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The Tipping Point—Great Resignation

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Bruce J. Carter
March 17, 2022

When COVID-19 hit the United States in early 2020, unemployment increased. A gallop survey conducted by Gandhi and Robison in March 2021, reported that 48 percent of the U.S. labor force, across all job categories, were actively disengaged from the job market, resulting in 3.6 million resignations in May 2021 alone. In August and September 2021, more than 4 million Americans—3.4 percent of all workers—had resigned from their jobs. This trend in workers quitting their jobs, more than in any other period in recent history, has been dubbed the Great Resignation or called the Extraordinary Exodus. The COVID-19 pandemic has become the tipping point that has impacted the following U.S business sectors the most: Retail Sector, Health care social assistance, Manufacturing, Hospitality and Foodservice. According to the Department of Labor, 650,000 retail workers exited their jobs in April 2021. The American retail sector has seen more recent resignations than any other industry. How did we get here? Economic factors have played a significant role in the great resignation, and non-economic factors have also contributed to the tipping point problem.

Economic Factors

Minimum Wage Stagnation. Wages—in real dollars—have stagnated for close to four decades. Before the pandemic, job openings were less than the number of people actively looking for work, which kept wages down, even as employee productivity and corporate profits increased. However, the pandemic has revolutionized the job market. Suddenly, workers in low-paying jobs are getting hired for more money than they have ever received in the past. Companies find it difficult to fill vacant positions unless they offer more money. Hence, the message in the job market is that employers are willing to pay more, but many companies are now hiring only for part-time work. The COVID-19 pandemic has made employers value workers more, unlike in the past when workers were treated as a fixed cost of doing business. From 2009 to date, the Federal minimum wage has stagnated at $7.25 per hour—attempts by the current presidential administration to increase it to $15 failed in the U.S. Congress (Kaplan & Hoff, 2022). Due to better pay in other sectors, employees are resigning en masse.

High Costs of Daycare. More women than men are exiting the labor force. The number of women who have exited the labor force during the pandemic is twice as high as that of men. Available data from Donegan in 2021, suggests that women’s labor force participation rate is at its lowest point in more than three decades. Since March 2020, about one-third of mothers in the workforce have either scaled down on their working hours or resigned from their jobs. According to Novello, from early 2020, the share of women in the workforce declined by two percent, from 59.2 percent to 57.5 percent, with approximately 3 million women forced out of the job market. For this reason, sectors that predominantly hire women, including healthcare, retail and hospitality, bear the greatest burden of the current labor shortage. More women are leaving their jobs since they cannot afford daycare. Daycare centers are significantly expensive and were in short supply even before the pandemic. With many daycare centers closed due to the pandemic, daycare costs have greatly increased. Additionally, even parents who can afford daycare have been forced to await placement for months. As a result, women have been forced out of the job market due to childcare services that are too expensive.

Noneconomic Factor. Immigration policies in the United States have historically contributed to the U.S. workforce. For decades, immigration has allowed the United States to meet the labor supply needs of the expanding economy. However, immigration levels, especially employment-based immigration, have stagnated over the past decade. According to research by the American Immigration Council in 2021, the current limit on permanent employment-based immigration is 140,000 per year. Furthermore, with the onset of the pandemic, the suspended temporary employment-based visas—H-1B and H-2B—have further worsened the labor shortage in the country. An additional area affected by immigration policy is Deferred Action for Childhood Arrivals (DACA), affecting more than 600,000 individuals with DACA status. The policy change has further reduced the size of the labor force. With more jobs than the available labor can fill, the supply shortage has pushed up wages. Hence, workers are willing to quit their current jobs to look for better-paying jobs.

In summary, as evident throughout the discussion about how we got here, the causes of the U.S tipping point great resignation are multifaceted. Hence, no single solution can address the mass exodus of key talent. Instead, to retain post-pandemic employees, organizations will have to develop customized solutions relevant to the economic and non-economic factors identified. Overall, the current U.S. labor market favors employees. With employees having more options to choose from, employers must treat their workers with respect and dignity and improve their working conditions. Any attempt to return to normalcy without responding to the real challenges is unlikely to reverse the tipping point great resignation.

Author: Bruce J. Carter recently was the Deputy military Director and Executive Officer for the U.S. Department of the Army Pentagon Inspector General. He has a Ph.D. in Public Policy, and Administration, and he’s co-authored Water Wars: Sharing the Colorado river with Doug Cooper. Recently, he received his Executive Certificate from Harvard University in Public Policy: Social, Economic, and Foreign Policies. For Bruce, writing is a form of political engagement. While serving in the U.S Military, Bruce has deployed around the world. Through his military deployments, he began to understand how a person could write about the world’s problems compellingly and beautifully. Email: [email protected] Twitter: @BC_bcarter06

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