The ‘great resignation’ is over. Can workers’ power endure?
Tens of millions of Americans have changed jobs over the past two years, a tidal wave of layoffs that reflected — and helped create — a rare labor moment when workers demanded higher wages and employers short of workers often gave them .
But the “great resignation”, as it became known, appears to be coming to an end. The rate at which workers voluntarily quit their jobs has fallen sharply in recent months — although it rose in May — and is only modestly above where it was before the pandemic disrupted the U.S. labor market. In some industries where turnover was highest, such as hospitality and retail, quitting has fallen back to pre-pandemic levels.
Now the question is whether the gains made by workers during the Great Retrenchment will survive the moment — or whether employers will regain leverage, especially if, as many forecasters expect, the economy slips into a recession sometime in the next year.
The pendulum may already be swinging back towards employers. Wage growth has slowed, especially in low-paying service jobs where it increased as turnover peaked in late 2021 and early 2022. Employers, while still complaining about labor shortages, report that it has become easier to hire and retain workers. And those who switch jobs are no longer receiving the big raises that have become the norm in recent years, according to data from payroll processing firm ADP.
“You don’t see the signs that say $1,000 signing bonus anymore,” said Nela Richardson, ADP’s chief economist.
Richardson compared the labor market to a game of musical chairs: As the economy began to recover from pandemic shutdowns, workers could move freely between jobs. But with recession warnings in the air, they are getting nervous about being caught out of work when fewer are available.
“Everybody knows the music is about to stop,” Richardson said. “It will cause people to stay a little longer.”
Aubrey Moya joined the big layoff about a year and a half ago, when she decided she had had enough of the low wages and backlog of waiting tables. Her husband, a welder, was making good money – he too had changed jobs in search of better pay – and they decided it was time for her to start the photography she had long dreamed of. Moya, 38, became one of the millions of Americans who started a small business during the pandemic.
Today, however, Mrs. Moya questions whether her dream is sustainable. Her husband earns less money and the cost of living has increased. Her clients, plagued by inflation, are not venturing out for the boudoir photo sessions in which she specializes. She’s nervous about making payments on her studio in Fort Worth.
“It was a moment of empowerment,” she said. “It was a moment of, ‘We’re not going back, and we’re not going to take this anymore,’ but the truth is, yes, we are, because how else are we going to pay the bills?”
But Mrs. Moya isn’t going back to waiting tables just yet. And some economists think workers are likely to hold onto some of the gains they’ve made in recent years.
“There are good reasons to believe that at least some of the changes we’ve seen in the low-wage labor market will prove to last,” said Arindrajit Dube, a professor at the University of Massachusetts who has studied the economics of the pandemic.
The Great Resignation was often portrayed as a phenomenon of people quitting their jobs altogether, but the data tells a different story. Most of them quit to take other, usually better-paying jobs – or, like Moya, to start businesses. And while turnover increased in virtually all industries, it was concentrated in low-wage services, where workers have generally had little influence.
For these workers, the rapid reopening of the personal economy in 2021 presented a rare opportunity: Restaurants, hotels and stores needed tens of thousands of employees as many people still rejected jobs that require face-to-face interaction with the public. And even as concerns about the coronavirus faded, demand for workers continued to outstrip supply, in part because many people who had left the service industry were not eager to return.
The result was an increase in wages for workers at the bottom of the earnings ladder. Average hourly wages for rank-and-file restaurant and hotel workers rose 28 percent from the end of 2020 to the end of 2022, far higher than both inflation and overall wage growth.
In a recent paper, Mr. Dube and two co-authors found that the earnings gap between workers at the top of the income scale and those at the bottom, after widening for four decades, began to narrow: In just two years, the economy began to shrink. reversed about a quarter of the increase in inequality since 1980. Much of the progress, they found, came from workers’ increased ability—and willingness—to change jobs.
Wages no longer increase faster for the low-paid than for other groups. But more importantly, in Mr. Dube’s view, low-wage workers haven’t lost ground in the past two years, giving wage increases that more or less keep pace with inflation and higher incomes. That suggests turnover may be falling not only because workers are becoming more cautious, but also because employers have had to raise wages and improve conditions enough that their workers aren’t desperate to leave.
Danny Cron, a restaurant server in Los Angeles, has changed jobs twice since returning to work after pandemic restrictions were lifted. He first started working at a dive bar, where his hours were “brutal” and the most lucrative shifts were reserved for servers who sold the most margaritas. He quit to work at a large chain restaurant, which offered better hours but little scheduling flexibility — a problem for Mr. Cron, an aspiring actor.
Then last year, Mr. Cron, 28, quit again for a job at Blue Ribbon, an upscale sushi restaurant, where he makes more money and is more accommodating to his acting schedule. The strong post-pandemic job market, he said, gave him the confidence to keep changing jobs until he found one that worked for him.
“I knew there were a lot of other jobs to be had, so I felt less attached to one job out of necessity,” Mr. Cron wrote in an email.
But now that he has a job he likes, he said, he feels little urge to keep looking — partly because he feels the job market has softened, but mostly because he’s happy where he is.
“Looking for a new job is a lot of work, and training for a new job is a lot of work,” he said. “So when you find a good serving job, you’re not going to give it up.”
The labor market remains strong, with unemployment below 4 percent and job growth continuing, albeit more slowly than in 2021 or 2022. But even optimists like Mr. Dube admit that workers like Mr. Cron could lose leverage if companies start cutting jobs en masse.
“It’s very difficult,” said Kathryn Anne Edwards, a labor economist and policy consultant who has studied the role of retirements in wage growth. A recession, she said, could wipe out gains made by hourly workers in recent years.
Still, some workers say one thing has changed in a more lasting way: their behavior. After being hailed as “essential workers” early in the pandemic — and given bonuses, paid sick time and other benefits — many people in hospitality, retail and similar jobs say they were disappointed to see companies roll back benefits as the emergency decreased. The big layoff, they say, was partly a reaction to that experience: They were no longer willing to work for companies that didn’t value them.
Amanda Shealer, who runs a store near Hickory, NC, said her boss had recently told her she needed to find more ways to accommodate hourly workers because otherwise they would leave to work elsewhere. Her response: “So do I.”
“If I don’t feel supported and I don’t feel like you’re taking my concerns seriously and you just keep dumping more and more on me, I can do the same,” she said. Shealer, 40, said. “You don’t have the loyalty of a company anymore, because the companies don’t have the loyalty of you.”
