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Is the “Great Resignation” really coming?

A few days ago I received an email from Andrew Seaman, Senior News Editor at LinkedIn, mentioning the “Great Resignation”. I was not aware of the term and as Andrew pointed out:

“The world is beginning to see some bright spots in its battle against COVID-19. As a result, many people are thinking of shaking up their careers as restrictions are lifted and economies improve. In fact, experts are predicting a “Great Resignation” due to people wanting to move on and try something new.”

The name is certainly catchy (everything “Great” is) and I wanted to dive deeper.

1. Why do people resign?

There are many reasons people resign, the top ones being:

1. They are fed up with their current job or manager. This includes all sub-cases such as not being recognized / feeling underappreciated, lack of career path, work-life balance, etc. A notable sub-case here is fear. There have been cases of people refusing going back to work due to fear of contracting Covid, but I do not estimate this to be a long-term trend (disclaimer: this estimate is based on empirical data and not on actual ones).
2. They found a better job. Either they were looking for a new job (as a result of reason 1) or they received a better proposal. Most of the time better means more money.
3. They have to move to a different place. Maybe their spouse/partner was re-located, maybe there is a medical reason, maybe something else. In any case, they have to leave their current home and start a new one, together with a new job.

Sources: Why Employees Quit: 60 Statistics Employers Should Know, 10reasons employees resign, The no 1 reason employees quit.

Has Covid aggravated the above? Not really.

1. Many people have not gone to the office for a long time and this has let them take some time off and relax. On top, the financial aid that many states have provided, has enabled many people to take a break from a hectic work environment, without starving. By no means, do I imply that all work-related problems have been corrected due to Covid — the same manager is still there, and no new career path has appeared. It’s just that many employees are not so stressed any more.
2. During Covid, unemployment rose in certain sections of the economy (such as retail, restaurants, tourism). The trend has reversed and many people have switched jobs during this reversal. However, if we take a closer look at the data we see that this change mostly affects lower-paying, short-term jobs, who traditionally have a greater churn rate.
3. During Covid, travel has essentially been suspended and very few people actually moved to a different area, leading to a job change.

2. When can people resign?

2.1. When they can afford to

It’s one thing wanting to resign and another being able to. The latter means that you have either secured a new job or that you can afford to live on your savings for a period of at least 3 months (and possibly much longer).

With many people living paycheck to paycheck, quitting your job is not easy. Take a look at the average account balance by income of American households and look at the median figures (i.e. half the account balances of the respective percentile are below the median):

• 50% of accounts belonging to people under 35, are less than $3,200.
• 50% of accounts belonging to people 35–45 years old, are less than $4,700.
• 50% of accounts belonging to people 45–54 years old, are less than $6,300.
• 50% of accounts belonging to people 55–64 years old, are less than $5,700.

There you have it: at least 50% of accounts belonging to people in the workforce are not enough to last them more than two months.

2.2. When they have new, employable, skills

Acquiring skills takes time, money and is easier said than done.

Staying at home and not working during Covid has provided some people with the time to learn a new skill. Some of them have let this time go by (I’ve been wanting to learn playing the guitar for many years now; however, once again, I failed to ramp up my practicing during Covid). Others may have actually learned new, employable, skills. The key point here is not learning something new (for example playing the guitar), but a skill that an employer is willing to pay you for.

Unfortunately, I could not find any data to quantify how many people learned such skills. Not only that, but even after you’ve learned something new, many employers will still not hire you due to “lack of previous work experience”.

On the other hand, there is considerable data that the closing of schools due to Covid has significantly hampered the knowledge transferred to students.

I would say that on a global level, Covid has had a negative effect on education and knowledge dispersion.

3. When do people dream of resigning?

All the time! And especially the younger ones.

• Three fifths of UK workers plan career changes due to Covid.
• 41% of employees plan to leave their current employer.
• Three in five employees planning career changes because of Covid, survey finds.

However these are just answers people provide to researchers. Saying that you intend to resign is easy. Doing it, not so. Especially as you grow older.

Let’s take a look at the age distribution of the workforce in the US, per industry. (Note: I expect a similar pattern to hold for other developed countries.)

Half of the workforce is more than 42 years old, maybe supporting a family and maybe not so keen on making bold career changes. A notable exception is the leisure and hospitality industry with half of the people being younger than 32 years. This is a highly seasonal industry with shorter-term jobs (compared to other industries).

With age comes risk aversion and a career change is a risky move.

4. Doesn’t remote working change it all?

Remote working, or work from home (WFH) has been a tremendous paradigm shift, challenging the stereotypical method of work. More than a year after it all started, many employees have fallen into remote working. Employers such as Google, Microsoft, Ford and others have embraced it (or are asked to, see the letter Apple employees wrote to Tim Cook.)

There is an excellent paper “Work from Home Before and After the COVID-19 Outbreak, February 2021”, by Alexander Bick with Adam Blandin, and Karel Mertens, that provides more insights on the situation. An interesting point is that WFH is not as ubiquitous as we might like to think. It has quadrupled in May-2020 compared to Feb-2020, but still 55% of the workforce were commuting to work. It has gradually declined, with people returning back to commuting (see Dec-2020), but still its percentage is way higher that it used to be.

WFH during the pandemic. / Source: “Work from Home Before and After the COVID-19 Outbreak”, Alexander Bick et al. (Figure 1b)

Furthermore, WFH mostly affects office jobs in specific industries and is mostly exercised by specific groups of people. Quoting from the same paper:

“For example, the share of highly educated WFH-Only workers (bachelor’s degree or more) rose from 8.5 percent in February to nearly 50 percent in May, and remains at 33.2 percent at the end of 2020. In comparison, the share of low-education WFH-Only workers (high school or less) rose from 6.4 percent in February to 14.2 percent in May, and dropped back to 8.6 percent by the end of 2020. The WFH-Only shares of female, white, high-income and older workers also all rose substantially more than those of male, minority, low-income and younger workers.”

WFH-only shares by demographic group. / Source: “Work from Home Before and After the COVID-19 Outbreak”, Alexander Bick et al. (Figure 6c)

WFH has its disadvantages too. The boundaries between work and home no longer exist; employees work longer and are more exhausted. According to a report by Microsoft: “high productivity is masking an exhausted workforce”, with “Gen Z at a risk”. The same report highlights another more serious effect on the companies: lack of innovation.

“When you lose connections, you stop innovating. It’s harder for new ideas to get in and groupthink becomes a serious possibility.”

Dr. Nancy Baym, Senior Principal Researcher at Microsoft

WFH is not a panacea for all work-related problems and do not expect it to keep on increasing. It will gradually decline, until it reaches its sweet spot.

5. Then, what is the hype all about?

People love to predict (myself included, I’ve made a prediction a few lines above!).

People love to generalise and broaden the scope of their propositions (myself included, this exact phrase is a generalisation!).

Some research states that some people intend to change their jobs. But, this is not something new; people want to change their jobs all the time. It just seems that now this number is higher.

Is this enough to actually affect the entire workforce? I doubt.

Is this enough to affect some industries occupied by knowledge-workers? Maybe, but not to a greater extent than previously.

I do not see the “Great Resignation” coming.

Time and data will tell.