Forget the great American resignation. This is the big upgrade

Despite a historic number of job offers, many workers who resigned never sought a new position. Millions of people have left the workforce altogether – to care for families, retire early, live on savings or reassess their life in Covid.

The challenge now is how to get them back. It won’t be easy and it won’t happen overnight.

Here are the calculations of the economists at Goldman Sachs: some 2.5 million people are missing. Around 800,000 of them have taken early retirement, many of them supported by increasing home equity and equity portfolios. This leaves 1.7 million people to re-enter the labor market, many of whom are “prime-age” workers with many years ahead of them in the labor market.

What holds them back?

“They have Covid concerns, they have a financial cushion, or their lifestyle has changed,” Goldman economists wrote. “Some people are likely to return if the spread of the virus decreases or antiviral pills reduce health risks, and others are likely to return once their savings have been exhausted.”

Goldman estimates that one million people will return to the workforce this year, bringing the labor force participation rate to a healthier but still below norm of 62.6% by the end of the year. the year. More workers will return to the labor market in the coming years, economists note.

“Even so, the depressed labor force participation rate implies it will be even harder to find workers than the unemployment rate suggests,” Goldman economists said.

Harder to find and with a new perspective. It’s safe to say that people aren’t going back to the jobs, salaries, and work-life balance they left. In fact, millions of these so-called “quitters” haven’t left the workforce at all – they’ve upgraded.

It was Bharat Ramamurti, the deputy director of the National Economic Council, who last month coined the phrase “The big upgrade.”
Companies are paying higher salaries, offering signing bonuses and adjusting schedules to attract and retain talent. A growing number of companies are now paying out student debt benefits, hoping to prevent good workers from jumping to other employers.

“We’re seeing a lot of labor market turnover,” Nela Richardson, chief economist at payroll processor ADP, told me. “But one thing we’re seeing is hiring is higher. They’re not leaving the job market, they’re leaving for other jobs in the same industry.”

The opportunity for American workers has never been greater, and they are being rewarded for quitting.

Job postings are at record highs. The pay to switch job that we found in our own data is also at record highs. Companies are paying for talent,” Richardson added.

Friday’s jobs report showed annual wage growth of 5.7%. Inflation, of course, is eating away at those wage gains, but it was the biggest pay rise in years for the typical worker.

Yet for many workers, it’s not just about money. They will not be satisfied with their old jobs. They leave for better pay, better hours, and better benefits.

For now, job seekers hold all the cards. Employers of all sizes are in an uphill battle for workers, offering better working conditions and more professional development to fill the nearly 11 million positions that were open in December.

With such an imbalance between employers looking to hire and workers looking to upgrade, Richardson said she believes the era of worker empowerment has legs.

“The employer is always behind the wheel of the car. They are the ones deciding the opportunities, the salary, the skills, the job description, the hours,” says Richardson. “But they’re listening to the workforce more than ever and trying to incorporate that and be sensitive.”

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