockdowns. 

The ONS figures showed the employment rate averaged 75.4 per cent in the three months to September, up 0.4 percentage points from the previous quarter, while unemployment fell 0.5 percentage points to 4.3 per cent.

At the same time, the ONS reports that job to job moves were at a record high, driven by resignations, not dismissals.What’s more, the number of payrolled employees rose by 160,000 to 29.3 million between September and October.

Jobs have not been filled at such a fast rate for decades. Tony Wilson, director of the Institute for Employment Studies, says that despite this, “we’re seeing labour shortages across all parts of the economy and a tighter jobs market than at any time in the last 50 years.” 

There are several explanations for the discrepancies. Here in the UK almost a million people have left the workforce since the beginning of the pandemic, mainly through early retirement but also because many young people have chosen to stay in education. Like in the US, many workers have been waiting until the virus disappears before reappearing in the workforce.. 

This puzzle has got business leaders flustered everywhere, from the US to the UK to continental Europe and indeed China – where employers are seeing similar patterns of job shortages and high employment levels.  

In a recent survey of more than a 100 CEOs carried out by Fortune and Deloitte, 73% of them said labour and skills shortages are the most likely external issue to disrupt their business in the next 12 months. More than half of the bosses also said that recruiting talent is among their biggest challenges while half said keeping them on board was another.

So what’s driving this post-pandemic wave of quitters? Klotz, an organisational psychologist at the May Business School of the Texas A&M University, arrived at his Great Resignation phrase by chance when explaining to his wife over the summer months why he thought so many people were leaving their jobs. 

Later on, in an interview with Bloomberg, Klotz added the Great to his description seeking to explain how big events like the pandemic make people step back and rethink their lives. As he put it, lockdown was a chance for them to pack their bags and try something new: to find more meaning and purpose in their lives. 

It’s perhaps why we hear so many stories in the UK and from across the Atlantic about bankers quitting their posts that pay six-figures salaries to become priests or 24/7 lawyers giving up millions to set up their own businesses or retrain as life coaches. And so on. 

Many commentators have sought to explain the Big Quit. Derek Thompson, a writer for the Atlantic magazine, suggests that: “Before the pandemic, the office served for many as the last physical community left, especially as church attendance and association membership declined. But now even our office relationships are being dispersed. The Great Resignation is speeding up, and it’s created a centrifugal moment in American economic history.”

In an article for Fortune, the boss of Salesforce, Sam Allen, said that rather than calling this moment the Great Resignation, it might be more accurate to call it the “Great Awakening” . After working from home for 18 months, many realised that commuting to the office had lost its appeal. But he added:  ”While all of that is true, perhaps what’s really behind the Great Resignation is a collective shift in our mindset fuelled by the pandemic—one in which many have reevaluated the very idea of what it means to work.”

All this is true, and there are undoubtedly many people who have switched careers because of the enlightenment brought about by the pandemic. 

But you do wonder whether these commentators are taking a too romantic – maybe sentimental – view of what the pandemic has wrought. They are seeing the lockdown through the prism of the middle classes for whom the period was something of a luxury, and a luxury which only a few could enjoy. 

For the many, those working on the front-line in factories, warehouses, supermarkets, the public services and as small business owners, the lockdowns have wreaked havoc. These workers were the ones who burnt out, and it’s they who suddenly find they are in demand, and can therefore demand higher wages.  

For it is the more routine jobs where the most acute shortages of labour are: the truck drivers, taxi drivers, bar and restaurant staff, and construction workers.  

Think back to March 2020. Countries around the world went into deep freeze, stock markets went into free-fall, businesses and factories closed, theatres and bars pulled down the curtains, shipping lines froze, supply chains were paralysed and demand for anything but the most essential goods gummed up.

Once the lockdowns were over, demand came soaring back, slowly at first but then with a roar as we emerged from our hibernation and wanted to spend again. That pent-up hunger was enough to send factories and businesses into a spin as consumers were hungry to spend again on themselves but also on entertainment and goods they hadn’t enjoyed for months. 

Business couldn’t cope. They faced shortages in goods from China – where factories saw a 10% increase in demand for goods over a couple of months but no longer had the workers to meet the demand – or staff to work in their restaurants. 

Supermarkets couldn’t find enough lorry drivers, warehouses couldn’t find logistics staff and bars couldn’t find enough barmen. Naturally, business leaders let it be known that they couldn’t find sufficient staff, some claiming that ‘no one’ wants to work anymore or that workers had become lazy, fed by generous government furlough schemes. 

They became so desperate they had to start paying more: Tesco offered drivers a £1,000 bonus to sign-up, in the US firms like McDonalds are now paying $15 an hour while Bank of America put the minimum wage per hour up to $25.

And hey presto, they found their workers, or certainly some. None of this is surprising. For decades now, average wages have been stagnant. If employers start shouting out they need workers, then workers worked out they could wait until wages and benefits went up. They had leverage for the first time in years and, for the first time in years, the tables were reversed: employers needed employees more than they needed employment. 

Which is why the ONS also reported that annual pay growth was 4.9 per cent among employees in the three months to September. This suggests real-terms earnings growth of 2.2 per cent, stronger than pre-pandemic rates, helping fuel fears over growing inflation. Workers are now in the hot seat. It looks as though what we are seeing is a Great Reckoning rather than the Great Resignation.