Costs Of The “Great Resignation” Starting To Add Up

Sometimes there are so many trees, you just don’t realize you’re in a forest.

That’s the case as we enter the year following the two greatest – back-to-back – in job market history. Only two four-year spans, both in the nineties, created more jobs than the last two years’ total of 11.2 million. Unemployment was a historic low of 3.5%. Also at historic lows were layoffs, mostly attributable to the labor shortage. While all this was going on, wages rose strongly and steadily, offsetting much of what would have been severe pain from inflation, which is now coming down appreciably.

But – and there’s always a but, isn’t there? – two statistics which are generally viewed in a positive light might have longer-term, and potentially negative, consequences. They’re the voluntary quits rate and the turnover rate. These are leading indicators, namely, they point to things to come, as opposed to trailing indicators – like unemployment rate – that point to things that have happened.

The Great Resignation

With the voluntary quits rate at 2.7% (peaked at 3.2%) and the turnover rate at 3.8% (peaked at 4.2%), we’re in an unusually fluid market. The civilian labor force in December climbed to 165 million, a record. Multiply that by the quits and turnover rates, and you see large amounts of people moving around. Fueling this is the hire rate that hovered around 4.5% for most of the last two years, and it became so easy for employees to move around, upwards or laterally.

And that’s what they did, in such glib and cavalier fashion, that it became know as “The Great Resignation.” Turns out, it wasn’t so “great” – for either the employees or the employers.

“What, exactly, have I done?”

Many of the inordinately high number of job switchers realized they had made a mistake or, at least, a less than optimal decision. The lure of so many open jobs was irresistible, but within three months, a reported 40% of them were dissatisfied with their situations almost immediately. Another 25% took a little longer to come to the same realization. And the data are not all in yet. So, to some extent, though, the career damage had been done. That shiny object in the corner turned out to be fool’s gold for an awful lot of people.

The cost to the employer

Now here’s where things add up. At last year’s voluntary quits rate, approximately 4.5 million workers left their jobs, creating not just one, but two new needs for new employee training: one at the company they left, where there was a new open job to fill, and one at their new place of employ, where the job hopper needed to be onboarded. Onboarding does not come cheap when you calculate actual training time of the trainer and the trainee, the lost or lessened productivity out of both positions, recruiting and hiring costs, and so on. Some estimates of total costs suggest that for skilled tech workers or middle management positions, those costs could reach 50% of annual income. If a great resignation causes that job to open once, that’s a severe enough hit. Twice? A catastrophe.

But that’s what happened. That’s what high turnover does.

The true costs of the Great Resignation will not be known for a couple of years, naturally, and as soon as someone thinks they have them, there will be a debate. “Nonetheless,” says Harold Eastmore, founder of a precision manufacturing firm with 180 employees, “the smartest thing we can do to offset the next resignation wave is not to wait until it gets here; it’s to remodel this company so that our valuable – and expensive – employees stay here.”

Original Article: (https://www.forbes.com/sites/eliamdur/2023/01/19/costs-of-the-great-resignation-starting-to-add-up/?sh=46f8cc2659eb)