The Word on Small Business
One of the biggest changes to happen to the U.S. economic landscape in years since the onset of the Covid-19 pandemic has been the voluntary resignation of millions of American workers from their jobs.
This highly reported occurrence has been named the “Great Resignation”, and it has been heralded as a “revolution” in the classic relationship between workers and management. Much of this was caused by the unwillingness of many workers to return to relatively low-paid service jobs after the pandemic shutdown that occurred for much of 2020.
According to the U.S. Bureau of Labor Statistics’ job openings and labor survey (JOTS), which is used to measure job vacancies, approximately 4 million American workers quit their jobs in September 2021. This already added to millions more who had quit earlier in the year – as the number of American workers quitting had been exceeding pre-pandemic monthly records for the prior six month of 2021.
Many of these workers were in lower-paying service industries – specifically food and leisure services, leaving employers struggling to fill gaps in their workforces. Employers across the country have attempted to respond by offering bonuses, workplace perks, and more flexible hours as an incentive to keep their employees from jumping ship.
Like so many changes that have occurred in business over the last few years, it appears that the widely reported exodus of employees has been hastened by the pandemic. From all appearances, this seems to be just another example of the pandemic accelerating a trend that was already in the making.
if your business model is based on paying your workers below subsistence levels, you don’t really have a sustainable business model.
For years, a large number of economists and representatives of employee unions and interests have pointed to the flat to declining relative income levels of the average American worker since the late 1970s. Several factors account for the stagnation of employee wages for the last 40 to 50 years, including:
- the globalization of the world economy, which accounts for the massive imports of manufactured products from every area of the world;
- the movement of large-scale industrial facilities to lower-income locations like Latin America and Asia;
- the increasing use of automation to replace introductory employment (which previously gave younger workers a chance to take lower-level jobs, but gain needed technical and relationship skills to advance in their careers);
- the weakening influence of labor unions as a force to represent workers in their demands for pay and health benefits.
Another possible contributory tend to this reported worker exodus is the ongoing retirement of millions of “Baby Boomer” workers, the generational cohort born between 1946 and 1964. Many economists point to lifestyle changes of millions of these “Boomers” as the biggest reason for the large-scale resignations.
Observers have noted that the physical and economic lockdown caused by the pandemic in early 2020, along with the stimulus payments they received to keep the U.S. economy running, gave millions of lower-wage employees a chance to something they previously did not think they could do – make choices about their preferred work-life balance.
The resulting prospects for small, minority businesses could be two-fold.
The widely-reported trend in millions of workers aggressively seeking better alternatives for their careers could provide a challenge for entrepreneurs, many of whom are struggling to control costs in fiercely competitive environments.
However, it has often been said that if your business model is based on paying your workers below subsistence levels, then you don’t really have a sustainable business model. Many existing service businesses in labor-intensive business — like childcare, retail, transportation, and food service — may have to devote a significantly higher focus on devising pay and benefit incentives to attract and retain talent.
On the positive side, there are indications that the trend in resignations could result in a corresponding wave of new business ventures, as previously unhappy employees look to carve their own destinies as entrepreneurs.
This can be especially true among minority businesses, as there has been a sharp rise in start-ups in the black community. According to a research study by Robert Fairlie, a professor at the University of California at Santa Cruz, the number of African American business owners surged by 38% from February 2020 to August 2021 to nearly 1.5 million.
Over the next few months, and into 2022, we will continue to monitor the reported wave in employee resignations --- as well as the potential challenges and promise it could mean for minority workers and businesses.
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