Was the Great Resignation Inevitable?
Authors: Megha Velakacharla (Project Lead), Sai Priyanka Iragavarapu, Steven Lu Chen, Joseph Ramirez
We’ve been hearing in the news about “The Great Resignation” and “The Great Reshuffling” for more than a year now. Burnout and epiphanies about work-life balance, believed to be sparked by the pandemic, are becoming the norm and workers now have much more leverage to demand better conditions and treatment from employers. Resignation levels plummeted in March 2020, steadily rising and surpassing pre-pandemic levels. Job openings have exponentially increased, nearly doubling, in the past two years. However, hiring — after the re-hiring of workers who initially lost their jobs in March 2020 — has not kept pace with the number of job openings. Are employers not offering a high enough wage, benefits, and opportunities for advancement? How long will workers’ leverage last? This article investigates the link between COVID-19 cases and resignations, the industries impacted, and the relationship between wage, quits, and total separations.
COVID-19 and Resignations
As shown in the visualization above, the beginning of the COVID-19 pandemic initially sparked a dramatic decrease in resignation levels caused by initial panic and layoffs. However, as the pandemic ensued, resignation rates increased. After this point, COVID-19 cases and resignation levels do not seem to follow similar patterns, and specific surges in COVID-19 cases do not directly incite surges in resignations. Resignation levels are shown to be growing at a relatively steady rate after the initial shock of the pandemic dissipated. COVID-19 cases on the other hand are a lot more volatile, suddenly escalating in waves, specifically near January of both 2021 and 2022. Although the pandemic may have created initial panic, it likely wasn’t the root cause of this great resignation.
The graphs above show the number of “quits” per month as a percentage of total job separations (layoffs, firing, retirement, etc.) between January 2011 and November 2021. Prior to March 2020, which marked the beginning of the COVID-19 pandemic in the United States, the percentage of quits increased at a consistent linear rate of approximately 1.52 percent per month for nearly a decade, as evidenced by the regression model. Given that the value of the coefficient of determination, or r-squared, for the model was about 0.919, we can conclude that there exists a very strong linear relationship between time and the percentage of separations that happen to be quits, at least for the period prior to the onset of COVID-19. In March and April 2020, the proportion dropped by over 40 percent, likely because employees had little motivation to quit their jobs during an absolute economic standstill. However, as the economy began to recover in the wake of the pandemic, quit rates not only returned almost immediately to pre-pandemic levels, they continued to grow at an even higher rate. As illustrated in the second visualization, quit rates rebounded rapidly in April and May 2020 before returning to a pattern of constant growth.
Quitting, Pay, and Total Separations
The graph above displays the quit percentages and hourly pay rates across various industries. The data suggests that industries, such as information and financial services, that pay more hourly also tend to have a fewer number of quits. Conversely, industries, namely leisure and hospitality, that pay less hourly also have a greater number of quits. There are a few reasons for why this relationship may exist, such as upwards mobility in career advancement being more significant in higher-paying industries such as financial services or general working conditions improving concurrently with pay rate. For workers in lower-paying industries, these resignation rates may be an indication of a labor force that is making better use of their bargaining power. For instance, recent price hikes in a variety of commodities may have encouraged salary negotiations. In addition, the initial spike in resignations at the beginning of the pandemic may have given more leverage to workers when deciding compensation. It may be the case that most resignations in lower-paying sectors are a result of switching jobs to higher-paying ones within the same industry.
Which industries are the most impacted?
Job openings in the sectors of Accommodation and Food Services and Health Care and Social Assistance have skyrocketed, with the highest pandemic job openings rate for the former nearly double pre-pandemic rates. We see a significant increase in job openings in the healthcare sector, which reflects the COVID-19 pandemic creating additional healthcare jobs and healthcare workers perhaps quitting due to burnout or personal health concerns. Surprisingly, the job openings available for Retail Trade have not visibly increased at the same rate as other industries. People may be quitting less in these industries, or more likely, have difficulty keeping stores open, and needing to lay off employees masks the rate of quits in this industry. The government has not been providing enough relief for small businesses — the Paycheck Protection Program (PPP loans), which provided relief for small businesses during the pandemic under the CARES act, officially ended in May 2021. Ninety-seven percent of PPP loans were used for payrolls, so the abrupt termination of this program might be reflected in these industries having fewer job openings than expected given quit rates.
Among the four spotlighted industries, Professional and Business Services was the least impacted. The proportion of people quitting out of all separations is around 60%, comparable to pre-pandemic levels. This supports our finding that there seems to be a correlation between pay/working conditions and quitting rate. Individuals working in Professional and Business Services tend to work in safe, sedentary conditions with a stable salary above median income and opportunities for career advancement.
The other three industries seem to have been significantly impacted, with the quits/total separations ratio higher by at least 5% post-pandemic. For Retail Trade and Accommodation and Food Services, a lack of career advancement opportunities, stagnant wages, or insufficient benefits might have contributed to a high quitting rate. For Health Care and Social Assistance, we hypothesize that burnout during COVID (especially for low-wage nursing home workers/home health aides) also contributed to a high quitting rate.
Final Thoughts
In this article, several aspects of the Great Resignation and its possible ties to COVID-19 were observed. This analysis suggests that COVID-19 did not incite or worsen the Great Resignation as significantly as initially believed. Resignation rates seem to be continuing to grow linearly, and would possibly be around the same level even if the pandemic never occurred. As for specific industries that seem to have high quitting rates now, the reasons for quitting are likely the same as the usual reasons people quit those jobs pre-pandemic as well. Regardless of the reasons for the Great Resignation, it will be interesting to continue monitoring how COVID-19 affects the declining workforce.
Sources:
https://www.bls.gov/news.release/jltst.t04.htm
https://github.com/nytimes/covid-19-data/blob/master/us.csv
