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Beyond BLS

Beyond BLS briefly summarizes articles, reports, working papers, and other works published outside BLS on broad topics of interest to MLR readers.

September 2023

The Great Resignation in the United States: How long will it last?

Summary written by: Abdulkadir ┼×enkal

In the last 2 years, the popular press in the United States has covered many stories discussing the “Great Resignation.” These news stories have greatly affected society and attracted attention. In particular, because of the COVID-19 pandemic, resignations of millions of workers in the American labor market in 2021 and 2022 have clamored loudly.

In his article “The Great Resignation in the United States: a study of labor market segmentation,” published in the Forum for Social Economics in January 2023, Thomas E. Lambert analyzes the resignations that occurred in the U.S. labor market after COVID-19 by using data from the U.S. Bureau of Labor Statistics Job Openings and Labor Turnover Survey. In his analysis, Lambert attempts to confirm the Great Resignation phenomenon. After controlling for economic growth, he finds that the levels and rates of turnover during the pandemic (until January 2022) are statistically different from those seen during the Great Recession (2007 to 2009) and the dot-com recession (2001).

The author finds that workers resigned during COVID-19 for many reasons, including the high cost of daycare for working parents, which resulted in many women participating less in the labor force. Other reasons comprise the liberating experience of not working at all or working from home instead of one’s usual place of work, low wages that made work less attractive and more stressful, and the feeling of not wanting to work more because of greater job tenure uncertainty and poor working environments.

Lambert shows that these factors not only affected labor force participation but also highlighted problems specific to certain U.S. industries. Some problems are contrary to theoretical expectations. The hypothesized effect of certain industries with more female employees than male, as well as increased childcare and tuition fees, leading to higher resignation rates on average instead shows an inverse correlation. In fact, similar studies identify higher levels of turnover during the pandemic for the whole economy. A regression analysis assessing the impact of the hiring rate, vacancy rate, hourly earnings, and unemployment rate on the quit rate revealed regression coefficients that were statistically significant and theoretically expected.

Given the empirical validity of resignations in Lambert’s study, a continued pandemic pressure on the wage-to-profitability ratio could motivate accelerated investments in labor-saving solutions. Likely sensitized to the possibility of another pandemic in the future, public and business leaders could increase their investments in laborsaving technologies that would prevent a repeat of economic impacts similar to those of the COVID-19 pandemic. In particular, higher wages and benefits would persuade firms to automate more so as to minimize rising costs. In this way, improved morale and any increased productivity and lower hiring costs could offset higher labor costs.

Another important finding reported in Lambert’s article is that greater pay and benefits not only are likely to reduce turnover rates but also could boost productivity and morale levels in many companies. This method, he claims, can also eliminate management problems and the need for employee supervision. In addition to higher wages, better and more widespread healthcare and childcare benefits would also help address the problem of underuse of labor in competitive, peripheral, and low-wage sectors of the U.S. economy.

However, some jobs are still difficult to replace with automation, according to Lambert. He reports that the corporate culture of many organizations will have to change from one of inadequate guidance and supervision, or “negative” supervision, to one in which employee training and increased productivity are linked to higher pay and retention.