The Great Resignation ‘bloodbath’ means businesses have to rethink hiring

February 2, 2022, 5:34 PM UTC
Fortune

More Americans started quitting in July. A lot more.

And it hasn’t let up since.

This December, for the sixth month in a row, over 4 million Americans quit their jobs. It’s forcing businesses to throw more and more money at trying to entice workers to join or even stay at their companies. 

Yet many of these workers aren’t just sitting at home on the couch waiting for the phone to ring. Instead, they’re cashing in on wage hikes and pandemic pay and signing bonuses—trading in one job for another to gain higher compensation and better benefits. And Americans have had their pick of jobs, as the rate of monthly new hires has remained steadily at more than 6 million since May.

Every sector is seeing this kind of high turnover, Ron Hetrick, a senior economist with labor market data company Emsi Burning Glass, tells Fortune. “No one’s immune to it,” he says, but adds that the real “bloodbath” in the war for talent is occurring in jobs on the lower-skill side.

In fact, quitting has picked up the most in sectors that already had high quit rates. Industries like leisure and hospitality, as well as retail trade, have traditionally had higher turnover, Nick Bunker, an economist with the Indeed Hiring Lab, tells Fortune. Now it’s even more of a squeeze.

Also, the numbers only tell part of the story. Many employers are dealing with a lot of ghosting, with workers never showing up for jobs that they have accepted, Hetrick says. It all contributes to companies spending more on wasted recruitment expenses. 

“There is experience in those industries of having tighter high turnover, but obviously not the level of turnover that we’re seeing right now,” Bunker says. For those sectors, the question now is whether the game plan going forward is to just use the strategies of the past, but dialed up, or are there some other responses to try?  

In retail, for example, many companies including Kroger and Under Armour have implemented raises for hourly workers. Others like Starbucks and Drury Hotels, have offered hiring bonuses for applicants to entry-level positions.

But companies may also need to look at nonfinancial incentives, such as changing aspects of the jobs themselves—perhaps by making workers’ scheduled work hours more stable and routine, Bunker says. Or reduce barriers, such as CVS Health’s bid to no longer require that job seekers have high school diplomas. 

Many employers are also beefing up their benefits—and not just offering health care and dental coverage. Fertility benefits have been on the rise, and many companies have also expanded their mental health support and caregiver leave policies.

The wage gains, however, are not to be dismissed, Hetrick says. “When you were making $12, $13 an hour, $1 more is a massive deal,” he says. “You would be foolish to tell these people not to take advantage of that opportunity.” 

Other sectors, however, have seen outsize turnover compared with historical averages. Manufacturing, for example, has seen the biggest quit rate, as a percentage—but not a lot of wage growth, Bunker says. 

When does it end? 

Quit rates are high now, but they are predicted to wane, says Iwan Barankay a behavioral economist and professor at the Wharton School of the University of Pennsylvania. “Now, with Omicron likely to be the last wave of large closures and restrictions, we should see quit rates recede again,” Barankay tells Fortune. 

Beyond the waning of COVID cases, Hetrick says, personal savings rates are also on the decline, which may indicate that the U.S. could be close to that turning point in getting more Americans back into the workforce. 

”I don’t care how terrified you’re getting. I don’t care how much you don’t want to get a vaccine. At some point you’re like, ‘I’m starving to death—I need income,’” Hetrick says. Americans’ personal savings rate hit an all-time high of 33.8% in April 2020, but has since slipped to 7.9% as of December.

In many ways, Bunker says, the turnover is tied to the elevated demand for goods. Unsurprisingly, that means there’s increased demand for workers who produce goods. If that dips as expected, particularly with the Federal Reserve set to hike interest rates in an effort to stanch consumer demand, it could bring a bit of relief to companies seeking more and more workers to keep pace. 

Right now Bunker says he sees the current turnover environment as more of this “demand-driven reshuffle that fades.” Of course, it may fade faster in various sectors than in others—and the U.S. may also see sustained churn in specific industries. It’s worth noting, for example, that even before the pandemic, fast food chains routinely saw turnover run as high as 150%

If some employers are in for a more prolonged high-turnover environment, businesses may have to get creative about finding workers, especially if they can’t continue to raise wages, Hetrick says. That may include companies getting together and funding day-care centers to entice workers who need childcare in order to work. 

“If a lot of this has been driven by the reopening of the economy…once these things are finished reopening, and the intensity dips there, then maybe we’ll see some fading in that quitting activity in those sectors,” Bunker says, but much of that, he adds, is still an open question.