For a number of editions of the West Midlands Economic Impact Monitor, we have been reporting that many sectors are experiencing high levels of vacancies; whilst labour market data shows that unemployment has stayed relatively low as government interventions such as furlough have kept people in employment. We also reported that the Universal Credit (UC) claimants have gone up, and this could be masking people in-work claimant counts as shift work, overtime and reduced hours have impacted on earnings, dropping people below the UC level despite being in employment. This would suggest that a traditional model of bringing the unemployed into employment to fill vacancies is potentially not the whole story or the complete answer to the high levels of vacancies and skills shortages.
The Great Resignation
A phenomenon economists are calling the ‘great resignation’ has taken hold globally. Initially, countries followed the normal pattern when in high unemployment risk quit rates are reduced as people seek security. But as the economy has opened up this has reversed. A year and a half of stress, anxiety, soul searching and burnout means people have taken a step back and reassessed their lives. Reflecting on roles, whether they are valued and whether their skills are put to good use, people have emerged with a stronger sense of what they want from work and are willing to accept.
In April 2021, the number of workers who quit their job in a single month broke an all-time U.S. record and has continued to break that record every month since. This is happening across all industries, but in some sectors such as leisure and hospitality, it is particularly acute, where 1 in 14 people quit in one month. In the US, four million people quit their jobs in April – a 20-year high – followed by a record ten million jobs being available by the end of June. In the UK job vacancies soared to over 1 million for the first time in July.
According to a recent UK survey, 48% of men and 45% of women intend to quit in the next year; pre-pandemic this was 27.5%. Reasons for resigning were a desire for flexibility and higher salaries for both men and women. Other reasons included better work culture, not wanting to work for their manager and seeking a better job title. Two-thirds stated they had experienced burnout during their careers and 80% had experienced this in the last 12 months. Working parents are more likely to quit (52%) and over a third said this was due to flexibility. A further study shows that a large number of workers globally (53%) want a hybrid working model where more than half of their work time is remote. Productivity has not suffered from remote work, with 82% saying they feel as productive as or more productive than before. Wellbeing has taken a hit, however, with more than half of young leaders (54%) reporting they have suffered burnout and three in 10 stating their mental and physical health has declined in the last 12 months. Workers want to reduce their hours and be measured based on results. Despite 50% of workers in the UK logging more than 40 hours a week over the past year, only two-thirds of those polled believed that such hours are necessary to get the job done. Meanwhile, 73% of workers globally are calling to be measured by outcomes rather than hours.
63% of UK respondents said that they are motivated at work, and half said they had generally been happier at work since the pandemic started (52%). However, that does not mean the picture is entirely rosy in the UK, which ranked worse against the global average in several troubling trends. For example, only half of respondents (51%) in the UK were satisfied with the performance of senior leaders (below the global average) and only 42% were satisfied with their career prospects.
The study found that the UK is the only country polled that reported higher levels of anxiety about going back into the office (52%) than excitement at seeing colleagues (48%). To compound this, over half of UK managers have not found it easy to manage the workforce on issues of burnout (58%) and mental wellbeing (60%). And, more concerning, 35% of UK respondents said their mental health got worse during the pandemic, which was above the global average, and 37% admitted to suffering from burnout. Only 13% believe their employers will provide coaching to help them deal with mental stress and burnout, the third-lowest score of all countries surveyed.
In the UK pre-pandemic, more than five million workers averaged an extra 7.6 hours a week, contributing to £35bn in unpaid overtime. Now, according to global figures from the ADP Research Institute, one in 10 people say they work at least 20 hours a week for free. On average, workers are posting 9.2 hours of unpaid overtime every week. Across the world, overwork figures have sharply risen in the wake of Covid-19 – with free hours more than doubling in North America, particularly.
In many ways, the international response to stem the employment effects of the pandemic have given people the chance to rethink and consider how they can do better: the ‘great resignation’ is a statement of optimism post-crisis. Rent and eviction moratoriums, furlough and benefits support, and loan and mortgage deferments have given people (especially the young) the ability to quit their current jobs and look for other opportunities.
As highlighted by the Prime Minister, wages are also growing, especially for low-income groups (although high pay growth is limited to a few occupations, rather than across the board, whilst prices are rising for everyone), and in the UK there is a very tight labour market due to pinch points in particular sectors and occupations, which are driving up wages (HGV drivers and agriculture). However, this creates significant issues for business as costs increase and many positions are left vacant for a considerable time. Britain’s employers are struggling to hire staff as lockdown lifts amid an exodus of overseas workers caused by the Covid-19 pandemic and Brexit.
The Great Reset
Globally, there is also a ‘great reset’ of working practices due to flexible and hybrid working; families are working at home, creating a new vision of what work-life balance means. The demands of employees have changed dramatically and there is greater recognition of family and care responsibilities and the need for more balanced lives. As the economy reopens following Covid-19, demand for talent is far outstripping supply and it’s an employee’s market. A Microsoft study has found that 41 per cent of the global workforce is considering leaving their employer this year. This is a marked difference from last year where there was an unprecedented slowdown. And the rebound is not just affecting the sectors which were closed, such as hospitality and entertainment; the intense growth and flexibility are creating greater opportunity across ‘white-collar’ workers who now have more choice and about where they deliver their work and how. Women are also leading this change as work-life balance and care responsibilities disproportionately affect them. Bad leadership, poor employee support and stagnant growth opportunities during the pandemic are driving enormous employee churn in the UK workplace. Resignations are highest in mid-career with an average increase of more than 20% between 2020 and 2021, but turnover is highest among younger employees (in line with traditional patterns). A mid-career change could be being driven by employers feeling they need more experienced people, especially when they do not have access to training and guidance, which creates greater demand. This could also be driven by these workers delaying natural transition, so creating an exodus of pent up resignations. Those in mid-career have suffered due to high workloads, hiring freezes and wider life pressures. Resignations are highest in tech and healthcare, and resignation rates are highest in sectors that have suffered the most under pandemic conditions.
Many workers had given up on looking for hospitality and retail jobs in favour of more secure work after three lockdowns in the past year. “There are also far fewer foreign workers seeking employment in the UK with overseas interest in UK jobs more than halving from before the pandemic, hitting these industries hard” Andrew Hunter, a co-founder of Adzuna, said. Adzuna said 250,000 fewer job-seekers from Western Europe and North America applied for work in the UK per month between February and April 2021 than before pre-pandemic: “UK employers can no longer rely on overseas workers to plug employment gaps.” A combination of Brexit and the Coronavirus pandemic is believed to have cut the number of foreign workers in Britain.
The ONS estimates the number of non-UK nationals employed in the country in the last three months of 2020 fell by 4% from the same period of 2019 to 4.22 million, based on tax data, compared with a 2.6% fall for UK nationals to 24 million.
The Great Reshuffle
Alongside this is the ‘great reshuffle’: companies are changing their business models, and where they are based as the geography of activity is rapidly reshaping. E-commerce is having considerable effects on where we buy goods and services but also where we buy skills from. We have proven that you do not need to always live near to work to do a job and this means labour markets are wider than ever before and competition for skills suddenly got much harder.
Businesses that do not offer flexible working are finding it harder to recruit, as employees want jobs that suit their lives. It is very hard to take away something they have already offered as employers. There is also a backlog of change and demand, suppressed for 18 months, is now surging and the labour supply cannot meet demand.
The Great Retention
The ‘Great Retention’ is now the new fight for bosses and need to be the strategic imperative, supporting staff and making them feel valued is the biggest factor in keeping good staff in an employee-led market. If companies don’t do this you are no longer competing with local markets you are competing with every company in the world. Pre-pandemic approaches will not work now; the office environment still has importance and the draw of face to face working will be ever-present – as our recent work on the Business Districts has shown.
But a new kind of employer/employee relationship needs to emerge, wages need to keep pace but more importantly, emotional connection, recognition, value and reward for contributions, effective managers and communication are vital to creating a successful retention culture that is front and centre in employee decision-making processes. There needs to be a relationship where burnout at all levels is taken seriously. Ensuring existing employees are engaged and satisfied at work will be critical in protecting against a staff exodus for most organisations; talent is a critical asset – but, unfortunately, potentially the biggest risk factor too. The more awareness employers can have about what drives and motivates their team the better, and this crisis can be an opportunity to rethink and plan for the long term. Critical to the workplace experience is an individual’s relationship with their line manager and how they feel they are valued by them. Regular constructive conversations are required to cement this relationship – and a tailored coaching-based approach is the best way to make these conversations feel personal and ensure better retention as the labour force continues to contract and reshape. Organisations that take time to learn why and act on resignations will have a leading-edge on attracting and retaining talent.
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.