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Beyond BLS

Beyond BLS briefly summarizes articles, reports, working papers, and other works published outside BLS on broad topics of interest to MLR readers.

September 2022

Great Resignation or Great Reallocation? A tale of two industries

Summary written by: Douglas Himes

After the effects of the coronavirus disease 2019 (COVID-19) pandemic appeared in the nation’s labor force statistics, a new “great” was added to the economic lexicon: the “Great Resignation.” The premise of the “Great Resignation,” though not officially defined, is based on larger-than-normal numbers of workers quitting their jobs in response to the COVID-19 pandemic and its effects on working conditions. In “The Great Resignation vs. the Great Reallocation: industry-level evidence” (Economic Synopses, Federal Reserve Bank of St. Louis, March 4, 2022), authors Serdar Birinci and Aaron Amburgey challenge the term “Great Resignation” in referring to the quits that occurred during the pandemic. In doing so, they look at 2021 U.S Bureau of Labor Statistics data from the Job Openings and Labor Turnover Survey and the Current Population Survey. As a result of their analysis, they propose a new term, the “Great Reallocation.”

Talk of the Great Resignation tends to focus on workers who quit their jobs during the pandemic, which risks missing potentially important distinctions. Quits are a type of job separation—an end of employment for a particular person at a particular job. Unlike other types of job separations, quits, however, are defined as worker initiated. That is, a quit is when a worker decides to stop working at a particular job. But as Birinci and Amburgey point out, a worker quitting his or her job does not necessarily mean that the worker will become unemployed, especially for a lengthy period, nor that the worker has left the labor force, neither working nor looking for work. In short, the workers who quit their jobs during the pandemic or its aftermath might not be as “resigned” as the “Great Resignation” terminology seems to suggest. Birinci and Amburgey also question what has happened to a worker who has quit but has not become unemployed or is not out of the labor force. That worker has obtained another job, undergoing what the authors call a “job-to-job transition.”

Birinci and Amburgey analyze the numbers of quits and job-to-job transitions from January 2021 to November 2021 in two industries: manufacturing and construction (combined) and leisure. They find that job quitters are sometimes part of a pandemic-induced worker reallocation, not a worker resignation. They report that the number of quits increased in both industries. Quits were up 27 percent in manufacturing and construction and 43 percent in leisure. When looking at the number of job-to-job transitions in these two industries, however, they find a striking difference. In manufacturing and construction, the increase in job-to-job transitions significantly lagged behind the growth in quits. In comparison, the number of job-to-job transitions in leisure increased along with the number of quits. Thus, the authors claim that most of the quits in manufacturing and construction were just quits, whereas quits in the leisure industry were more likely to be from job switching.

Many job quitters look for higher wages when considering a job-to-job transition. Birinci and Amburgey find that wages in manufacturing and construction increased during the study period by about 4 percent, while wages in the leisure industry increased by nearly 13 percent. In real terms (adjusting for inflation), wages in manufacturing and construction decreased slightly, while wages in leisure increased 6 percent. The authors maintain that the higher wage growth in leisure is consistent with the increase in job-to-job transitions in that industry.

Birinci and Amburgey recognize that talking about the Great Resignation may be common in the economy as a whole. The authors conclude, however, that although speaking of worker “resignation” in one industry may be correct, speaking of worker “reallocation” in another is equally valid.