- Workers have been using the Great Resignation to demand higher wages and better working conditions.
- A recession could change things, say senior executives who spoke to Insider at the Davos summit.
- Inflation in the US rose to 8.3% in April, prompting the Fed to raise interest rates.
The Great Resignation that’s swept through the American workforce over the past two years has been an expression of worker power.
The pandemic lockdowns liberated them from their daily routines, desks and overbearing bosses, with workers exerting a new level of control.
They’re resigning in their droves, no longer willing to put up with companies that don’t give them what they want. In March, 4.5 million Americans quit their jobs, notching up the 10th consecutive month that resignations surpassed 4 million.
But a looming
could change things, according to senior executives Insider spoke to at the World Economic Forum in Davos this week.
Coram Williams, finance chief of the Adecco Group, told Insider: “If some of the things that people are talking about come to fruition – if the levels of inflation are sustained, if interest rates continue to rise, if energy prices don’t come down – I think it by definition shifts some of the balance.”
While the US economy is not yet in a downturn, some economists, Wall Street banks and execs warn that one may arrive by sometime next year.
Supply chain woes, exacerbated by COVID-19 lockdowns in China, the Ukraine War and rising energy prices, coupled with a tight labor market pushed consumer price inflation up to 8.3% in the 12 months to April.
Despite enjoying record rises in pay during the first quarter of the year, increases have not kept up with inflation. The Employment Cost index, the best monitor of pay levels, rose by 4.5% in the year to March.
officials, who already raised the main interest rate by half a percentage point this month, are expected to impose further increases over the coming months. Rising borrowing costs could slow demand sufficiently to help trigger a recession.
“I don’t know whether it will be a soft or a hard landing,” Williams added. “But it’s clearly going to take some of the froth out of the world economy. And that means that you have some aspect of rebalancing within labor markets, which probably shifts the pendulum slightly for slightly more back towards the employer.”
However, that doesn’t mean workers will suddenly be left completely powerless.
Dogged by ongoing labor shortages, employers have been increasing pay and investing in perks and training to stem the flow. There’s a growing awareness that forcing staff to return to a prepandemic, full-time office is unrealistic if companies want to attract the best talent.
Ravin Jesuthasan, global transformation leader at Mercer, told Insider: “These concepts of flexibility are here to stay, it’s just not going to go. I know many hope we’ll just go back to where we were in January of 2020, but that’s just not going to happen.”
Is the great resignation simply the great reshuffle?
While Americans are quitting their jobs, they’re not giving up work. They are seeking to take advantage of the labor shortage to move into roles that pay more and offer greater satisfaction and flexibility. Some are also setting up their own businesses.
The unemployment rate for April stood at 3.6%, marginally above the 3.5% in February 2020, according to the Bureau of Labor Statistics. The labor force participation rate of 62.2% is about 1 percentage point below February 2020 levels.
“You can call it what you like – we call it the ‘Great Re-evaluation’. What’s really happening is that people are reconsidering the jobs that they do, not reconsidering their participation in the labor market,” Williams said.
Stephanie Trautman, chief growth officer at tech giant Wipro, told Insider: “People are still evaluating, you know, what do I do? Do I enjoy what I do? Do I have the kind of opportunities?”
As long as the labor shortage persists, many workers will continue to hold the upper hand.