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Nicklaus: It will take higher wages to end the Great Resignation

Nicklaus: It will take higher wages to end the Great Resignation

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Edward Carrette wasn’t looking to change jobs until he started getting calls from recruiters.

Carrette, who worked in public relations for Fleishman-Hillard, didn’t take the offers they were dangling, but he noticed friends and colleagues job-hopping. He realized he could make more money while working from wherever he chose to live.

Carrette recently became part of what’s being called the Great Resignation, a phenomenon that finds Americans quitting their jobs at a record pace. He moved to Albuquerque, drawn by New Mexico’s climate and outdoor recreation opportunities, and works remotely for a New York PR firm.

“I thought I’d be there four or five years if not more,” he said of Fleishman-Hillard, his employer for about 18 months. “It was a good place to work, but all of a sudden there were greater opportunities.”

Nationally, 2.9% of all workers left their jobs in August, a rate one-quarter higher than before the COVID-19 pandemic.

The strong economy explains some of the surge: People are more likely to quit a job when they’re confident of finding another.

The pandemic has created other reasons to resign: child-care issues, sick family members, fear of infection or unwillingness to comply with a vaccine mandate. An estimated 2 million Americans have retired earlier than expected, helped by a booming stock market and soaring house prices.

Plus, as Carrette discovered, wages are escalating in some industries. Even in low-wage sectors such as retail and fast food, Target, Starbucks and others raised their base pay to $15 an hour. Amazon starts warehouse workers at $18 an hour, putting pressure on smaller employers.

Employers are complaining about a worker shortage, but David Nicklaus and Jim Gallagher say the job market's imbalances are likely to linger. One factor: Millions of people decided to retire because of the pandemic, and most aren't eager to return to work. Video by Colter Peterson, cpeterson@post-dispatch.com

“There’s so much press coverage about the $15 minimums, some workers may have adjusted their reservation wage, or the lowest wage they are willing to take,” said Chris Varvares, co-head of U.S. economics for IHS Markit. “When people making $12 an hour hear about $15, they are going to be looking, and that leads to people quitting.”

In fact, the quit rate is rising fastest among workers without a college degree. For college-educated workers, the quit rate remains slightly below pre-pandemic levels.

Some people also are giving up second or third jobs. The number of multiple-job holders has fallen by more than 1 million since the pandemic began.

The government checks that most Americans received last year and this year provided a financial cushion, allowing some workers to forgo the extra job. Others may have stopped moonlighting after getting a raise or more hours at their primary job.

Many people are baffled that COVID-19 vaccinations and rising wages haven’t done more to ease the labor shortage. Employers report 10.4 million job openings, 50% more than before the pandemic, but say they can’t fill them.

One problem: For every three workers they hired in August, two others quit.

What will it take to bring the job market back into balance, with fewer unfilled vacancies and fewer resignations?

Varvares has two answers: Get the coronavirus under control to eliminate the health- and child-care-related reasons for quitting, and allow time for wages to adjust.

“There’s a realignment of wages happening,” Varvares said. “Firms that are the first to raise wages will attract workers from firms that are slower to act. As long as that’s happening, the quit rate will remain high.”

For Carrette, joining the Great Resignation was a matter of striking while the iron was hot. “I felt like if I didn’t do this, I might be putting myself at a pretty big disadvantage,” he said. “You don’t know when the market will be this good again.”

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