The policy examples from this article is under the spotlight during the OECD Local Development Forum, which took place in Cork, Ireland, on 15-17 June 2022. This event was organised as part of the Local Employment and Economic Development programme (LEED) Programme, which marked its 40th anniversary this year. Since 1982, the mission of LEED has been to create good jobs in great places.
In March 2022, a record 4.5 million US workers quit their jobs. Workers were already voting with their feet before the pandemic but recently many more have been heading for the exit. A Great Resignation is underway. So far it has been a US phenomenon but is now showing signs of spreading to Europe and beyond. Is it something that people and places should be celebrating?
COVID-19 acted as a trigger for many workers to reflect on their career path and prospects. This has been most true for those working in low-paid jobs that were either put on hold (e.g. tourism, hospitality) or those that were put under increased pressure (such as healthcare and education) during the pandemic. Since March 2020, US nonfarm quit rates have risen by 7% in total but by more than 10% in the accommodation and food, retail, health and social assistance sectors. Over that period, these sectors have collectively accounted for more than 40m quits, with workers citing poor pay, a lack of career prospects and feeling disrespected at work as the top reasons for quitting. Many of these are disgruntled younger workers, with 37% of young adults saying they quit in 2021, compared with 17% of those aged 30 to 49, 9% of those aged 50 to 64 and 5% of those aged 65 and over.
These quitters have been emboldened by the fact that jobs are plentiful. The number of unemployed workers available for each job opening in the US fell to a record low of 0.5 in the April 2022. SMEs are finding recruitment particularly challenging: around 50% of US SMEs recently reported that hiring challenges are preventing them from operating at full capacity.
While the Great Resignation is making a splash in the US, some other countries are beginning to see similar waves of “job quitters” too. During the first quarter of the year, the number of resignations in the UK was 27% higher than the first quarter of 2019, prior to the pandemic. In Australia, 1 million people began new jobs in the quarter to November 2021, with the rate of job switching 10% above pre-pandemic levels.
Rising pay and pressure on workplace culture
This pressure is prompting a response from firms, with many offering enhanced pay and benefits to retain talent and draw workers back, especially in sectors most affected by labour shortages. Yet changes to working conditions may be equally important, given employee concerns about corporate values, workload, mental health, and respect – in short, corporate culture. This may be a tougher nut to crack given evidence of a growing disconnect between managers and workers.
These factors also help explain why the Great Resignation has hit some states harder than others. Alaska, Wyoming, Georgia, Kentucky and Montana – predominantly rural states – topped the list for resignations in November 2021, while states with the lowest resignation rates are those which have been able to offer workers higher salaries, more flexible work arrangements, and better benefits.
Similar changes are underway in Europe with firms increasing pay and perks in an attempt to attract workers: some firms in Belgium have started to offer private health insurance, whereas companies in the Netherlands are attempting to lure workers with learning stipends and reduced working hours. In Germany, workers are being granted extra annual leave, while in the United Kingdom and Ireland some businesses are even offering a 4-day workweek to employees in order to improve retention.
Local action can help smooth the path
Improvements to pay and conditions – particularly for the lowest-paid jobs – are to be celebrated. Yet firms and workers need support to adapt to the new environment – support that is often best delivered locally, building on subnational governments’ unique knowledge of local skills and firms.
In particular, they can improve local matching of worker skills and jobs. Mismatches between workers’ skills are responsible for lower job satisfaction, as well as lower wages and productivity. Local partners are coming up with unique ways of tackling this issue, such as the city of Eindhoven’s new Passport for Work programme, which is using new algorithms to better match workers to firms.
Subnational governments can in particular support young people – who account for the majority of quits – in their transition from school to work and in finding jobs that match their aspirations and career goals. To support them the OECD has recently adopted a new Recommendation on Creating Better Opportunities for Youth. They can also help mobilise the local business community, building on the OECD Stand by Youth Initiative, which seeks to rally firms to create and improve opportunities for young people.
Local actors can also play an important role in modernising firm management practices, to help them improve their treatment, development and retention of staff. Here local employer networks and business support programmes are playing an important role, such as the UK’s Growth Hubs, or Germany’s Weiterbildungsverbünde (“Continuing education and training employers’ networks”), which have recently started to develop in Berlin.
An uncertain future
There are many factors driving the Great Resignation – including resignations delayed during the depths of the pandemic – and its future is uncertain, especially with the war in Ukraine now threatening the recovery.Carlos Usano Garcia and Andrew Paterson
Yet it has shone a light on growing discontent with the pay, prospects, and treatment of workers in many occupations. National and local governments must now use the momentum to drive lasting changes – to the benefit of workers and firms.
Following the beginning of the Great Resignation, US quits have been higher in the accommodation and food, professional and business, retail, and health and social assistance sectors.