The myth of the "great resignation"

The myth of the "great resignation"

By Matthew Yglesias

The American labor market is being haunted by the specter of a “Great Resignation.” I think this is, in crucial respects, fake.

The rate at which people are quitting their jobs really is unusually high, and policymakers ought to take it into consideration when thinking about the labor market. But this high quits rate is often framed as a kind of cosmic revaluation — a Bloomberg headline suggests “workers are opting out” while Yahoo reports that “Americans are rethinking their work expectations” — in a way that’s not supported by the data.

The quits rate is unusually high, but the hires rate is also unusually high, and the ratio of hires to quits is very normal.

In other words, people aren’t dropping out of the labor force or embracing the ideology of “antiwork.” They are quitting their jobs in the sense that back when I was 25, I quit The American Prospect to go work at The Atlantic — in other words, I got a better job.

Twitter avatar for @FinancialTimes

It’s also worth saying that while the current quits rate is at a historic high, our history of this metric only goes back to December 2000. We know it varies with the state of the labor market, but we don’t really know what kind of quits rate we’d expect in a boom because the quits data doesn’t go back to any labor market boom years. And that’s what we are seeing here: with a very strong demand for hiring, lots of people are taking the opportunity to switch jobs. This ought to reorient our policy thinking — efficiency matters more and “creating jobs” matters much less than it did in the Bush and Obama years — but it’s not some kind of mass walk-off.

The great hiring surge

The United States right now is experiencing an extremely elevated rate of hiring. Businesses have spent the past 18 months reopening on a rolling basis as legal restrictions on activities have rolled off and consumer demand has rolled on. At the same time, the federal government has pumped dollars into people’s pockets, generating a lot of spending and also a lot of hiring to meet the demand that the spending creates.

But new hires don’t materialize out of the ether. You need to hire them from somewhere.

You can, of course, hire currently unemployed people. But except in the special case of recalling workers from temporary lockdown-related furloughs, the volume of gross hiring always greatly exceeds the number of unemployed people who get jobs.

And going from “not in the labor force” and supposedly not looking for a job to employment is actually much more common than going from unemployment to employment.

But even when you add these two up, there is significantly more total hiring happening than non-working people getting a job.

That’s because when a company hires someone, they are usually hiring someone who already has a job, oftentimes a pretty similar job. That’s how the economy has always worked. These are called “quits” in the Bureau of Labor Statistics numbers, but that doesn’t necessarily mean someone got so fed up that they quit their job and slammed the door on the way out. That is a quit in the BLS numbers, but so is thanking your manager for a few good years and a lot of lessons learned, letting her know you got an attractive offer elsewhere, then shaking hands and having some cake in the break room.

In the fall of 2020, the economy was still down millions of jobs from its pre-pandemic level. The country could have embarked on a very slow labor market recovery that took us years and years to get back to where we were. Instead, policymakers — Jerome Powell, Nancy Pelosi, Steve Mnuchin, Joe Biden — opted for a much faster recovery. The only way to get that is with month after month of intense hiring demand, and there’s no way to generate a huge surge in hiring without a bunch of quitting. But that’s what the quitting is; it’s hiring plus, to an extent, a surge in new business formations.

Don’t fall for the hype

If you just look at quits, as The Washington Post’s Heather Long does here, you can end up worrying about things like “the most alarming chart from the Great Resignation: Skyrocketing quits in health care — doctors, nurses, aides & more are burned out and we're still in a pandemic.”

And there are plenty of burned-out health care workers these days!

But as in every other sector of the economy, health care hires are running higher than health care quits. A hospital can’t hire someone who was laid off two years ago from a now-closed downtown sandwich shop as an ICU nurse. Hiring a lot of nurses generates a bunch of nurse quits because almost everyone who is qualified to work as a nurse is already working as a nurse.

Rep. Tim Burchett, who doesn’t seem to understand how Unemployment Insurance works and is unaware that bonus UI benefits had already expired when he sent this tweet, indicated that he thought people were quitting their jobs to go take money from the government.

Twitter avatar for @timburchett

At around the same time, Robert Reich declared that the high quits rate was “an unofficial general strike,” and Sarah Todd at Quartz wrote that “quitting your job is now a political act.”

The truth is more boring than any of this. Companies are looking to hire, and if you accept a new position you need to quit your old one. It’s not a strike, it has nothing to do with government benefits, and while it certainly could be political, it also might just be a chance to work someplace with a more convenient commute or to nab a hiring bonus. It’s a strong labor market, not a crisis or the dawning of a new leftist utopia.

Economics for when people want to hire

After 20 straight years of a sluggish labor market, it’s hard to pivot our thinking about economic policy to a world in which workers are more scarce than jobs.

It’s a big problem for society if everyone with a commercial license goes to work delivering parcels and nobody’s left to drive the school buses. You could have local governments increase pay for bus drivers and overbid the private sector, but if the private sector can’t hire truck drivers, you get supply chain snarls. What would be great is if someone would invent a self-driving school bus that would let us safely deliver kids to school without a human operator. That wouldn’t “cost jobs,” but it would let schools operate smoothly while freeing up drivers to do other work.

That doesn’t seem likely to happen in the short run. But it does seem like we now have the technology to operate grocery stores with much less labor. In 2011, you might have said that would be immiserating. But under today’s circumstances, it would be really good — we need more people to do jobs. You can’t instantly retrain a retail worker to drive a school bus, but it’s not undoable either.

And then of course there’s my hobbyhorse of immigration. If someone can move here and get a child care job, that’s a win-win-win for the immigrant, for the parents, and for the general public because it makes it easier for parents to get back into the labor force.

The greatness of being able to resign

One thing that the Great Resignation story does get right is that there’s power in having confidence that you can find another job.

It can mean higher wages. But it can also mean you don’t need to put up with sexual harassment. It means that managers who engage in racial discrimination will lose out to those who don’t. It means that you’re not counting on omniscient, hyper-competent regulators to solve all problems because you can solve them for yourself by walking off the job.

It’s less that quitting is a political act than that giving people the ability to quit is a profound political accomplishment, something that empowers people in a real-world sense. And note that this is all about expanding demand for labor. It’s the knowledge that people are hiring that creates empowerment — constraining the supply of labor doesn’t have the same impact. So we should see the elevated quits rate as a big deal and a real accomplishment. But the important part is the hiring surge; the quitting is a complement.