How the Great Resignation Will Shape HR & The Future of Work
What is the great resignation?
The great resignation is the ongoing economic phenomenon where mass swathes of the global workforce quit their jobs and sometimes the employment system altogether. This economic and social trend rose to prominence in 2021 and has yet to exhaust its momentum. Some observers, such as Professor Robert Reich of the University of California, Berkeley, have even compared it to a general strike.
While most of the conversation around the great resignation tends to focus on how events unfold in the US and the unique aspects of its labor landscape and laws, the truth is that people are leaving their jobs in many different regions. This is a global phenomenon, and in this post, we will describe how the geography of the great resignation is playing out worldwide.
Who came up with the great resignation?
While it can be referred to by many different names, such as the “Big Quit“ and “Great Reshuffle,“ most people will refer to this phenomenon as the Great Resignation. Professor Anthony Klotz of the University College London’s School of Management first used this term in several interviews (like this one by the Washington Post) and opinion pieces starting in early 2021.
Why are so many people quitting their jobs?
A definitive list of causes has yet to be identified. Still, a confluence of factors has exacerbated the trend of people leaving the workforce.
Below are a few commonly accepted factors contributing to the ongoing mass resignation. This list is not exhaustive; many other factors may influence the employment market, both globally and locally.
The COVID-19 pandemic
The pandemic that kicked off in 2020 is one of the most significant factors contributing to the Big Quit. It may be the catalyst that kick-started the phenomenon.
As the world waited for the development of vaccinations, lockdowns and social distancing caused many workers to rethink their roles and careers. Especially with remote work technologies having proved themselves able to support a mass transition to remote and asynchronous work while often improving productivity.
Additionally, with high numbers of people suffering from long COVID, having flexible work schedules and working from the comfort of one’s home proved to be more of a necessity than a perk for those suffering from this often debilitating condition.
The pandemic didn’t only affect workers whose roles enable them to work remotely, however. The retail and hospitality industries have been among the hardest hit by the pandemic and most affected by the great resignation.
In many cases, COVID relief payments and social welfare schemes deployed during the pandemic to support those who could not work enabled many people to think, often critically, about their work conditions, wellbeing, and overall workplace satisfaction.
One of the biggest reasons people abandon their job or the workforce is that salaries are often insufficient to cover basic living expenses. This issue is especially true in high-cost-of-living urban areas, where real estate can be inaccessible to middle-class workers. Even a full-time job can leave workers in dire financial conditions without options to save or plan for the future.
Wage stagnation and dramatic increases in wealth inequality have left many workers poorer than they would have been a few decades ago. And this is not just an American phenomenon: European wages have not grown to match the cost of living increases in a long time either. The push for better compensation for labor is driving people away from work.
However, perhaps more interestingly, it is also at the root of impending changes and developments on the workplace horizon. Unionization efforts are growing in the US. Many companies in the hospitality industry have raised their wages and increased their benefits to attract and retain a workforce that is not willing to take up underpaid jobs anymore. There is widespread talk about raising minimum wages both in the US and Europe; in some cases, the tide is turning.
The desire for a better work-life balance
By the time things started moving “back to normal,“ large portions of the workforce had already concluded that the old normal wasn’t good enough and were unwilling to give up the freedom and flexibility they had grown accustomed to throughout 2020. The popularity of remote and hybrid work is such that these approaches to work are now among the top reasons employees change jobs.
The pandemic accelerated a trend that was already happening, albeit slower, with younger generations, such as Millennials and Gen Z, more open to changing careers and exploring different paths when unsatisfied. These demographic cohorts bring their need for change, values, and flexibility into a job market that often still needs to adapt to new conceptions of work. When change is not quick enough, they are willing to leave.
An aging workforce
An aging population reaching retirement age in large numbers might also contribute to the global phenomenon of people leaving their jobs. The impact of this potential contributing factor to the great resignation is less clear, and sources offer different points of view.
The Harvard Business Review, for example, puts retirement among the five main causes of the great resignation. However, older workers may have been driven out of the market involuntarily as part of layoffs or increased health concerns, so the impact of retirement on the resignation phenomenon is still ambiguous.
Social networks might have a part in the build-up of the great resignation too. The ability to share information, activism efforts, personal experiences, and thoughts, whether from a senior economist on a LinkedIn post or a first-time fast-food worker in a Tik Tok video, has contributed to the normalization of quitting and looking for better opportunities.
What is the relationship between the great resignation and a possible new great recession?
Generally speaking, the rate of resignations decreases when going gets tough. The workforce is not as willing to abandon the relative security of a job they already have in a situation perceived as unstable or downright harmful. The opposite is usually true in times of plenty. When there is increased demand for workers and the economy is stable and has a positive outlook, workers feel safer venturing into new jobs, roles, and career changes.
While this trend was matched in the initial months following the pandemic (at least in the US), with record amounts of layoffs and a consequent reduction in resignations, as more months went by, more and more people quit even though labor shortages and high unemployment persisted.
The great resignation is still going strong. However, things changed drastically throughout 2022. The conflict in Ukraine heavily impacted energy prices and whole economies, and many countries braced for and entered a recession. This factor, coupled with record inflation levels, has caused rough seas for many. How the labor market and modern approaches to work are impacted is still to be determined.
Who are the people most affected by the great resignation?
Dissatisfied and disillusioned Millennials and Gen Z are the driving force behind the movement, with over 60% of Gen Z reportedly looking to switch jobs within the next year. In addition, Millennials and the younger Gen X segment, which tend to be mid-career employees, had the highest increase in resignation rates.
How is the great resignation affecting different geographical areas?
The great resignation in the US
The great resignation has been sweeping across the country from California to Idaho, New York to Georgia.
In April 2021, with COVID-19 vaccination rates increasing and a general expectation of things returning to normal, resignation rates started growing, too, with a record 4 million workers leaving their jobs.
The highest quit rates were in public-facing jobs, such as food service workers (6.8% of whom left their job) and healthcare workers, of which a staggering 20% quit from the start of the pandemic to November 2021.
The great resignation in the US has been compared to labor strike phenomena such as Striketober, a 2021 strike wave that saw over 100,000 workers participate, or a general strike.
Wage growth has jumped considerably, reaching record growth rates unseen since 2001, with many companies increasing wages and benefits to retain employees or even attract new ones to fill long-running vacancies.
An extra element confirming dissatisfaction with wages and benefits as a driving element in the Big Quit is that resignation rates are higher in the private sector than in the public sector, where benefits are generally better.
While some observers say the wave might be (slowly) subsiding, 2022 still saw record levels of employees leaving their jobs, and numbers are still very high as we enter 2023.
For more information, look at the JOLTS (Job Openings and Labor Turnover) report from the US Bureau of Labor Statistics.
The great resignation in Australia
In Australia, a record number of workers have been leaving their jobs. Job turnover reached 9.5%, the highest level in a decade. The increase in job mobility is highest for women and is often a sign of workers being able to move to better opportunities, roles, and positions.
Increased mobility of the workforce is connected to wage increases. According to the Australian Bureau of Statistics, wages have reached record growth rates since 2018 at 2.4%. Most people changing jobs are seeing a salary bump of 8-10%.
Some industries, like IT, have seen increases of up to 10%. Nevertheless, the average wage growth rate still needs to be increased to cover the increasing cost of living.
Unlike other countries or areas (such as North America and the UK), the unemployment rate in Australia is at its lowest in 48 years.
The great resignation in Asia
China is also experiencing a social protest phenomenon deeply connected to the labor market.
The Tangping (躺平), or laying flat movement, started around the same time the great resignation kicked off, in the first months of 2021. The movement involved a general withdrawal from the workforce, the “Chinese dream,” and the high pressure and overwork in the 996 working hour system.
The Tangping movement mirrors trends in other areas and is mostly embraced by disillusioned younger generations. In many cases, Chinese workers who decide to lay flat are almost completely withdrawing from the labor market, choosing to work just the minimum amount they need to get by.
According to the Micheal Page report, India has also seen a wave of resignations affecting many different markets, with a record-high 86% of the surveyed workers considering a job change in 2022.
The IT sector has been especially affected, with over 1 million resignations (around 25% of the IT workforce) just in 2021.
The great resignation in Europe
Resignation rates are not as dramatic in Europe as in the US—possibly due to different policies adopted when facing the pandemic emergency. However, while rates and details of how the labor market reacted to the pandemic and the great resignation differ from country to country, the trend seems to match what we have described so far for other regions.
A 2021 Personio study (in Dutch) found that 46% of Dutch workers plan to leave their job in the next 6-12 months. A general employee shortage and rising inflation might be behind plans to increase the minimum wage.
Over 20% of the UK workforce planned to quit in 2022, according to Bloomberg data. Many European countries saw people resign at record rates, though the wave had not gained critical mass at the time of publishing.
What does this mean for companies?
As resignations continue, worker preferences change, and the competition becomes increasingly global, businesses can anticipate persisting talent shortages. Companies must do what they can to boost employee retention, job satisfaction, and overall efficiencies to win the war on talent.
Implementing remote and flexible working, embracing global hiring, and streamlining and automating many core processes will be the solution.
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