Understanding The Great Resignation And How To Combat It
Everything is different now. The world remains amid a global pandemic, and the workforce is changing rapidly because of it. There has been a massive change in expectations, needs, and demand in the US and Ohio regarding workplace practices, unemployment, and labor force participation. In the coming years, expect to feel the effects of the Great Resignation in a flurry of changes in workplace norms coupled with the impact of unsteady unemployment and labor force participation rates in the manufacturing industry.
The Great Resignation
A record 47.4 million Americans quit their jobs in 2021.
Beginning primarily in the United States in early 2021, the Great Resignation saw mass amounts of employees voluntarily resign from their jobs. This trend includes employee dissatisfaction with employment situations, a lower unemployment rate in the US, and a large number of new job openings. The Global Pandemic allowed these workers to rethink their personal and professional goals, work/life balance, working conditions, and careers. Employees were given the opportunity to gain a clearer idea of what kind of work environment they thrive in. This trend greatly affects the US economy and can be observed through unemployment and labor force participation metrics.
Understanding Unemployment and Labor Force Participation
The unemployment rate refers to the number of workers in the labor force who do not currently have a job but are actively looking for work. According to the US Bureau of Labor Statistics, the national unemployment rate in the US was 3.9% in December 2021, which is about 6.3 million people. In Ohio, the unemployment rate was 4.5% in December 2021, or around 256K people.
When looking at these figures, it is important to put them into perspective, considering the ongoing global pandemic. In April 2020, at the height of the pandemic, national unemployment reached 14.7%, or about 23 million Americans. The unemployment rate reached 16.4% in Ohio or 909K Ohioans.
You may be wondering how these metrics are relevant to you and your industry. In the manufacturing sector, a foundational component of the US economy, unemployment reached 1.4 million at the start of the pandemic. By the end of 2020, around 800K of these vacancies had been filled, leaving over 500K open positions in the industry. If changes aren’t made to fill these positions, there will be 2.1 million vacant manufacturing jobs by 2030. This means that the vacancies currently unfilled in the manufacturing industry will prove detrimental to the economy if action is not taken to fill them.
With that in mind, it’s important to understand and recognize our next metric, the labor force participation rate. The Labor Force Participation Rate is the number of people aged 16+ currently working or actively looking for work. In December 2021, the national labor force participation rate was 61.9%, and slightly lower in Ohio at 61.3%.
These metrics can also be compared to April 2020 data, where the labor force participation reached 60.2% nationally and 59.6% in Ohio.
Surprisingly, a time period with unsteady labor force participation rates saw a 5% increase in manufacturing outputs. This shifted from a previously labor-intensive industry into a capital-intensive one. Because of this, a “skills mismatch” or a gap between what skills are required by manufacturers and those that workers have, was created. This mismatch is a key factor to understanding the observed decline in recent manufacturing employment. That said, there are several other trends you should expect to see in the workplace in the coming years.
Workforce Trends to Expect in 2022
According to Harvard Business Review, the first major workforce trend you should expect to see is an increased emphasis on fairness and equity within organizations. One major issue brought to light in the last few years was diversity, equity, and inclusion in the workplace, or a lack thereof. Many skilled employees voluntarily quit their positions, searching for workplaces with a greater emphasis on equity and fairness. Organizations are responding to this change and adopting Diversity, Equity and Inclusion (DE&I) plans to increase employee retention.
Along with an increased emphasis on DE&I, the wellness of employees will be increasingly important in the coming year. Past indicators of employee well-being include things like satisfaction or engagement, shifting the metric to mental and physical wellness in order to measure employee well-being.
- 94% of companies made significant investments in their well-being programs
- 85% increased support for mental health benefits
- 50% increased support for physical well-being
- 38% increased support for financial well-being
You should also look for more patience from employers regarding Covid-19 related practices. Employees returning to the workplace have a wide range of views on vaccination efforts, a total return to work, and even potential Covid-19 cases within the home. Expect organizations to provide more infrastructure around these subject matters in the coming year.
Shorter workweeks will trump an increase in wages. The average year-to-date salary increase in the US has been more than 4% as opposed to the historical average of about 2%. However, when we consider current inflation rates, the real wage in the US has declined despite this increase in salary. Firms that do not have the capital to compete with these rising wages will likely reduce the number of hours worked by employees while keeping wages the same.
Increased employee turnover is another trend to expect in the presence of hybrid and remote work. Employees who work in hybrid or remote settings have fewer social connections at their place of work, making it easier for them to quit if workplace conditions do not meet their expectations. Conversely, firms that properly manage these work environments will experience greater employee retention.
Automation will continue to lead to new innovations in the workplace, with up to 65% of tasks that a manager currently performs having the potential to be automated by 2025, leaving managers more room to build connections with employees. Tech companies are automating tasks such as scheduling, approving expense reports, and monitoring task completion in the workplace. This leaves room for organizations to rethink their management strategies. Task management applications such as EOS have soared in popularity due to their ability to optimize efficiencies and create a greater sense of accountability across organizations, as well as helping managers to define and solve issues and improve processes. The EOS or Entrepreneurial Operating System helps measure success on an individual, departmental, and organizational level.
With managerial tasks becoming increasingly automated, remote work tools will also continue to become automated performance measurement tools. Managers have less insight into what their employees are doing in remote and hybrid environments, and virtual meeting technology will likely develop the ability to identify less active members in a meeting and nudge managers to call on them to speak.
Despite several studies conducted supporting the efficiencies and productivity of remote work, 64% of managers and executives still believe that in-office employees are higher performers than remote employees and 76% believe in-office workers are more likely to be promoted than remote workers. Because of this mindset, the complexity of managing remote and hybrid workers will drive some organizations to require a return to the office. Reasons for this include poor business performance that management will incorrectly blame on hybrid and remote employees, increased employee turnover and a perceived loss of organizational culture. A return to the office will show that there are other underlying causes for poor performance other than hybrid and remote work.
Lastly, despite increased awareness of DE&I, expect outcomes to worsen. As previously mentioned, managers and executives believe that in-office employees are higher performers than remote employees and believe in-office workers are more likely to be promoted. According to DiversityInc., white males are more likely to come into the office than women and people of color, who generally prefer remote work, which could easily increase wage gaps if measures are not taken to combat this trend.
In a world of uncertainty and in the wake of a global pandemic, measures must be taken to ensure success in the workplace. From the Great Resignation to interpreting unemployment and labor force participation rates, we now have a better understanding of what forces will continue to shape the workplace in the next year.
The workforce has reached a new age of efficiency, lifestyle, balance, and performance and it’s important to keep an open mind and watch the data. As you visit your business plan and look for moments of opportunity and success in your workforce, keep these forecasted trends in mind and reach out to others for support.
For help navigating these trends and making the right decisions for scaling your business due to COVID setbacks, let’s chat! Reach out to our workforce consultancy team.