As American workers leave their jobs at an almost record pace, the labor shortage is more severe and remains persistent than most professional forecasters. It was also inevitable, says Anthony Klotz, a professor of business administration and an associate professor of management at Texas A&M University, who has made a career out of studying resignation.
A year earlier, Klotz predicted what would become known as the Great Resignation—a term he inadvertently coined for a phenomenon that has puzzled economists, flattened central bankers, and the US economy. suffering from shortage of goods and services. While some workers eventually re-entered the labor market in November, the COVID-era workforce-participation rate has remained below pre-pandemic levels, defying hopes of a massive return to work that could lead to an increase in the supply chain. And there would have been cold inflation.
Why are so many workers leaving? Where are they going, and will they come back? in search of answers, baron’s Spoke with Klotz recently. What follows is an edited version of our conversation.
baron’sYou have seen that there is a huge wave of resignations of the workers. What has tipped you off?
Anthony Klotz: I’m not an economist, so I don’t study macro labor trends. I study organizational psychology, or the psychology of work, on a more subtle level. Looking at it this way, there were several trends that I found to be somewhat unique to the pandemic, and all related to an increase in future resignations.
There was a pretty straight backlog in the first quits. It seemed intuitive that in 2020, due to the uncertainty caused by the pandemic, many workers who would otherwise have left their jobs postponed their plans. So, I looked at the quits numbers reported by the Bureau of Labor Statistics, and of course, there was a 5% to 15% decrease in the number of resignations on a month to month basis during 2020. I argued that when vaccines are available and the economy is back online, many people will leave their jobs late.
The second is widespread burnout. There were a lot of stories about frontline workers facing long hours and difficult conditions during the pandemic. There was jealousy among parents, especially female caregivers, juggling educating their children while working remotely, and reports of burnout among organizational leaders trying to manage through the pandemic She was Burnout is a predictor of turnover: the way to deal with it is to move away from the source of the burnout. Some people need a break, and many don’t have the ability to take a month or more off to take care of their mental health.
How has the pandemic affected the way people view work?
This tendency is probably the hardest to get around our weapons. The place of work in people’s lives was changing during the pandemic, and it was understandable. There is an organizational psychology theory called panic management, which holds that when individuals are near life-death situations, or reflect on death or illness, they tend to have existential thoughts. It shocked me that perhaps the whole world was giving little consideration to his life because of the deaths and disease caused by the pandemic at the same time. I argued that many people would jump to the conclusion that they wanted to pivot to life.
Most people work to pay their bills and save for their children and retirement. How can so many people afford to quit their jobs?
Resigning is a privileged move in the workforce because you need the financial resources to leave your job or have another job on the line. But what has facilitated these moves, whether they are career pivots or life pivots, is the fact that many of us were locked in during the pandemic and had time to sit down, think and plan. What To Do Next.
Also people saved money. Some got incentive checks. Many people cut their expenses because social programs weren’t running, or because of the economic uncertainty caused by the pandemic. This largely existential reflection was happening at a time when many people had the time and money to implement some sort of life change, from career moves to entrepreneurial adventures to stay home.
Has Work From Home Contributed to Mass Resignations?
The experiment took place on a global scale: millions of people have taken a year or more to work from home. While remote working has pros and cons, it gives employees more autonomy in terms of organizing their work and lives as compared to working in an office. Freedom is a basic need for human beings, and when we have got that freedom, we do not give it up voluntarily.
It makes sense that as the economy recovers and everything opens back up, some people would be called back into the office. Many will be eager to go back, but there will be many who will say, “No. I’m not going to give up this autonomy, especially now that there are so many more remote jobs available.”
A large proportion of those who left the labor force retired early. Is retirement permanent, or will some people change their mind?
After the idea of great resignation went viral, people started reaching out to me with their stories. A big surprise to me was the number of people who said they were five or so years away from retirement. They were working from home and now had to go back, or they had an epiphany during the pandemic that they didn’t have that much time left and wanted to try something different.
Some retire early. But in many cases, people take up some form of bridge employment, such as freelance work. I don’t think retirement is an on or off switch. Some people may have done well in the stock market and retired entirely, and they enjoy it for six months before deciding they are ready to get back into something. Work is often a source of joy and meaning and relationships. I can see some early retirees re-entering the economy in some form or another.
Entrepreneurship is booming. Will it last?
The autonomy that many have experienced while working remotely is probably contributing to the rise in entrepreneurship. People are opening their minds to the idea that there are ways to make a career out of Monday through Friday after 9 to 5. For some, there is a sense of resilience from making it through the pandemic so far, and it’s progressing in a way that they see the career risks. People may realize that they have overestimated the stability and predictability of a traditional career path, and that their risk tolerance is higher than they expected. And given the high number of job opportunities, the risk of starting a solo venture seems low.
The failure rate of entrepreneurial ventures is extraordinarily high, so for some people who go out and try to make it work, it won’t work. But with the Internet, online marketplaces, and the pandemic moving rapidly toward a virtual economy, there are more ways than ever for employees to slowly switch to entrepreneurship while still working at their current jobs. And many people can use the savings accumulated during the pandemic to slowly grow a business, as opposed to raising venture capital and launching all at once.
What types of companies are best positioned to win in the struggle to attract and retain workers?
The simple answer is: companies that have complete flexibility in how their employees work, and have a lot of cash or huge profit margins. Some companies are offering their employees relaxation and flexible scheduling to help them deal with burnout, but not all can afford it. Companies with low margins, low wages and individual work are going to be the most constrained. That’s where we’re seeing the most businesses, because they don’t have as many ways to prevent resignations.
As companies invest in productivity to make up for lost labor, do we risk losing too many jobs permanently?
There is a tension between individuals and business owners, who feel that the work ethic has changed and no one wants to work anymore. Some people are saying that they want to work, but not just a job. And it is believed that over time many unfinished tasks can be replaced by artificial intelligence or robotics. This raises the question, which jobs will remain, especially jobs for those with less education? Will we have good jobs with a living wage that humans can do? Or, do we need to completely rethink what work is and how much we work in return for a living wage?
Policymakers talk of a return to a pre-pandemic labor market. Is this possible?
The technology around automation is expensive. But as labor shortages drive up the cost of human labor, some of those investments become economically viable. I anticipate that organizations have invested heavily in AI and robotics over the past 18 to 24 months because of labor shortages and questions about whether people will be able to work in close contact again.
The second piece I think has to do with individuals adopting remote work. Earlier, companies recruited locally. But as many jobs went away, organizations realized they could recruit globally—and potentially save money—by hiring remote workers elsewhere in the world. What worries me is that it creates a global market for work, and American workers are more expensive than workers in other parts of the country.