The Great Resignation: Economic Impacts of Workers Leaving Their Jobs

25th August 2021

A wave of resignations in 2021 is reshaping the labour market. This piece investigates the economic ramifications of the Great Resignation and what it means for businesses and economies.

In the summer of 2021, the world watched as millions of workers across the United States and beyond walked away from their jobs, in what has come to be known as the Great Resignation. A phenomenon that saw employees in record numbers quitting their positions, this unexpected shift in the labour market has sent ripples across economies and businesses alike. As we explore the causes, effects, and long-term implications of this mass exodus, we must consider the broader economic ramifications and whether this represents a temporary blip or a fundamental shift in the way we view work.

The Great Resignation, which began in earnest around the middle of 2021, saw a surge in voluntary resignations in the US, with many workers choosing to leave their jobs rather than continue in positions they found unsatisfying or unsustainable. This movement has had widespread effects on a range of industries, from hospitality and retail to healthcare and technology. At its core, the Great Resignation is not just about workers quitting; it’s about a profound reassessment of work, wages, and the social contract between employer and employee.

The pandemic acted as a catalyst, exposing deep inequities in the labour market and prompting many workers to rethink their career paths. For some, the enforced time away from the office provided an opportunity for introspection, revealing the limits of job satisfaction and highlighting the personal costs of work. For others, the shift to remote work made them realise that they didn’t need to commute long hours to be productive, and in many cases, they were better able to balance their professional and personal lives. This newfound perspective on work-life balance, combined with the stress of the pandemic and the uncertainties it introduced, pushed many workers to reconsider their priorities and ultimately resign from their positions.

Economists have suggested that the pandemic created a “reset” moment, whereby workers, having had a taste of what it might be like to live without the grind of daily office life, are now demanding more flexibility, higher wages, and better working conditions. As we return to a semblance of normalcy, workers are no longer willing to accept the status quo of low-wage, high-stress jobs, particularly in industries such as retail and hospitality. In many cases, workers in these sectors have been reluctant to return to positions that offered little in terms of job satisfaction or career advancement. As a result, businesses are facing a new challenge: how to adapt to a labour market where employees have greater bargaining power than before.

But it’s not just workers who have been impacted by the Great Resignation. Businesses are feeling the strain as well. Across industries, companies are struggling to fill vacancies, particularly in sectors that rely on low-wage workers. This has led to labour shortages, rising wages, and an increased need for businesses to offer more attractive benefits packages in order to entice workers back. In the short term, this has placed additional pressure on businesses, forcing them to raise wages and offer better incentives in an effort to attract talent.

For some industries, the effects of the Great Resignation have been more pronounced. The hospitality sector, for example, has been particularly hard-hit, with many restaurants, bars, and hotels struggling to fill positions. According to some reports, businesses in this sector are offering sign-on bonuses, higher wages, and increased benefits to try to lure workers back. However, despite these efforts, many workers remain hesitant to return to the sector, citing poor working conditions, long hours, and low pay as reasons for their decision to leave. The rise in demand for services, paired with a limited supply of workers, has created a situation in which businesses are being forced to raise prices, a move that could have longer-term implications for inflation and the overall cost of living.

The effects of the Great Resignation are also being felt in industries that rely on higher-skilled workers, such as technology and healthcare. In the tech sector, companies have been scrambling to find qualified workers as demand for digital services continues to grow. As businesses embrace digital transformation, the need for skilled workers has never been greater, but many employees in the sector have opted for jobs that offer more flexibility, higher pay, and better work-life balance. The result is a highly competitive labour market, with tech companies offering record salaries and benefits packages in an attempt to attract the best talent.

In healthcare, the pandemic placed immense stress on frontline workers, leading many to reconsider their careers in the sector. Nurses, doctors, and other healthcare professionals, many of whom have worked tirelessly throughout the pandemic, are leaving their positions in large numbers, citing burnout, stress, and poor working conditions. The shortage of healthcare workers is already having a significant impact on patient care, and the long-term consequences of this exodus could be far-reaching, particularly as the world grapples with the lingering effects of the pandemic.

While the short-term effects of the Great Resignation are clear, the long-term implications are less certain. On one hand, businesses may be forced to adopt more flexible and employee-friendly policies, such as remote work options, better benefits, and higher wages. This could lead to a more equitable and balanced labour market, where workers have greater control over their careers and work-life balance. However, there are also concerns that the Great Resignation could contribute to rising inflation, as businesses raise prices to cover the costs of higher wages and benefits.

Another potential consequence of the Great Resignation is the impact on productivity. With businesses struggling to fill positions and workers demanding more flexible working arrangements, there is a risk that overall productivity could decline. This is particularly true in industries that rely on low-wage workers, where businesses may have to raise wages to attract employees, but may not be able to pass these costs on to consumers. This could lead to a situation where businesses are forced to either accept lower profit margins or pass on higher costs to consumers, potentially fuelling inflation.

The economic impact of the Great Resignation is also tied to broader structural changes in the labour market. For years, many workers have felt that their jobs offered little in terms of upward mobility or personal fulfilment. The pandemic and the subsequent mass resignations have highlighted the importance of job satisfaction and work-life balance, which may lead to lasting changes in the way companies approach their workforce. In the future, businesses may be more inclined to offer flexible working conditions, better benefits, and higher wages in order to attract and retain talent, leading to a more competitive and worker-centric labour market.

In literary terms, the Great Resignation evokes themes of rebellion and self-determination, akin to the struggles of the protagonists in The Scarlet Letter by Nathaniel Hawthorne. Just as Hester Prynne resists the constraints of her society, so too do workers in 2021 challenge the established norms of the workplace, seeking a greater sense of autonomy and purpose. There is a sense of individual agency in the resignations that echo the personal revolts of characters such as Austen’s Emma, who pushes against the conventions of her time to redefine her own future. However, as with the characters of Austen and Hawthorne, the choices of the workers may be fraught with unintended consequences. Will the demand for higher wages and better conditions lead to greater prosperity, or will it spark inflationary pressures that undo the benefits of higher pay?

In conclusion, the Great Resignation represents a profound shift in the labour market, driven by a combination of factors including the pandemic, the rise of remote work, and a reassessment of the value of work. While businesses are facing challenges in filling vacancies, this wave of resignations could ultimately lead to a more worker-centric economy, with higher wages, better benefits, and more flexible working conditions. However, the long-term implications remain uncertain, and the economic consequences could be far-reaching. The Great Resignation is a reminder that, just as in the novels of Austen and Hawthorne, the decisions we make today can have lasting effects, not only on our own lives but on the broader social and economic landscape.