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The U.S. economy is in the throes of what’s been called the Great Resignation: Workers are quitting their jobs at or near the highest levels on record since tracking began in 2001. The attrition is particularly acute in the hospitality sectors, but it isn’t limited to low-wage industries. As of August, more than 10 million jobs sat open, causing businesses to reduce their hours and change how they operate.
As my colleague David Leonhardt has said, what the economy is now experiencing is not a labor shortage so much as it is a shortage of workers who are willing to accept the terms employers are used to offering them.
“It’s like the whole country is in some kind of union renegotiation,” Betsey Stevenson, a University of Michigan economist who was an adviser to President Barack Obama, told The Times. “I don’t know who’s going to win in this bargaining that’s going on right now, but right now it seems like workers have the upper hand.”
Is the Great Resignation a sign of a major realignment in the labor market that could change the future of work or just a temporary readjustment? Here’s what people are saying.
Why the Great Resignation is happening
Surveys suggest that the pandemic led many workers to rethink their relationship with their jobs. As my colleague Paul Krugman has written, “America is a rich country that treats many of its workers remarkably badly”:
Adjusted for inflation, the typical male worker earned virtually no more in 2019 than his counterpart did 40 years earlier. (The typical female worker’s wages have gone up, but still lag behind the typical male’s.)
The United States is a “no-vacation nation,” offering far less time off than its peer nations.
Jobs are also unstable and precarious, with many low-wage workers — nonwhite ones, in particular — subject to unpredictable fluctuations in working hours that can upend their family lives.
The pandemic is still making it prohibitive for some people to work, and the abundance of open jobs may be inspiring others to turn down offers they do not want.
Savings built up during the pandemic have played a key role in making this refusal possible. Over the past 18 months, many families received stimulus checks and increased unemployment benefits, and Americans now have trillions more in savings than they did before the pandemic. Most of those gains accrued to the wealthy — the soaring stock market caused their fortunes to balloon, further widening wealth inequality — but low- and middle-income households also saw their savings grow.
“The net result is that, arguably for the first time in decades, workers up and down the income ladder have leverage,” my colleague Ben Casselman writes. “And they are using it to demand not just higher pay but also flexible hours, more generous benefits and better working conditions.”
Some employers have raised their wages and expanded their benefits in response, but Casselman says that alone may not be enough to draw people who left back to work: The steepest drop in labor force participation came from older workers, who faced the greatest Covid risk. While some may return if the U.S. outbreak abates for good, others have permanently retired.
A shortage of affordable child care is also keeping people out of the labor force. Even before the pandemic, half of Americans lived in places where there was no licensed child care provider or where there were three times as many children as slots. And now, my colleague Claire Cain Miller reports, child care providers are operating at 88 percent of prepandemic capacity, in large part because they can’t find enough workers.
It’s no mystery why: The median hourly pay for the job is $12 — despite requiring qualifications, including background checks, certifications and even college degrees in some areas — and 98 percent of occupations pay more. Yet child care providers have not been able to significantly raise wages and expand benefits as other businesses have because more than 60 percent of families are already paying more for the service than they can afford. And as long as parents can’t find reliable, affordable child care, many won’t be able to return to work.
Is a shift in ‘attitudes’ enough to change the future of work?
“If you asked me to predict the most salutary long-term effects of the pandemic last year, I might have muttered something about urban redesign and office filtration,” The Atlantic’s Derek Thompson writes. “But we may instead look back to the pandemic as a crucial inflection point in something more fundamental: Americans’ attitudes toward work. Since early last year, many workers have had to reconsider the boundaries between boss and worker, family time and work time, home and office.”
But whether a shift has occurred in workers’ attitudes toward work is one question; whether employers will accommodate that shift is quite another.
They might if, as Leonhardt suggests as a possibility, we have truly entered a new era of tight labor markets. With more Americans unable or choosing not to work, companies would have little choice but to improve their pay and benefits. “In this scenario, the pandemic would represent a turning point,” he writes. “Almost a half-century of a low-wage economy would end, and incomes would grow more rapidly, as they did from the 1940s until the early ’70s.”
Better pay and perks alone, though, might not be enough. A McKinsey article from last month cautioned that employers will also have to make an effort to better understand how their employees’ relationship with work has changed and recalibrate accordingly: “If you’re a C.E.O. or a member of a top team, your best move now is to hit ‘pause’ and take the time to think through your next moves. A heavy-handed back-to-the-office policy or other mandates delivered from on high — no matter how well intentioned — are likely to backfire.”
But another possibility is that workers will soon lose their leverage. Most of the pandemic relief measures have ended, as Leonhardt notes, and the financial cushion most households have is still small: The median cash savings of the bottom quarter of households is about $1,000.
“Eventually those savings, especially for lower-income people, they’re going to run out,” Pablo Villanueva, an economist at UBS, told Casselman. “A lot of people are going to be increasingly unable to stay out of work even if they have some fear of Covid.”
And when they do return to work, Leonhardt says many will find a job market where employers hold the upper hand because of the decimation of labor unions and an increase in corporate concentration.
For now, Casselman says, there’s a standoff: “Workers are holding out until their savings disappear. Businesses are holding out until their customers disappear. Maybe one or the other will give, or maybe there will be a meeting in the middle. (Or, realistically, some of all three.)”
How does ‘Striketober’ fit into all this?
In unionized industries, resistance to management has taken a more militant form: strikes. In 2021, workers have initiated strikes against 178 employers, The Washington Post reports.
As Jonah Furman and Gabriel Winant write in The Intercept, this isn’t the 1940s, when one in 10 U.S. workers went on strike in a single year. But it also isn’t the 2010s, when large striking activity in the private sector was almost nonexistent.
The wave of strikes, economists say, is emanating from the same source as the wave of resignations: workers’ newfound leverage, which has enabled more resistance to the demands of employers. But whether that resistance can be organized and harnessed to increase labor’s long-term bargaining power remains to be seen.
“I am skeptical of the idea that there is a whole new world,” Aaron Sojourner, a labor economist at the University of Minnesota who worked in the Obama White House, told The New Yorker’s John Cassidy. “I don’t think the balance of power has shifted in a fundamental and permanent way.”
For that to happen, Cassidy says, government would have to intervene. The Federal Reserve and Congress could do so by keeping the unemployment rate low, since, he says, “as Karl Marx pointed out way back as 1867, there is nothing like a ‘reserve army’ of jobless workers to keep in check the demands of those who are employed.” The Biden administration could also more muscularly enforce labor laws and try to persuade the Senate to enact the PRO Act, which would strengthen labor rights and make it easier for workers to unionize.
“Going forward, the ability of workers to organize and maintain gains hinges on these policy changes,” Sojourner told Cassidy. “The reality is being defined on the ground right now.”
Do you have a point of view we missed? Email us at [email protected]. Please note your name, age and location in your response, which may be included in the next newsletter.
“It’s Quitting Season” [The New York Times]
“In Hollywood and America, the Strike Is Back” [The American Prospect]
“How Do They Say Economic Recovery? ‘I Quit.’” [The New York Times]