(Bloomberg Opinion) -- I recently caught up with a friend who has been working at the same company for more than a decade and was content enough. Other companies might pay more, make him feel more valued and offer room for advancement, but he didn’t pay much attention to his growing dissatisfaction and lack of forward trajectory because his sales job meant he was on the road a lot and liked his clients and colleagues, as well as the nice hotels and fancy meals. The pandemic took away all those perks and he had to face what the job wasn’t offering. Now my friend is considering quitting -- and he should. American have a history of not changing jobs often enough, to the detriment of the economy.
Although the quit rate normally varies with the state of the labor market, rising when it is tighter and there are lots of jobs around, the overall trend has been lower since the 1980s. The reasons are not well understood. Some economists suspect it is due to the growing power of employers or maybe the increasing prevalence of non-compete agreements. But these can’t explain why job switching has fallen across all skill and income levels, and even in industries with competitive labor markets. Maybe the reason has to do with how employer-provided benefits have become a bigger part of overall compensation. Economists have speculated that the lack of job changes is a big reason why wages haven’t gone up much since the 1980s.
Another possibility for the lack of mobility among workers is a languishing population. Organizational psychologist Adam Grant has written about how more Americans are languishing, meaning they are not depressed and are functioning, but not thriving. They take fewer risks and have become less open to change and experiencing the unknown. If we are languishing, we aren’t growing emotionally or economically. The pandemic forced many Americans into a state of acute languish, with some not leaving their home for extended periods of time, which forces one to realize how long he or she has been stuck in a rut.
The pandemic and the work-from-home environment it spawned also led many economists to speculate that workers would become better adapted to technology, more efficient and strike a healthier balance between work and life. This, in turn, would leave them more mobile. A Microsoft Corp. workplace trends survey found that 40% of Americans are considering leaving their jobs this year. And many are doing just that, with 2.5% of the employed quitting their jobs in May, according to the Bureau of Labor Statistics’ Job Opening and Labor Turnover Survey. Although that’s down from the record 2.8% in April, it’s still higher than any other point since at least before 2001. Plus, consider that the quit rate was only 2.3% in 2019 when unemployment was just 3.6%, compared with 5.8% this May.
These sorts of proactive changes are important, not only because they typically mean higher wages when one switches jobs, but they can also mean more innovation and skill development that make the economy more fundamentally sound and durable. It could even reduce inequality. Economists estimate that industries where workers switch jobs more often offer higher pay. To many economists, the fact that job switching had become less common contributed to more inequality and less economic mobility.
There’s still a question of whether this increase in quits is a temporary phenomenon or becomes a new normal. On the one hand, we’ve all been forced to live with discomfort and things we can’t control these past 15 months. Perhaps our new freedom and some stimulus money will inspire us to make the changes we need. The other, more likely, alternative is we’ll become more risk-averse. What often happens after big negative shocks is that we recoil from more risk. In other words, even if many people intend to quit, will they end up embracing the familiar and stay put once they see their colleagues and get back into their old routines?
Employers are banking on the latter. Some are offering more flexible schedules and remote work, hoping that will be enough to keep employees from quitting. Others are betting that people are still passive by nature and the desire for change will pass. Casinos to high end law firms are offering mid-year retention bonuses in the hopes that these special payments will be enough to get people back to their old routines and complacent ways.
Change is hard and we are not practiced at dealing with it even after the last 15 months. But if we can learn to accept and embrace change, the result will be a more dynamic economy. What about my friend? He is waiting on a bonus that requires him to stay on a few more months before quitting.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Allison Schrager is a Bloomberg Opinion columnist. She is a senior fellow at the Manhattan Institute and author of "An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk."
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