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The End of the Great Resignation? Part 1

Over the past two years, the United States has witnessed a tidal wave of job changes as tens of millions of Americans left their positions. This phenomenon, known as the Great Resignation, stemmed from a rare moment of worker power, where employees demanded higher pay and employers, facing a shortage of staff, often granted their requests. However, recent data indicates that the wave of resignations is subsiding. While there was a slight increase in voluntary quits in May, the overall rate has sharply fallen and is only slightly above pre-pandemic levels.

The Big Question

Now the question arises: Will the gains made by workers during the Great Resignation endure, or will employers regain leverage, especially if the economy enters a recession in the coming year, as many forecasters predict? The pendulum may already be swinging back in favor of employers. Wage growth has slowed, particularly in low-paying service jobs where it had surged during the peak of turnover in late 2021 and early 2022. Although labor shortages persist, employers report an improved ability to hire and retain workers. Additionally, job switchers are no longer receiving the substantial raises that had become the norm in recent years, according to data from payroll processing firm ADP.

The signs of change are evident. Gone are the enticing offers of $1,000 signing bonuses. Nela Richardson, ADP’s chief economist, aptly likens the labor market to a game of musical chairs. Initially, workers had the freedom to move between jobs as the economy recovered from pandemic shutdowns. However, with recession warnings looming, individuals are becoming apprehensive about being left without employment in a dwindling job market. Richardson states, “Everyone knows the music is about to stop,” suggesting that workers are likely to stay put for a while longer.


Economists suggest that workers may retain some of the gains made in recent years. Arindrajit Dube, a professor at the University of Massachusetts, highlights that lasting changes are expected in the low-wage labour market. The Great Resignation was not merely about people quitting work altogether but rather finding better-paying jobs or starting businesses. Although turnover increased across all industries, it was most prevalent in low-wage services, where workers traditionally had limited bargaining power.

The reopening of the in-person economy in 2021 presented a unique opportunity for low-wage workers. Restaurants, hotels, and stores required a substantial influx of employees while many people hesitated to accept jobs involving face-to-face interaction with the public. Even as concerns about the pandemic waned, the demand for workers persisted, partly because individuals who had left the service industry were not eager to return. This led to a surge in wages for those at the lower end of the earnings scale. Rank-and-file restaurant and hotel workers saw their average hourly earnings rise by 28 percent from the end of 2020 to the end of 2022, outpacing both inflation and overall wage growth.