This is the first article of a two-part series by Lewis Silkin LLP, exploring the drivers behind the phenomenon often labelled the “Great Resignation”.
The “Great Resignation”. Hybrid working. Work-life balance. Purpose. Culture. As we emerge from the worst of the pandemic, these words have become ubiquitous in the debate about the “new normal”. While some may dismiss them as “clickbait”, the reality is that they signpost a significant shift in the way society, employers and their workforces have come to view the world of work.
There’s no doubt that the pandemic has caused devastating and wide-ranging global and societal impacts alongside accelerating change in the world of work. In this first article of the series, we assess how the labour market has evolved over the course of the pandemic and explore the extent to which the pandemic or other, longer-term, drivers of change have been behind the phenomenon often labelled the “Great Resignation”. Understanding the impact of these drivers of change on the workforce is fundamental to an organisation’s ability to retain and attract talent.
In the second article of this series, we will look more closely at the psychology behind an individual’s motivation to work. We’ll also consider how employers can harness this understanding to attract and retain talent in the context of an evolving labour market and shifting societal expectations in relation to the role work plays in our lives.
What is the so-called “Great Resignation”?
Anthony Koltz, an organisational psychologist and Associate Professor of Management, coined the term the “Great Resignation” in early 2021 to describe the wave of people reportedly quitting their jobs during the pandemic. Since April 2021, in the United States alone, over 37.8 million people quit their jobs. Media reports in the UK consistently comment that rates of resignation were at their highest since 2009 and the rates of redundancies are at their lowest since the mid-1990s. A prolific amount of commentary agrees with Koltz’s suggestion that the pandemic caused “pent up resignations” and “pandemic-related epiphanies” leading to this wave of resignations.
However, even pre-pandemic, the global workforce was navigating an unsettled labour market, changing demographics, unprecedented societal shifts, and the impact of new technology. As James Davies, Employment Partner at Lewis Silkin explains in his “Eight drivers of change” report for the Future of Work Hub, the pandemic is but one of many factors that have been subtly changing how, when, where, and why we work for some time.
Labour market shifts
Before the pandemic, the labour market was already in a state of flux. Ian O. Williamson, Dean of Merage School of Business, identifies that employee turnover was already in a period of steady incline for a decade before the start of the pandemic. In 2019, 28% of the United States’ workforce and 16% of the UK workforce quit their job. 31% of UK employers had to use temporary or atypical employment relationships to manage recruitment difficulties.
During the course of the pandemic, the number of resignations and vacancies increased together, enabling the workforce to move more freely between employers for more subjective reasons. CIPD data shows that in summer 2019 67% of employers reported having hard to fill vacancies, whereas by summer 2021 this had fallen to 39%, indicating a workforce capitalising on the increasing fluidity of the labour market. Despite the uncertain post-pandemic economic climate in the UK, data from the Office of National Statistics shows that the number of job vacancies increased to a record 1,318,000 between December 2021 and February 2022.
At the same time, traditional methods of attracting and retaining talent by raising wages alone proved to no longer be enough. A comparison of 2019 and 2021 CIPD data indicates that there was a 4% drop in the number of employers increasing salaries to tackle recruitment difficulties. Furthermore, in 2019 only 24% of employers reported increasing investment in training to improve recruitment/retention in the previous two years. By 2021 this increased to 46% of employers reporting an intention to upskill existing staff to manage recruitment struggles, indicating a shift in response to workforce expectations.
Some commentary suggests that the Great Resignation consists of a mass of resignations, across every role and industry. However, the data is mixed, and a clear picture has not yet emerged. For example, Martha Maznevski, a Professor of Organisational Behaviour, notes that some people who are financially stable or sufficiently experienced are re-evaluating their relationship with work and are freely moving around the labour market between a good and better option. Others, however, are being forced to choose between unhealthy/toxic work environments and surviving. This risks the emergence of a two-tier workforce – with one tier feeling empowered and the other feeling like they have no option. What is clear is that the interplay between the drivers will continue to evolve the relationship an increasing number of people have with work.
Demographic shifts
As James Davies explains in the “Eight drivers of change” report - a workplace reflects society. As baby boomers retire, millennials are taking on more senior positions and Gen Z are joining the workforce. Whilst commentators tend to ascribe divergent values and characteristics to the different cohorts, Dr Eliza Filby, a generational expert, explains in a recent Future of Work Hub podcast the importance of understanding a more nuanced picture beyond just generational categories. For example, the relevance of the life-cycle stage of the employment relationship a generation is in.
Increasingly, the workforce is moving away from the idea of a job for life. Even pre-pandemic, a 2018 study by Deloitte found just 28% of millennials and 12% of Gen Z expected to stay with their employer beyond 5 years. The pandemic facilitated the wider adoption across generations of the reconfigured relationship with work. A study led by Ian Cook found resignations between 2020 and 2021 among workers aged 30 – 45 years old increased on average by 20%.
Although the 2018 Deloitte survey also found Gen Z prioritise financial security over fulfilment, personal values were already becoming increasingly important. For example, an earlier Deloitte survey found 64% of ‘senior’ and 49% of ‘junior’ millennials’ personal values and morals influenced their decisions at work. However, as is evident from this extract from McKinsey 2021 research, employers do not appear to have fully understood the factors which play the most important part in an individual’s decision to leave.
Societal shifts
Underlying societal norms are evolving, further driving a reconfiguration in the relationship workforces have with work.
As Lucy Lewis, Employment Partner at Lewis Silkin, recently explained, employees expect employers to live their values and have an external voice on global issues, such as Black Lives Matter or the invasion in Ukraine. Millennials and Gen Z, as identified in a 2021 survey by Deloitte, are more likely to call out racism or sexism and avoid employers who don’t align with their personal values. Widespread use of social media has increased the workforce’s ability to call out such behaviour, with the associated reputational risks for employers.
Once only a concern of the significant minority, now nearly two thirds of office workers would be more likely to work for a company with a strong environmental policy, according to one survey of 2,000 UK office workers. Research in the United States even suggests half of respondents would accept a decreased salary to work for an environmentally responsible business.
In 2016, according to this Deloitte report, 26% of millennials considered employee satisfaction to be one of the most important values to support long term success of a business. In the 2022 Edelman Trust Barometer 60% of people said that when considering a job they expect the CEO to publicly speak about controversial social and political issues they care about, indicating a shift in what satisfies and instils trust in the workforce.
Technology
Technology has infiltrated every part of our lives, not least work. It has and continues to create jobs and industries that simply didn’t exist before. However, as Dr Eliza Filby explains, automation may alleviate the ‘dull stuff’ from our work but upskilling the workforce to deal with the work automation is not suitable for is essential. For many, it will become more and more crucial to work for companies which invest in the ‘future-proofing’ and upskilling of their workforce.
As Ian O. Williamson highlights, technology has made it far easier for people to find jobs and working from home has caused barriers such as locality to become a thing of the past. This increased ease of finding job opportunities and the ability to move employer without, for example incurring the costs of moving house/location, means the workforce can be more selective and move job more easily to join the ‘right’ employer that meets their needs and values.
Technology has also given rise to the proliferation of platform working enabling individuals to organise their work around their life. Research from January 2022 suggests, in the UK, one in six adults work a “gig” job at least once a week and although over 50% of the “gig” specific workforce are between 16 – 34 years old, every age group is engaging with this method of work.
Covid-19 pandemic
The pandemic has been an accelerant of change. Some have had an abundance of time, for the first time, to stop and consider what they wanted from work. Others, as Dr Eliza Filby highlights, became increasingly busy and more productive – resulting in increased levels of burnout. Burnout was prevalent before the pandemic, but a study by Limeade (a well-being company) found the number of affected employees rose from 42% to 72% in the early stages of the pandemic. Pre-pandemic, commuting provided the workforce with a discernible start/end to the workday. Now, however, a survey by Indeed in 2021 found that 27% of respondents cannot unplug from work. The issue has been exacerbated by the fact that burnout can also be caused by a lack of connection – a growing concern in a hybrid working world.
Working from home and hybrid working have changed when, where, and how we work, introducing flexibility and autonomy into our working lives. The 2021 Deloitte survey highlights that millennials and Gen Z now consider flexibility and adaptability to be the most critical employee characteristic for a successful business, more so than employee expertise/proficiency. A 2021 EY global survey found 54% of employees surveyed would even consider quitting their job if they did not have some flexibility in their work patterns.
The Great Reconfiguration
The “Great Resignation” is a narrow branding for a more subtle reality. Evidently, people and their priorities have changed. While these changes were already underway as a result of the interplay of a number of long-term drivers, the pandemic has been a catalyst and accelerant of change which will continue as we emerge into a post-pandemic world of work.
It is only by understanding how the short- and long-term drivers of change are reconfiguring the current landscape that organisations can address the needs and demands of their workforce to design resilient business models, fit for the future world of work.
The second article in our two-part series will explore what motivates people to work and the opportunities and challenges ahead for employers in attracting and retaining talent in the context of the evolving world of work.
This first article of our two-part series was written by Sam Berriman, a Trainee Solicitor at Lewis Silkin LLP.
Click here to read the second article of this two-part series.