KATZ: The quitters are not really leaving the workforce. What happened is a lot of people lost their jobs early in the pandemic and a lot of them have not come back, especially when they haven’t had the opportunity to come back to their previous jobs. What’s puzzling, relative to the historical data, is the slow movement of people who have been unemployed for a while back into employment, given how many job openings there are.
The number of people who switch from one job to another is what you would predict given the great opportunities. It’s always been true that people who switch jobs tend to get higher wage growth than people who stay put, but it looks unusually high right now — about 2 percentage points over the last. So, there are very strong economic incentives to change jobs — that’s the first reason.
But a second issue — we see a lot of anecdotal and survey data on this — is, I think we’ve really met a once-in-a-generation "take this job and shove it" moment.
GAZETTE: What’s driving that?
KATZ: There’s no perfect way of measuring these types of factors. But what we do see is a lot of people asking about getting remote work, for example, and a lot of people questioning low-wage, high-turnover situations, and employers starting to respond, but pretty slowly relative to the expectations of workers.
The other reason why this is a "take this job and shove it" moment for a lot of workers is their financial situation is much better than it was coming out of the Great Recession, with the expansion of the social safety net and the stimulus payments during the pandemic period.
Upper-middle-class and well-off people are doing quite well with the stock market boom and have saved a lot. But even people in the bottom two quartiles of the income and wealth distribution are in much better financial situations than in previous economic recoveries, so we’ve seen a slow return from unemployment given the job openings. Having a stronger safety net and having built up some savings means people can put more weight on their caregiving responsibilities, or can look for something better. They can invest in a training or another program that they might not have been able to do in the past.
Whether this is a temporary phenomenon or whether this is truly a once-in-a-generation change in labor activism is an open question. But the number of strikes we’re seeing and workers willing to protest, whether it’s Hollywood production crew workers, John Deere employees, or Harvard graduate students, is very high relative to where the unemployment rate is at. So, I think there may be something more persistent here.
"I think we’ve really met a once-in-a-generation ‘take this job and shove it’ moment."
GAZETTE: Costs for necessities like food, shelter, and cars are still going up. Does that put any pressure on employers to raise wages to retain workers, particularly with the hiring gap in the background?
KATZ: I think the combination of the high inflation with the fact that workers have a lot of outside options and are a little better off financially will put pressure on employers to raise wages to keep workers. Jumps in inflation always put a little pressure to keep the real value of things, but that by itself wouldn’t be strong enough. It’s the combination of a tight labor market with that. And workers really will need substantial wage increases to keep up with inflation.
These are quite unprecedented times in the whole range of the pandemic-related health situation and disruption and the temporary inflation. There’s not a good historical record to look at this one. We haven’t had a jump in inflation like this in decades, and we’ve never had one, in our living memory, related to pandemic shortages.
GAZETTE: Are we in a reset period, where employees and employers are reassessing the terms of engagement?
KATZ: Yes. I think a lot of employers are surprised at how many workers have balked at coming back to the office, the restaurant, or other workplaces. What I don’t know is whether employers can hold out and try to restore the pre-pandemic bargain more favorable to employers than to workers. The longer people stay out of work, the more their finances will go down, and they’re not going to get stimulus checks again. Maybe workers can hold out for six months and then the world will go back to the way it was before the pandemic. Or maybe the current moment reflects a permanent change in people’s values and a change in their willingness to withhold labor supply, individually and collectively.
We’ve also been seeing a spurt in union organizing successes for a wide range of professional and technical workers over the last couple years and into the pandemic at places like the Urban Institute, MDRC, and the Brookings Institution, where the employers have voluntarily recognized staff unions. Using collective clout to improve pay and working conditions may be an increasingly important way for workers to make progress in the labor market. That could be a major change in the balance. A lot of it is individual decisions, but a lot of it is workers acting collectively now in a way that we haven’t seen in decades.
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