In 2020, resignation rates across the US plummeted due to the fear and uncertainty caused by the pandemic. However, one year later, as the workforce experienced a collective burnout, individuals left their jobs at unprecedented rates, leading some to describe the phenomenon as the Great Resignation.
In November 2021, 4.5 million workers left their jobs according to the US Labor Department. This matched record numbers observed in September and accounted for 3 per cent of the workforce quitting their jobs each month. Estimates indicate that in total, 75.5 million people in America resigned in 2021. Furthermore, according to a ResumeBuilder.com poll, around 23 per cent of the workforce will seek new jobs in 2022.
Low-wage workers were more likely to resign than their higher-paid counterparts with the sectors most affected including hospitality, healthcare and social assistance, and transportation, warehousing, and utilities. Around 4.4 per cent of all positions in education are open, over 6 per cent in retail, and more than 8 per cent in healthcare. This amounts to almost a million and a half vacant positions.
In India, the situation is not as dire but still cause for concern. Following the Great Resignation, the IT and technology sector is hiring at unprecedented rates with the top five IT companies hiring around 1.7 lakh people in 2021. Not only are people in the workforce changing jobs, but according to a September 2021 survey by Amazon India, nearly 51 per cent of job seekers are looking for opportunities in industries where they have little to no experience.
The Great Resignation has largely been fuelled by burnout, but other factors also include the shift to working from home and the desire to move into a more stable profession. An MIT Sloan study found that more innovative companies suffer from a higher turnover as they demand more from their employees and project a sense of instability due to their cutting-edge nature. Unsurprisingly, companies that report higher employee satisfaction are better at retaining their employees. The MIT analysis found that a toxic corporate culture is the higher predictor of attrition and over ten times more important than salary in predicting turnover.
In light of these resignations, the labour market has incentivised companies to offer better benefits and higher salaries. Economists predict that the race to attract top talent will continue with larger companies who can offer better salaries winning out. A recent report from the Conference Board found that the share of job postings that include a hiring bonus more than doubled between March 2020 and October 2021.
According to research from the WFH Project, while higher pay can be a big factor, people value the flexibility to work from home as much as they would, a ten per cent pay rise. Consequently, companies across the board are offering employees shorter and more flexible work weeks with several shifting permanently to work from home.
The work from home culture has also impacted the housing market. For what one would pay to rent a small apartment in a city like New York or San Francisco, they could afford to buy a house in a city like Greenville, South Carolina. This in turn has attracted big employers like BMW and Michelin to move to smaller cities, while also nurturing small businesses and start-ups.
Bleeding workforces have also fuelled more automation. In 2020, the World Economic Forum surveyed 300 global companies and found that 43 per cent of business expect to reduce their workforce with new technology. As companies struggle to hire in the US, companies are increasingly turning towards automation and outsourcing to combat labour shortages.
What can be done?
According to the same MIT study, there are a number of ways that companies can retain top talent. The first is to provide opportunities for lateral job moves. The study found that people experience burnout due to a lack of new challenges and the opportunity to try something new. When employees are offered new jobs at their companies, they are almost 12 per cent less likely to resign. International postings are also a big incentive as they come with new experiences.
The study also found that companies that have a healthy work culture are less likely to lose employees. Creating a better workplace includes hosting more cooperate social events, providing employees with benefits like happy hours and organising more excursions outside the office. This has the dual benefit of creating fun experiences and strengthening connections between team members.
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The paper notes that when blue-collar employees describe their schedules as predictable, they are less likely to quit. It, therefore, advises companies that higher low-wage workers to make schedules more predictable by establishing concrete time slots and putting in place measures like mandatory mask wearing and social distancing.
Lastly, companies should offer employees more remote working opportunities. While not all industries would benefit from work from home policies, high wage earners, who tend to have more comfortable housing arrangements, tend to prefer working from home.