4 reasons that workers quitting at a record pace means the economy will come back stronger than ever
bwinck@businessinsider.com (Ben Winck)
Here are four reasons the quits surge could benefit the US, from higher pay to a productivity revolution
1. More power for workers
While record-high quits might seem like a setback on the labor market's recovery, the April reading is encouraging. The surge suggests Americans are confident in their abilities to find work that pays the same or better.
Data from the Federal Reserve Bank of New York's consumer expectation survey back up this narrative. Americans' job-finding expectations leapt in May to their highest level since February 2020, just before COVID-19 lockdowns began. Expectations for wage growth similarly swung higher.
Taken together, the data and spike in quits suggest workers are leveraging new power in the economy. With labor in such high demand, businesses are offering perks like signing bonuses and better benefits to speed up their hiring efforts.
2. Higher wages
The clearest sign of boosted worker power is in nationwide wage growth. Pay has soared over the last two months at the fastest rate since the 1980s as companies competing over workers raise starting wages. Large-scale employers including Amazon, McDonald's, Chipotle, and Under Armour have all announced wage hikes in recent weeks.
Boosted pay can quickly benefit the entire economy, particularly when wages climb among low-income Americans, who are the most likely to spend new cash instead of parking it in a bank. Studies of how stimulus checks were spent support the assertion.
3. A productivity revolution
The wave of quits has also opened the door to stronger productivity growth. Many businesses that lasted throughout the pandemic were forced to strip their operations to the bare essentials. Waiters were replaced with QR codes, hotel check-ins were completed through online apps, and real-estate tours turned virtual.
The country has since retracted many of its COVID-19 restrictions. Yet a sharp pick-up in worker productivity suggests some of the pandemic-era changes remain. Businesses are paying their employees more, and workers are leveraging new technologies to get more done. Productivity boomed 5.4% in the first quarter, the fastest rate in more than 20 years.
Businesses doing more with fewer workers and increased productivity can spark what economics writer Noah Smith deems a "virtuous cycle" for the broader economy. Technological progress and new innovations can further lift productivity, which gives workers a better case for demanding higher pay, Smith wrote in a June 13 blog post.
bwinck@businessinsider.com (Ben Winck)
Record-high quits suggest Americans are confident in their ability to find better jobs.
The unusual labor market trend may give way to several encouraging developments for the US economy.
Here are four reasons the quits surge could benefit the US, from higher pay to a productivity revolution
.
On the surface, the labor market hasn't been making much sense.
Take April for example: Ten million Americans were unemployed, even though nearly that same number of jobs were open (9.3 million, a record high). That same month, hiring slowed to a crawl and 4 million more people quit their jobs (another record high). That sum could grow even larger; roughly 40% of employees have considered quitting, according to a Microsoft survey.
For the first time in decades, it's workers that are in short supply, not jobs. And businesses' efforts to attract hires could bring improvements long overdue for the average worker.
Here are the four reasons why a wave of quits can pay dividends for working Americans down the road.
On the surface, the labor market hasn't been making much sense.
Take April for example: Ten million Americans were unemployed, even though nearly that same number of jobs were open (9.3 million, a record high). That same month, hiring slowed to a crawl and 4 million more people quit their jobs (another record high). That sum could grow even larger; roughly 40% of employees have considered quitting, according to a Microsoft survey.
For the first time in decades, it's workers that are in short supply, not jobs. And businesses' efforts to attract hires could bring improvements long overdue for the average worker.
Here are the four reasons why a wave of quits can pay dividends for working Americans down the road.
1. More power for workers
While record-high quits might seem like a setback on the labor market's recovery, the April reading is encouraging. The surge suggests Americans are confident in their abilities to find work that pays the same or better.
Data from the Federal Reserve Bank of New York's consumer expectation survey back up this narrative. Americans' job-finding expectations leapt in May to their highest level since February 2020, just before COVID-19 lockdowns began. Expectations for wage growth similarly swung higher.
Taken together, the data and spike in quits suggest workers are leveraging new power in the economy. With labor in such high demand, businesses are offering perks like signing bonuses and better benefits to speed up their hiring efforts.
2. Higher wages
The clearest sign of boosted worker power is in nationwide wage growth. Pay has soared over the last two months at the fastest rate since the 1980s as companies competing over workers raise starting wages. Large-scale employers including Amazon, McDonald's, Chipotle, and Under Armour have all announced wage hikes in recent weeks.
Boosted pay can quickly benefit the entire economy, particularly when wages climb among low-income Americans, who are the most likely to spend new cash instead of parking it in a bank. Studies of how stimulus checks were spent support the assertion.
3. A productivity revolution
The wave of quits has also opened the door to stronger productivity growth. Many businesses that lasted throughout the pandemic were forced to strip their operations to the bare essentials. Waiters were replaced with QR codes, hotel check-ins were completed through online apps, and real-estate tours turned virtual.
The country has since retracted many of its COVID-19 restrictions. Yet a sharp pick-up in worker productivity suggests some of the pandemic-era changes remain. Businesses are paying their employees more, and workers are leveraging new technologies to get more done. Productivity boomed 5.4% in the first quarter, the fastest rate in more than 20 years.
Businesses doing more with fewer workers and increased productivity can spark what economics writer Noah Smith deems a "virtuous cycle" for the broader economy. Technological progress and new innovations can further lift productivity, which gives workers a better case for demanding higher pay, Smith wrote in a June 13 blog post.
4. Smarter job creation
Americans have long feared that automation will permanently erase jobs from the US economy. But previous periods of sweeping innovation prove otherwise, Smith wrote. The industrial revolution pushed countless Britons out of antiquated trades and into higher-paying jobs. The internet has boosted productivity in practically every pocket of the economy, but it also paved the way for entirely new industries.
The nationwide push for higher wages and stronger productivity should be viewed as an encouraging development, not one of doom and gloom, Smith wrote.
"Believing in technological progress is about believing in the potential of humankind," he said. "Do we really think that QR code ordering in restaurants will be the innovation that finally renders humans obsolete?"
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