UCI News

What’s next: The ‘Great Resignation’

Dean of business school shares insights into record-setting turnover among US employees

by Cara Capuano, UCI | February 1, 2022
What’s next: The ‘Great Resignation’
Businesses must “adapt to the new labor market conditions and develop innovative approaches to keeping workers happy and in their jobs,” says Ian O. Williamson, dean of UCI’s Paul Merage School of Business. “There is no evidence to suggest this trend will change going forward.” Steve Zylius / UCI

On Jan. 4, the U.S. Bureau of Labor Statistics released its latest Job Openings and Labor Turnover Summary. The numbers are staggering: 4.5 million workers quit or changed their jobs in November 2021, the highest number ever recorded in one month. The “quits rate” – the percentage of those who voluntarily left their jobs – jumped back up to 3 percent in November 2021, matching the all-time high set in September 2021. Quits increased in several industries, with the largest coming in accommodation and food services.

Ian O. Williamson, dean of UCI’s Paul Merage School of Business, is a globally recognized expert in human resource management. We asked him to help explain this phenomenon being called the “Great Resignation.”

The trend of workers quitting or changing their jobs continues, tying a record-high in November. Why is this happening?

Observers have credited several factors for all the turnover we’re seeing, from paltry wages and benefits being offered to fear of contracting COVID-19 and complications associated with infections.

Like many advanced economies, the U.S. has been moving away from productive sectors like manufacturing to a service-based economy for decades. The service sector contributed to 79 percent of economic growth and about 86 percent of employment in the U.S. in 2017.

Being successful in many service-based jobs requires generalizable occupational skills such as competencies in communications and computing. Because these talents are easily transportable across companies in a wide range of professions, it’s relatively easy for employees to move between companies and maintain their productivity in service-based economies.

What are some of the incentives for employees seeking a change?

To complement the obvious factors of increased wages and improved benefits, people’s cultural values and life situation often influence what they want from work. With the U.S. labor market expected to diversify in terms of gender, ethnicity and age moving forward, employers need to provide greater flexibility and variety in their working environment to be able to attract and retain workers.

Between the internet and social media recruitment, employees can find out about new job opportunities all over the world. We have also seen an increase in remote working, meaning some employees no longer need to physically relocate to start a new job. This has removed many barriers and transition costs historically associated with switching employers. Greater options and lower costs to move mean that employees can selectively pick jobs that best meet their personal needs and desires.

How is this trend affecting companies?

A survey in August 2021 found that 73 percent of 380 employers in North America were having difficulty attracting employees – and 70 percent expected this difficulty to persist into 2022.

Between finding and training a replacement, the estimated cost to the employer of replacing a departing employee is, on average, 122 percent of that employee’s annual salary.

These factors combine to incentivize businesses to adapt to the new labor market conditions and develop innovative approaches to keeping workers happy and in their jobs. There is no evidence to suggest this trend will change going forward.

How can companies counter the trend?

A March 2021 survey of employees from around the world found that 54 percent would consider leaving their job if they were not provided some form of flexibility in where and when they work.

With employees placing a higher priority on finding a job that fits their preferences, companies need to tailor the types of financial, social and developmental incentives and opportunities they provide to individual employees’ preferences. Customizing reward packages may potentially increase administrative costs, but it can help retain a highly engaged workforce.

Companies should also reframe how they approach managing their workers. One way to do this is by investing in external relationships that ensure consistent access to high-quality talent. Enhancing relationships with educational institutions is one option. Adopting alumni programs that recruit former employees to rejoin is another. Former employees are often less expensive to recruit and possess both an understanding of an organization’s processes and an appreciation of its culture.

Is there any timeline for when we’ll see the trend change?

The quits rate is likely to stay elevated for some time to come. The sooner employers accept that and adapt, the better they’ll be at managing the new normal.

If you want to learn more about supporting this or other activities at UCI, please visit the Brilliant Future website at https://brilliantfuture.uci.edu. Publicly launched on Oct. 4, 2019, the Brilliant Future campaign aims to raise awareness and support for UCI. By engaging 75,000 alumni and garnering $2 billion in philanthropic investment, UCI seeks to reach new heights of excellence in student success, health and wellness, research and more. The Paul Merage School of Business plays a vital role in the success of the campaign. Learn more by visiting https://brilliantfuture.uci.edu/paul-merage-school-of-business/.