Monday, July 12, 2021

The 'Great Resignation' Is Underway

By Berna Barshay

► Back in March, an unusually large number of workers said they planned to look for a new job once the COVID-19 pandemic had subsided...

According to the results of a survey conducted by insurance company Prudential Financial (PRU), 26% of workers planned to start interviewing for something new "once the threat of the pandemic has decreased." Among millennials – the largest cohort in today's workforce – the intention to make a change was even higher, with 34% hoping for a job switch.

Of the workers thinking about making a change, 80% cited career-growth objectives as a reason to quit. But it wasn't just ambition motivating the desire to change jobs... It was also the pandemic, which 72% of prospective job changers said prompted them to "rethink their skill sets."

Other factors cited for wanting to quit included burnout, a need to better manage work-life balance, and a feeling of disconnect after a year away from the physical office.

The survey also indicated that 87% of workers desired the freedom to keep working from home at least part-time, and 33% would not want to stick with an employer that required them to come to the office full-time. However, respondents did worry that if they stayed remote while their co-workers came back to the office, their job security could eventually suffer.

Fast-forward a few months, and the pandemic has largely subsided... But it appears even more people want to quit their jobs...

A recent study by tech giant Microsoft (MSFT) found that 41% of workers globally are thinking about quitting their jobs. And as in the Prudential survey, the urge to quit is stronger with younger cohorts. A whopping 54% of Gen Z workers said they were thinking about quitting, many of them claiming digital burnout.

The propensity to want to quit has gotten so bad that economists have come up with a name for it: the "Great Resignation."

The Great Resignation is no longer theoretical... It's here. In April, the number of people quitting their jobs spiked to 4 million.

It should be no surprise that this phenomenon is affecting some of the industries hit hardest by the pandemic...

I've written before in Empire Financial Daily about worker shortages at restaurants, hotels, amusement parks, and other public-facing services. Readers have also written in with boots-on-the-ground accounts of the labor shortage, noting restaurants with reduced hours or even unplanned closures because they were short on staff.

Even as concerns about safety subside and hospitality layoffs transform into a glut of unfilled positions, many workers who left these jobs don't want to come back.

Some hospitality industry alumni pivoted, retrained, and found other work during the pandemic... and have no desire to come back to what they view as a volatile industry characterized by job insecurity. Others feel that industry pay is too low and access to promotions too scarce. Additionally, many workers who were deemed essential during the peak of the pandemic don't feel their contributions and the risks they took were appropriately valued through pay or respect from employers or customers.

The end result is leisure and hospitality workers quitting at a record pace. Take a look at this chart from news site Axios...

Source: Axios

The 5.3% quit rate in leisure and hospitality is more than twice the average quit rate of 2.5% across all industries... and translates to a whopping 764,000 hospitality workers quitting their jobs in May. This comes despite an average 15% year-over-year hike in hourly earnings, the second highest growth among all industries.

And raising wages further may not even be enough to tempt workers, as hospitality jobs remain very unpopular. According to a recent survey by job search company Joblist...

Thirty-eight percent of former hospitality workers report that they are not even considering a hospitality job for their next position. These workers are transitioning out of the industry in search of a different work setting (52%), higher pay (45%), better benefits (29%), and more schedule flexibility (19%).

And this is the kicker...

Over 50% of former hospitality workers who are looking for other work say that no pay increase or incentive would make them return to their old restaurant, bar, or hotel job.

If it's true that even big raises won't lure workers back to the hospitality industry, then the expiration of supplemental unemployment benefits – which is already well underway in many states – will probably not help restaurants, hotels, and bars struggling to stay staffed. Looking at the chart below from Joblist, it's pretty clear that a quick fix is unlikely...

Source: Joblist

But it's not just hourly workers in service jobs looking to give their two weeks' notice...

White-collar workers are also contemplating quitting in droves.

Many salaried, skilled workers – like their hourly counterparts – also felt undervalued, overworked, and unheard during the pandemic. U.K. news outlet BBC took a deep dive into the Great Resignation and concluded...

Foremost, workers are taking decisions to leave based on how their employers treated them – or didn't treat them ­– during the pandemic. Ultimately, workers stayed at companies that offered support, and darted from those that didn't.

Alison Omens, chief strategy officer of research firm JUST Capital – which is studying these issues – commented...

The early days of the pandemic reminded us that people are not machines.

If you're worried about your kids, about your health, financial insecurity and covering your bills, and all the things that come with being human, you're less likely to be productive. And we were all worried about those things.

Employers had an opportunity to make employees feel supported and offer them flexibility, benefits, and work-life balance. Those who didn't are at risk of losing people now that the job market is hot.

Many recent job quitters say a big part of their decision was that their bosses wanted them back in the office when they wanted to stay home. However – and ironically – other people say they are quitting because they miss the office and their companies went hybrid or fully remote! Perhaps the Great Resignation is the "Great Mismatch" as well?

There's also a momentum aspect to all of this. If enough of your colleagues quit, the workplace you return to will feel very different from the one you left, especially for office workers, most of whom have only recently started to trickle back. As with many other aspects of post-pandemic life, there's no "return to normal"... only a "return to the new normal." As Texas A&M management professor Dr. Anthony Klotz commented to Axios, "A lot of people who want to go back are finding that the office that they come back to is not the office they left behind."

Why is this happening... and what does this mean for employers?

Time alone at home also meant a lot of time for introspection. With many other aspects of life removed, people had ample opportunity to examine what remained – work, immediate family, and home – and really think about whether these things were making them happy. And many times, the answer was that work was not.

For employers, this is already translating into wage inflation and could ultimately produce productivity headaches.

Between labor shortages and increased hourly worker turnover, employers are having to pay more to attract and retain workers. And some of the biggest increases are in where workers were put under the most stress during the pandemic.

In this chart compiled by Axios, you can see that wage inflation has been greatest in transportation and warehousing (the people behind the e-commerce orders getting to your home), leisure and hospitality, and retail...

Source: Axios

But it's not just hourly workers that employers need to dangle carrots in front of... It's also higher-wage workers in fields like finance, professional services, and technology, where many firms are struggling with a large number of open positions and unusually high quit rates.

The investment banks have been raising pay for junior bankers who are claiming burnout. Earlier this month, Citigroup (C) announced it would hike analyst and associate salaries between $15,000 and $25,000, which will bring the first-year analyst (new college graduate) base salary up to $100,000. The jump in pay follows similar actions by Barclays (BCS) and JPMorgan Chase (JPM), which are trying to slow the tide of defections.

The banks are also trying to focus on wellness. They're making sure junior employees get more time off and aren't called in during holiday weekends... much to the chagrin of some of their elders, who think the youngsters are getting off easy. This follows Jefferies Financial (JEFF) making the news earlier this year by offering all 1,124 of its analysts and associates their choice of a Peloton (PTON) bike, Mirror home workout system, or an Apple (AAPL) bundle complete with Apple Watch, iPad, and AirPods.

Wage hikes and perks may help retain employees in the short term... But in the long term, it will be hard to keep unhappy workers from eventually quitting. And when employees quit, productivity is lost and expenses are incurred from hiring and training the replacement staff... Getting someone fully up to speed takes months in most jobs.

It's hard for me to remember a time since I began working when employers didn't have the upper hand over employees...

Between offshoring, outsourcing to gig and contract workers, the decline of labor unions, waves of mergers and the restructurings that followed, digitalization and automation, and the secular challenges to high paying industries from financial services to media... everyone from hourly workers to corporate types working anywhere short of the C-suite have not been a position of power for decades – until now.

The silver lining of all this for companies may be that a period of heightened turnover leads to a more muted one, as resignations lead people into jobs that are more suitable for them over the long term.

Workers can hope that the employers who suffer the worst turnover may in the future put more effort into valuing and supporting them and creating desirable work environments and attractive compensation packages in order to prevent a second Great Resignation.

But there will undoubtedly be losers in the Great Resignation...

After experiencing massive layoffs and being put potentially in harms' way during the peak of the pandemic, many hospitality workers are gone for good. This will be a continuing headache for operators of hotels, restaurants, bars, and other venues. Retailers will likely be facing similarly persistent labor supply challenges.

We could also witness an increased migration out of teaching and medical professions – both areas where workers put in long hours and felt undervalued during the pandemic. These folks are generally burned out from a tough 16 months.

And the pushback against returning to the office full-time continues to remain strong – especially among younger cohorts – which will likely have a long-term negative effect on office real estate.

The winners here will be recruiters... employers who have always treated their employees well and offered a supportive culture and good pay and benefits... as well as workers overall.

In the mailbag, an appropriately timed letter about the state of the labor market...

Do you think the pandemic caused people to hit the reset button on their life choices, or is it just a hot job market? Have you thought about quitting your job, and if so, why? Or if you're a manager or own a business, have you seen a pickup in employee turnover? What reasons have people that you wanted to retain given for quitting? Share your thoughts in an e-mail to [email protected].

"Hi Berna, One item that hasn't been in the media is how employers have treated the hiring process. I can't tell you how often after several interviews with a company, especially a face to face at the company's location, I've been ghosted. No feedback, just crickets. I am on a mailing list called 'Ask The Headhunter'. This week's column is an interesting one and I suggest you check it out. Here is the link for it.

"Some of the comments are insightful. While the column deals with white collar jobs, the method and statements given by some of the small businesses seem like they are of the same bent." – John B.

Berna comment: Thanks for sharing the article, John. I can totally empathize with the ghosting... It's rude and dismissive of people's time, especially for folks deep in the process who have had several meetings or sometimes even provided a work sample.

The article you sent is interesting, particularly the idea that hiring can be too slow and laborious a process. This particular line from the piece stood out to me...

The Society for Human Resources Management ("SHRM") has reported that the average time to fill a position is 42 days. But, according to an OfficeVibe report, "The best candidates are off the market in 10 days."

There's clearly a lot of friction in the recruiting process, for all kinds of jobs.

Regards,

Berna Barshay
July 12, 2021

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