The social and economic upheaval of the past two years has generated many predictable outcomes. There were widespread layoffs, whole business sectors were threatened, and those on the lower end of the economic scale suffered most. As the U.S. economy was staggered by the initial haymaker of lockdown, wobbled to its feet, and absorbed subsequent blows, there have been surprising consequences as well. Who predicted our culture-defining embrace of streaming services or the supply-chain breakdown that has led to lingering shortages of consumer goods and contributed to high inflation?
Perhaps the most puzzling phenomenon to come out of this unsettled economic era, however, is what has been dubbed the Great Resignation, which refers to the unexpectedly high “quit rate” among American workers that is inconsistent with current employment conditions. Originally seen as an example of worker malaise and disaffection, the trend revealed, upon closer examination, a more complicated picture. It seems that certain workers, including those designated as essential workers and mid-career professionals, were leaving their present jobs in search of better working conditions, higher wages, or both.
The pressing question is what does this moment signal for business, workers, and the economy as a whole? And what can companies do to seize the moment in a way that will lead to an efficient and ethical employment picture for employers and employees alike?
At a recent seminar on the topic hosted by Nobel Prizewinning economist Paul Krugman, Derek Thompson, a writer for the Atlantic magazine, sought to clarify the landscape. He suggests that popular perception of the Great Resignation is conflating two unrelated conditions: One is the high quit rate of workers moving straight from one job to the next, and the other is a labor shortage that is contributing to a historically high number of job openings, which are now approaching 10 million.
For context, Thompson gives the example of all-star basketball player James Harden, who recently left the Brooklyn Nets mid-season for the Philadelphia 76ers. “Harden didn’t resign from the NBA,” Thompson says. He moved to another team that paid him more and had a better chance of winning a championship. His decision mirrors those of thousands of workers who are changing jobs based on parallel, if less high-profile, calculations.
In this same online conversation, Harvard economist Lawrence Katz points to older workers who were left behind during the slow recovery from the Great Recession and younger workers, including parents of young children, who are unable or unwilling to return to in-person jobs, as leading contributors to the current labor shortage.
There may also be a more fundamental cause for worker dissatisfaction: A century-long social contract between workers and companies has been straining over recent years. With the widespread erosion in collective bargaining due in part to a proliferation of right-to-work laws across the country, employers relied more and more on their employees’ fear of economic insecurity as a means of retention, which while effective, especially without a public safety net, was largely a Band-Aid that plastered over, but did not address, low worker morale.
Then something broke.
Marcel Bolboaca-Negru, Ph.D., professor in the Bachelor of Science in Business Administration at Pacific Oaks College, sees this moment as “the most significant social movement in the United States in some time.” He points to the scale of the phenomenon, a resignation rate that’s nearly double its long-time average of just under 4%, and also its scope, the fact that this behavior pattern is highly inclusive and diverse. “Black people, white people, female, male, younger generations, older generations, they are all part of this movement,” he says, “and, I think, it’s rooted in the employers’ inability to fulfill the psychological contract with their employees. During the pandemic, that psychological contract was really important.”
Dr. Bolboaca-Negru comes to this question from an interesting perspective. In addition to his work as an educator, he is a major in the U.S. Army who, in his more than 20 years of active duty, has deployed to the combat zones of Kosovo, Afghanistan, and Iraq. His specialization is in human resources, which he says are largely the same in the military as in civilian life, except for a few characteristics that are intrinsic to the service, including its built-in diversity and the fact that pay grades are fixed and cannot be negotiated.
It is from this perspective that he looks at the state of employment relations in the public sector. He views the situation in the military as one private companies can learn from because the salaries are fixed, he and his colleagues must focus on work-life balance issues as well as quality of life issues for their families. This is something that Dr. Bolboaca-Negru feels that the civilian sector too often fails to do, which goes a long way toward explaining a startling statistic he cited that 45% of new hires will look for a new job in six to nine months.
Dr. Bolboaca-Negru sees a range of culprits that have led us to where we are, including the federal government for providing overly generous unemployment benefits and HR managers for being too quick to look for new hires rather than to invest in the ones they already have, which he views as a poor cost-benefit analysis.
Above all, he points to employers and organizations that, for too long, took the psychological contract with their employees for granted, because they knew their workers relied on their income, and therefore didn’t make greater efforts to retain staff. “However, the pandemic changed the status quo and gave employees a voice,” he says. “They want to feel valued. They want to have certain tailored benefits to fit their social problems at home. Many organizations failed to identify that. And this is what triggered the Great Resignation.”
When addressing this moment in history, which she describes as “spellbinding,” Pacific Oaks professor Carol Rinkoff, Ph.D., believes we need to first take stock in the extraordinary adjustments that we have made as a society over the last two years. “There was such a giant disruptive moment. Then, suddenly overnight, literally overnight, we figured out how to work in a whole new way—at home rather than in an office. A lot of businesses found that productivity did not diminish. In fact, in many cases it increased.”
Dr. Rinkoff points to the rise of Zoom as an example of how the workforce has transformed. Videoconferencing technology has existed for many years before the pandemic, but in most cases, individuals would phone each other to conduct business. While many workers, especially essential workers on the low end of the pay scale, were not able to work remotely during the pandemic with the assistance of technology, those who have are daily raising new questions about what it means to be “at work” that never would have occurred to them two years ago.
This is one reason why Dr. Rinkoff is fascinated by this time in history. “I am horrified by the number of people who have died and who have significant physical challenges due to infection,” she says. “But from an organizational viewpoint, this is fascinating. You rarely see change this dramatic happen overnight.”
When asked what the relationship between business and employees, and what that will mean for productivity in the near term, Dr. Rinkoff exudes caution. “I’m not sure of a lot,” she says. “But what I am sure of is that it’s going to be a really interesting next two years as we balance out what happened in the last two years.”
One of the reasons Dr. Rinkoff sees a period of uncertainty and reorganization in the immediate future is the profusion of information that individuals have today. Not only do workers have access to a seemingly endless array of job listing sites, they also have access to sites like Glassdoor that offer—often blunt—feedback about the working conditions and public reputations of companies or organizations to which they may be considering applying.
“Because we have so much information, because we can get our hands on it pretty readily, because as a population we’re better educated, we’ve had more life experiences, our human needs have changed,” Dr. Rinkoff says. “And that’s changed the social contract.”
Dr. Bolboaca-Negru agrees that increasing expectations among workers is driving a lot of uncertainty. “The labor force expects to enter an organization and have opportunities for training and growth on both the personal and professional level. This is where organizations need to focus,” he says.
An important first step may be retention efforts to improve organizational culture by making employees feel valued. “I talk with so many of our students who are mature learners,” he says, “and most of them say the same thing: ‘I feel that my employer doesn’t allow me to show my true worth within an organization.’”
Dr. Rinkoff agrees that seeking and acting on employee feedback will be even more essential in the future.
“Feedback loops show up in a lot of different management models now, but they sometimes can be pretty passive,” she says. “Organizations need to continually ask for, and be prepared to act on, honest input from their workers.”
Drawing on his background, Dr. Bolboaca-Negru believes that employers need to not “just check a box” but actually engage with their employees. “This is how the future is going to look, an employer-employee relationship that is more personal in nature—and more constructive.”
Dr. Rinkoff also sees this period of readjustment leading to a more stable future. “I’m hopeful that as the dust settles, organizations and employees will fall into a delightful equilibrium where the right people position themselves in the right environments, and the right environments are created and sustained as opportunities for the right people, whatever those are,” she says. “I’m excited. It’s going to be a rocky couple of years, but I can see past that and say, ‘Yeah, this is going to look good.’”
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