Among the many problems that folks speculated about as the pandemic got its grip on the economy, surely the notion that a rush of people would be quitting their jobs was not one of them. Losing their jobs, sure. But quitting them? And yet, here we are, amid the so-called “Great Resignation,” with unheard of numbers of people voluntarily leaving their employment.
Conventional wisdom holds that the Great Resignation is a bad thing; something that needs fixing. At a time when – and this is a first for our economy – there are more job openings than there are people looking for jobs, we don’t need even more jobs opening up. What we need is more folks entering the workforce and filling the job openings that are already out there.
While I get the conventional wisdom – lower labor force participation is at least arguably a bad thing – I am not so sure it tells the whole story. For one thing, while the pandemic has not cratered the economy, it has shaken it up. Working from home and hybrid working arrangements have created new opportunities for workers and businesses. Supply chain problems have created a demand for new technologies and business models, as have changes in buying habits (I counted a dozen packages on the front porch a few days ago). All of these factors suggest that jobs are shifting in terms of industries and skillsets, and so are workers.
But there is another reason that the Great Resignation may be worth featuring rather than fixing. One of the distinguishing characteristics of highly innovative economies – think Silicon Valley and its brethren – is high employee turnover. These regions spawn new companies (and create wealth) at much higher rates than less innovative regions. And those companies grow – and fail – much faster than traditional small and big businesses. That, in turn, creates a constant high demand for – and supply of – new hires. The process is revved up by the huge differences in risk/reward profiles between the newer companies (higher risk/reward) and the more established companies (lower risk/higher security). (See Employee Turnover: A Cloud with
a Silver Lining (jsonline.com) for a deeper discussion of this idea.)
The slower rebound of labor force participation relative to job creation since the bottom of the Pandemic recession is surely a big part of the Great Resignation. But something else may very well be going on. Something kind of encouraging. The economy may be creating more opportunities for innovation and wealth creation. And just maybe more folks looking for ways to be a part of the economic engine that drives the “creative destruction” that in turn drives economic growth. A little Silicon Valley in places other than Silicon Valley would be a good thing.
The slower rebound of labor force participation relative to job creation since the bottom of the Pandemic recession is surely a big part of the Great Resignation. But something else may very well be going on. Something kind of encouraging.