Massive resignations are driven purely by this one demographic

The so-called Great Resignation has flared up in the American consciousness, alluding to the wave of people leaving the workforce and the difficulty companies are having in finding replacements.

The big question for financial markets and policymakers is whether these workers will leave. Some posit that is the case, which will lead to permanently higher wages, reduced profits, and higher prices for consumers.

Economists at Barclays led by Michael Gapen disagree. They say what’s going on is like a “great procrastination”.

“In our view, the high dropout rate is a red herring for understanding the slow return of workers to the US labor market after the COVID-19 pandemic. Instead, the real cause is workers’ reluctance to return to the workforce, due to effects tied to the pandemic such as the risk of infection, infection-related illness, and lack of care. affordable child care,” these economists say.

First, the dropout rate often coincides with an upward trend in hiring rates. They said in a new study: “We now note that these voluntary departures have encountered problems with corporate job search, implying that those who resign These are more accurately described as transitioners,” they say in a new study.

Another finding, based on the Atlanta Fed’s wage growth tracker, is that wage growth is led by job-changers – almost entirely in the 16- to 24-year age group – “those who are often less skilled.” and less likely to be constrained by non-monetary considerations (such as infection risk, child care, health care coverage, and workplace) that may affect the ability to switch their jobs. “

A unique finding in the Barclays report is their demographic analysis of the current workforce compared to February 2020. Married people are more likely to live with their spouse as a whole. participation decline. Of the 3 million workforce reductions compared to February 2020, 3.5 million fewer workers are married. The participation of workers who do not live with their spouse has increased to half a million respectively.

At the start of the pandemic, the decline in participation was almost entirely among unmarried people, but that changed in September 2020. “We think this reflects the fact that ‘ coinsurance’ in a dual-income household provides greater scope for spouses to stay away to be more cautious about re-entering the labor market. That makes other considerations, such as infection risks, pandemic-related childcare challenges and unusually healthy balance sheets more likely to keep the scale from working, they said.

Examination of occupational positions shows that the decline in the workforce is almost exclusively concentrated in side jobs, sales and administrative and non-professional office positions. “Certainly, these categories have also been hit hard by the effects of the pandemic on the demand side, with households shifting demand from services to goods and with back-office workers having to work remotely. However, in our view, other common problems are that these jobs often require less skills and involve considerable interpersonal interaction, and therefore carry a higher risk of infection. ,” the economists said.

The Barclays team hopes to see most of the missing workers return to US forces, albeit gradually. They point out that, for many people, retirement is not necessarily a permanent state.

“Given a composition of retirees and non-participants, the re-entry rate is higher for workers of non-retirement age and the participation rate is unusually high for workers in the As the near-retirement age led to the pandemic, our expectations for exiting retirement in the coming quarters will be much higher than usual,” they said. Massive resignations are driven purely by this one demographic


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