‘Great Resignation’ a misnomer for tight labor market, according to U-M business, economic experts

February 17, 2022
Written By:
Jeff Karoub

A help wanted sign. Image credit: Tim Mossholde, Unsplash

The so-called Great Resignation of people leaving jobs during the pandemic is widely misunderstood, according to faculty panelists at a recent Ross School of Business/University of Michigan webinar.

Data show that large numbers of resignations in the last couple of years aren’t really due to people giving up on long-term careers, but rather to entry-level workers finding better opportunities, said Nirupama Rao, assistant professor of business economics and public policy at Michigan Ross.

“This term that’s really become very popular, ‘Great Resignation,’ is actually quite a misnomer,” Rao said. “This isn’t a story of widespread quitting of jobs. It’s much more a story of low-wage workers leaving jobs to move to better jobs. … We hear a lot about white-collar burnout, but that’s really not the driver of this pattern.”

Rao’s comments came during “What to Expect During Pandemic Year Three: A Business and Economic Perspective,” a webinar hosted by Michigan Ross in conjunction with Michigan News. In addition to Rao, the webinar featured perspectives from Samantha Keppler, assistant professor of technology and operations at Michigan Ross; and Gabe Ehrlich, director of the Research Seminar in Quantitative Economics at U-M’s College of Literature, Science, and the Arts.

Keppler built on Rao’s point, emphasizing the staffing problems across many sectors.

“One thing that is getting lumped together with talking about the Great Resignation is general staffing issues,” she said. “We’ve seen this with airlines having to cancel thousands of flights because they don’t have enough staff, and in education, maybe our children’s schools are closed because of staffing issues.

“This is not because of resignations; this is because of COVID exposures or illnesses or other (factors). This is fundamentally just an operations problem of how to staff more effectively or find replacements.”

Despite the ongoing pandemic, Ehrlich noted that 2021 was overall a strong year for job gains, with further improvement likely to come later this year. He added a major drop in international immigration during the pandemic has contributed to slow growth in the labor force and a tightening in the job market.

“A labor shortage was really becoming a problem before the pandemic, so in a lot of ways, the situation we’re in now is getting back to where we were before the pandemic,” Ehrlich said. “A big part of it is that the population in the United States is getting older; a lot of people are aging into retirement. That was starting to put a limit on job growth even before the pandemic.”

In addition to issues of the labor market, the panelists addressed questions about several other topics, including:

  • The overall health of the economy, with some signs of strong growth but concerns about inflation
  • Changes in the way education is delivered, and whether they will become permanent
  • How society can be better prepared for the next pandemic

To close the webinar, each panelist discussed two important items they are watching in the coming months, including whether the pandemic has altered the way companies treat frontline workers; whether consumer consumption has permanently changed; and the effect of COVID on supplier nations, particularly China.


Written by Bob Needham, Ross School of Business