During the earliest months of the pandemic, employers couldn’t downsize fast enough. Millions were laid off, executives took symbolic pay cuts and ordered wage and hiring freezes, and many economists predicted a grim year ahead for workers hoping to just get their old jobs back, never mind get ahead.
Eighteen months later, U.S. employers are struggling to fill 10 million jobs and many of those same workers are looking at the offerings and saying, “No, thanks.” Since April of this year, Americans have quit their jobs and not returned to the workforce at a historic rate, an exodus some call “The Great Resignation.”
According to the latest U.S. Bureau of Labor report, 4.3 million quit their jobs in August, 242,000 more than in July. The monthly quit rate hit a new high, at 2.9 percent. Though quitting is happening across all job sectors and among workers at all skill levels, it was up in August in hospitality and food services, wholesale trade, and in state and local education.
Lawrence Katz, the Elisabeth Allison Professor of Economics at Harvard, is a labor economist who analyzes earnings inequality and the effect that education has on living standards. Katz spoke to the Gazette about why this is happening and whether it could represent a major power shift between workers and employers. Interview was edited for clarity and length.
GAZETTE: What’s going on? Have we seen anything like this before?
KATZ: We haven’t seen a quit rate this high since 2000, when the U.S. Bureau of Labor Statistics began the current Job Openings and Labor Survey data series. Last month was the highest quit rate that we’ve observed in the JOLTS data.
There’s a monthly survey of a random sample of employers in the U.S. They’re asked, “In the last month, how many workers who were working here last month are no longer working,” and they’re asked the reason. There are three reasons. A worker can voluntarily quit. They can be laid off or fired. And there’s a smaller miscellaneous category called other separations, which is largely announced retirements.
Historically, people are much more willing to quit their jobs when there are a lot of job openings. And what we’re seeing is a record level of job openings. Employers are looking for a lot of people to fill jobs and we clearly see in the data that expenditures by consumers, for a wide range of consumption products, are very, very high. People delayed a lot of consumption during the pandemic. So, there’s huge demand. We’re also seeing inflation take off a bit with shortages in these areas.
A large number of workers lost their jobs in the pandemic and some are hesitant to come back to the labor market. We also have disruptions to the supply of temporary and seasonal workers through increased restrictions on immigration and work visas. And when there are a lot of outside opportunities, people are much more willing to take a chance on leaving their current job.
GAZETTE: So these “quitters” are not simply retiring and they’re not just job-hopping. Are they between jobs or are they done with the rat race entirely?