Bad managers are making the labour crisis worse

It is being called the Great Resignation. Quits are at their highest rate in 20 years and no one seems to understand why. One thing is for sure: the labour market has gone weird. People are leaving their jobs without having a new one lined up, pushing up unemployment rates even as wages rise and companies complain they cannot find enough workers.  That has led to lots of speculation that the pandemic has changed people's priorities —  and hence the U.S. labour market — forever.

 In the urgency of the moment, it is easy to overstate the significance of what is going on; every major recession leaves scars. But some things do not change, and that includes the most basic requirement for keeping employees happy and on the job: Good management.

Government policymakers can run around trying to fix the situation by mandating higher wages, more benefits, or even by expanding the power of unions. None of that will change the simple fact that bad managers are a handicap no company can afford anymore.

Since the 1980s, the trend has been for Americans to stick with the same job longer. That changed last year. It is not just that people are quitting more often, which is not such a surprise if there are lots of better jobs available. Quits and hires normally move in tandem, or with a small lag, and those job-to-job changes are definitely part of the quit mix now. But what is rattling the market is the disconnect:  quits are up and hiring is down at a time when employers are desperately trying to attract workers.  

A big educational divergence in this trend is also causing more problems for some industries than others. Using data from the Current Population Survey, I estimated the share of workers who quit or left the labour force in the last year and who still are not working. High school dropouts in this category rose to 2.8% from 2.1% two years ago. More educated workers have not become more likely to quit.

That tracks with the fact that the retail and food-service sector has been hardest hit. These jobs have always had high turnover, but we have seen a large uptick in quits in the last few months.

This has left us trying to figure out why. The most likely reason is that the labour shortage has increased wages, especially at the lower-paid jobs.  Changing jobs often is the only way to access that better pay, and there are many options in this labour market. But higher pay does not explain the number of people who have quit their jobs without taking another. This may be because of childcare issues. More women than men quit or left the labour force. Even with school back in session, there is still uncertainty from a constant risk of quarantine.

Another possibility is that, between the pandemic stimulus payments and enhanced unemployment benefits, Americans have more money than before and may feel less need to work. Quits, though, are concentrated among a population that tends to have very little spare savings. In any case, as the months go by since the benefits ended, this will become less of a factor.

A narrative has also emerged that these jobs are awful and workers just cannot take it anymore. That is surely true for some people, but it could also be journalists and pundits projecting their feelings about those jobs onto the people holding them. Not all jobs that do not require a college degree are terrible. There is a correlation between pay (and education) and job satisfaction, but it is not as strong as you might expect. People in media report similar levels of job meaning and satisfaction as some service and blue-collar jobs.

How happy you are with your job often depends on things that are hard to measure — along with pay and benefits (which are obviously very important), there is also company culture, how much you like spending time with your coworkers, and whether there is scope for development or progression. These things matter no matter what the job is because they determine how it feels to go to work each day. One survey found that among lower-income workers, doing something enjoyable, having a stable income and doing work that feels important rank higher for job satisfaction than earning more money.

And management is critical to all of those harder-to-measure factors. A bad manager can make any employee feel like their work is pointless, that they are not valued, or have no stability. This is often what tips the decisions to stay in a job or not.

Whether to leave a job is usually a very personal, complex blend of factors, and the pandemic seems to have created a perfect storm: people got used to not working during lockdowns, they received a lot of government benefits that eased the financial necessity of a steady income, faced new challenges with child care and developed new routines. Many also had a rare opportunity to step back and reassess whether their life — or job — is going in the direction they want.

Getting out of our ruts will take time because corporate culture is hard to maintain when so many people quit or work remotely. Convincing workers to come back and keeping them from quitting will require creating a work environment that people want to be part of. Management, this is your moment.

Allison Schrager is a Bloomberg Opinion columnist. She is a senior fellow at the Manhattan Institute and author of "An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk."

Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.