Why you should be celebrating the record number of people saying, ‘I quit’

In August, 4.3 million Americans quit their jobs, extending a five-month streak of historically high walkouts.
While quitting could hold up the wider economic recovery, workers who quit likely find better pay and productivity.
Americans are simply capitalizing on a wide range of job opportunities, one labor-market economist told Insider.

Americans are ditching their jobs at a record pace. While employers bemoan a labor shortage, the extraordinary amount of quitting suggests the US economy will bounce back stronger than ever before.

August marked the fifth month of Americans quitting in near-record numbers, with 4.3 million workers quitting. The continually elevated departures show that workers are taking more control over their careers – and saying no to low wages and bad working conditions.

There are plenty of reasons for Americans to quit their jobs right now. COVID-19 continues to rage across the country, making some Americans too concerned to work in-person jobs, or leaving work to take care of their own or someone else’s coronavirus symptoms.

Burnout has become a crisis of its own, particularly in sectors where reopening brought a sudden surge of demand.

And some people are simply just leaving their jobs for better work.

The last reason is exactly why record-high quits should be applauded, not feared. Usually quits tick up when the labor market is strong and unemployment is low; indeed, unemployment dropped to 4.8% in September, even as the country added a lower than expected number of jobs.

Recent data backs up the idea that workers are quitting amid a plethora of options. Job openings soared to record highs through much of 2021 and, despite falling in August, still totaled more than 10 million, according to JOLTS data published Tuesday.

There’s a whole lot of opportunities out there right now, Nick Bunker, economic research director at Indeed, told Insider. “We’re seeing lots of workers seemingly going out and seizing them.”

The benefits of being a quitter

Leaving one’s job doesn’t just free up new work opportunities. Research suggests it gives way to higher pay and greater productivity.

In fact, it could lead to a whole new economy: Arindrajit Dube, an economics professor at the University of Massachusetts Amherst, wrote on Twitter that if quits stay elevated through next year, it “could have a fundamental and lasting impact on labor market power and wage norms.”

There’s a “remarkably strong relationship” between switching jobs and higher wages, economists at the Federal Reserve Bank of Chicago found in 2015. Switching jobs tends to push workers up the economic ladder. Generally, a jump in the quit rate leads to stronger wage growth one to two quarters later, the team said.

Quitting can also give way to stronger productivity. Some of the strongest productivity gains of the last decade have taken place during the pandemic, when workers were leaving their jobs and looking for new ones. Businesses are pushed to do the same amount of work with fewer employees, forcing adoption of new practices or technologies.

And Americans who quit can better match their skills with a new job. That also lifts productivity and gives workers more power when bargaining for higher pay.

“One of the best ways for a person to boost their earnings is to switch jobs. And I think that’s very much likely to be the case right now,” Bunker said.

Quits can also send a strong message to companies mired in the status quo

DataTrek Research, an economic research group, tracks what it calls the “take this job and shove it” indicator. That’s the share of job separations that were quits as opposed to layoffs or other reasons for leaving work.

Jessica Rabe, DataTrek’s co-founder, told Insider in an email that the indicator rose to a record 71.1% in August. She noted that two-thirds of the month’s increase in quits came from accommodation and food services – an industry that is historically lower-paying and has been hard-hit by labor shortages.

“That tells us workers continue to leave the restaurant industry amid challenging demands put on existing staff due to labor shortages and other requirements, such as mask mandates for customers,” Rabe said. And, because the quits rate has remained high in leisure and hospitality, “the industry will remain constrained due to the dearth in available workers which will continue to weigh on overall employment.”

To be sure, quits data only tells economists so much about where workers are going next. Quits only show Americans leaving their jobs, not finding new ones. And JOLTS data doesn’t show whether Americans quitting their jobs left for other sectors or stayed in the same industry.

If labor shortages continue, the number of workers quitting might remain stubbornly high.

“The outlook for demands still seems pretty robust moving forward,” Bunker said. “So it seems likely we will see quitting stay elevated for quite some time.”

Read the original article on Business Insider

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