workers are quitting at record rates for higher-paying work

Behind inflation and supply-chain driven supply shortages one of the biggest topics in 2021 economics discussions is the so-called ‘Great Resignation’. This is a phrase increasingly used to describe the historically high levels of people quitting their jobs. Most often this is treated as one of the many ills facing the COVID and post-COVID economy. It’s also blamed what are frequently described as labor shortages. And it’s even blamed for inflation.

In fact, virtually everything we know about the Great Resignation is a good thing. And we should embrace it. It’s not knowledge workers reevaluating work life balance. It’s low wage workers in grueling and thankless jobs finally telling their bosses to go F themselves, quitting and finding better paying work.

Why did anyone ever think it was anything else?

Perhaps inevitably, since people who report and talk about the news tend to be educated and at least somewhat affluent knowledge workers, commentary on the Great Resignation has focused on office, knowledge and managerial workers reevaluating their lives and work-life balance in the wake of the Pandemic. People want to keep working from home when their companies want them back in the office. They want to prioritize work-life balance. They want their companies to match their values. No doubt some of this is going on. It’s a big country. The Pandemic has upended our lives more than any collective event in virtually any of our lifetimes.

But that’s not what the Great Resignation is. Not all of this mischaracterization was myopia. Until recently good information was spotty. We’re now finally getting robust data that shows that the historic rise in ‘quits’ is being driven by low wage workers who are quitting their jobs because they’re able to get better paying ones. We’re don’t have good data on exact income levels. But we can get a good idea from the industry breakdowns. They’re concentrated in the service and hospitality sectors and light manufacturing where wages are low. Overwhelmingly these are people in what were already grueling and thankless jobs and became, in many cases, dangerous jobs during the Pandemic. They aren’t quitting and leaving the labor market. They’re quitting because they are finding other jobs that are paying them more.

That can certainly create turbulence in labor markets. And it can be part of the equation in inflationary pressures in the economy – though that’s more complicated. But by almost every measure that we’re supposed to care about that’s a good thing. Peoples’ wages are going up and that increase is concentrated at the bottom of the income scale.

The question is, why? Or rather, why now? Early in the pandemic I noted that big historic crises, in which society becomes especially reliant on working people who otherwise remain marginalized in political debates, often lead to growing demands for pay, rights and other renegotiations of the social contract. It’s hard not to believe that something like that is playing a role in these changes. But while labor militancy is playing some role the big factor seems to be the availability of better paying jobs. In other words, it’s not you have a walk out and get your employee to increase wages. It’s that there are other places in town hiring for me, so you quit the job you underpaid at in the first place. (Obviously, in a big country there are countless different scenarios playing out. I just mean to suggest what seems dominant.)

Just why this is happening I don’t have the professional or analytic tools to make sense of. But one study that pricked my attention is discussed in this article at CNBC. Economists at Barclays confirm that the people quitting their jobs aren’t leaving the labor force. The decline in labor force participation is “being fed almost exclusively by married people living with a spouse who left the labor force in the late summer of 2020 and did not return.” And the resistance to return is more hesitation tied to what are presumably transient factors tied to the Pandemic.

In this scenario, the economy is coming back. But a small but key part of the labor force is at least temporarily waiting on the sidelines. That in turn is creating a seller’s market for labor. Workers who didn’t have other options besides their grueling low paid job are finding other job openings at higher wages.

Who knows whether that precise theory will bear out. But we have enough data to see that this isn’t knowledge workers experiencing burnout or people leaving the labor market. It’s people in low wage jobs seeing the chance for better jobs at higher wages and taking it.