The term ‘The Great Resignation’ was coined in May 2021 by Anthony Klotz, a professor of management at University College London’s School of Management, predicting a mass walk out exodus that would be continuous for a period of time. It refers to the ongoing economic trend wherein people are resigning from their job roles, leading to many industries facing a huge challenge in recruiting talented and skilled people.
High quit rates normally suggest high worker confidence in the capacity to obtain higher-paying jobs, which correlates with high economic stability, high employment relates, and low unemployment rates. On the other hand, during historic periods of economic uncertainty, resignation rates tend to decrease as hire rates and employment rates also decrease significantly. During the Great Recession of 2007-2009, in the U.S the quit rate dropped from 2.0% to 1.3%, which coincided with the hire rate falling from 3.7% to 2.8%.
The causes of the Great Resignation lies in a combination of factors and variables which have had a profound impact on pretty much every industry imaginable. It’s no coincidence that the Great Resignation happened during the COVID-19 pandemic as workers took a more observant look at their working conditions, career development, and what they really wanted from life.
We break down why the Great Resignation happened and continues to this day, the effects it has had on businesses across the globe, and why employers don’t necessarily hold all the cards anymore…
What Really Caused The Great Resignation?
As the pandemic hit the world like a bullet train, many employees were offered the opportunity of being on furlough leave or working remotely, where they were able to really dig down and think inwardly about their career choices like never before. Schedule flexibility, a better work-life balance, and working remotely, or hybridly, were seen as primary priorities. If employers refused to match the preferences of their employees, particularly as more people were encouraged to return to the office later on in the pandemic, many employees chose to resign and search for work roles which matched these priorities. As well as this, the effects of those who quit had a direct impact on the workers who stayed put in their job roles, leading to remaining overworked employees resent having to work even harder to handle the workload and therefore more inclined to resign.
The sense of empowerment from employees proved sustaining as workers began to resign in mass numbers, particularly in industries such as restaurants and hotels. Emergency COVID loans and unemployment benefits saw a huge spike in workers staying home and not working. An Adobe study which surveyed over 5000 individuals, found that the Great Resignation was largely derived from Millennials and Gen-Z, who became disenfranchised with their job roles in large numbers. A staggering over half of Gen-Z respondents (those born between 1992-2012) stated they were to be looking for a new job within the next year.
Another alternative reason for the Great Resignation, which many economical analysts have pointed to, is due to a shortage of migrant workers caused by travel restrictions during the pandemic, as well as a general spike in anti-immigrant sentiment. Not to also mention the atrocities faced by the older generation in facing the COVID-19 pandemic, which led to many fatalities as well as early retirements. In the UK between July and September 2021, over 400,000 workers left their jobs. This was an increase of 270,000 from two years prior, whilst a record high 1.3 million job vacancies in December 2021 was documented, equating to 4.4 vacancies for every 100 jobs.
What Will The Lasting Impact of The Great Resignation Be?
If there’s one thing that is certain when talking about the effects of the pandemic on the workplace, is that it has definitely created a worker shortage. As a result, many industries particularly within the white-collar sectors, have experienced severe problems recruiting quality staff reinforcements leading to stagnation accentuated by the cost-of-living crisis. This will naturally have a detrimental knock-on effect economically, deepening the impact of an impending recession across the world.
As a result of the power shift from employer to employee, more businesses are choosing to focus intently on staff wellbeing and making sure they’re looked after and their desires met. Job roles advertised now are more than likely to promote flexibility, collaborative work environments, hybrid/remote working arrangements, vested employee interaction within the company, strong social bonding events etc.
The pandemic also exposed a spotlight on many injustices within wider society, including the Black Lives Matter movement, environmentalism, as well as a concentrated fixation on mental health, specifically within the workplace. This direction of progressiveness has already made huge inroads in the short term, and this is likely to continue within the long-term recovery of the job market and recruitment. This will obviously differ in terms of industry and sector, but already the contrast to pre-pandemic is eye-opening to say the least.
Job satisfaction and happiness is paramount to personal and professional wellbeing more than ever. The faster businesses and organisations understand, accept, and adapt to this, the more likely they are to progress and limit the damage that the next few years of economic instability will bring.
We hope this has outlined to you the causes and impact of the Great Resignation, and what businesses can do to keep hold of quality, skilled team members. If you’d like to know any further information on anything mentioned, or anything accounting related for that matter, please do not hesitate to get in contact with us at Nordens, where one of our trusted advisors would be happy talking you through your query.