In the News
In This Economy, Quitters Are Winning
July 4, 2018
Written by: David Harrison and Eric Morath
Kimberly Enoch had a stable job working from home managing grants for a Little Rock, Ark., nonprofit, but she was bored and thought she could do better.
So she quit.
Within three months, she landed a job as a grant writer at Southern Bancorp Community Partners, snagging a 14% raise, a faster pace at work and an easy seven-minute commute.
“I knew I could do more,” Ms. Enoch said.
She is part of a bigger trend. Workers are choosing to leave their jobs at the fastest rate since the internet boom 17 years ago and getting rewarded for it with bigger paychecks and/or more satisfying work.
Labor Department data show that 3.4 million Americans quit their jobs in April, near a 2001 peak and twice the 1.7 million who were laid off from jobs in April.
Job-hopping is happening across industries including retail, food service and construction, a sign of broad-based labor-market dynamism.
Workers have been made more confident by a strong economy and historically low unemployment, at 3.8% in May, the lowest since 2000. Ms. Enoch started getting interview opportunities the same day she began sending out applications online.
The trend could stoke broader wage growth and improve worker productivity, which have been sluggish in the past decade. Workers tend to get their biggest wage increases when they move from one job to another. Job-switchers saw roughly 30% larger annual pay increases in May than those who stayed put over the past 12 months, according to the Federal Reserve Bank of Atlanta.
Almost one in seven of the nation’s 6.1 million jobless Americans in May were voluntarily unemployed, having left a previous position to look for another, the highest share of voluntary unemployment in more than 17 years.
For much of the expansion, skittish workers, stung by their experiences during the recession, chose to stick with their employers. Janet Yellen, the former leader of the Federal Reserve, began following measures of quitting closely, seeing the reluctance of workers to leave their jobs as a sign of slack in labor markets. Now job-hopping is a feature of good economic times.
The recent uptick in quitting goes against a long-running decline in worker mobility. In recent decades, as the population aged and business startups became relatively more rare, employees tended to stick at their jobs longer, said Steven Davis, an economist at the University of Chicago who studies labor-market churn. He and co-author John Haltiwanger presented the findings of diminished economic dynamism to central bankers at the Federal Reserve’s annual Jackson Hole, Wyo., symposium in August 2014.
The problem was exacerbated by the 2007-2009 recession. Fretful workers stayed in roles that weren’t good matches for them, also hurting national productivity. Now that they are looking for better matches, productivity could improve.
In the third quarter of 2009, 2.1% of workers changed jobs, according to Census Bureau data. That climbed to roughly 4% by the first quarter of 2017, matching the highest rate since 2001.
“A husband and wife can easily quit their jobs and both find good opportunities in jobs they want, where they want to live,” Mr. Davis said. He says the recent uptick in quitting suggests the economy is running hotter, though it doesn’t necessarily reverse the long-running trends leading to less churn.
Jeremy Divinity, 27, quit his marketing job in Washington, D.C., in August because he wanted to move back to Los Angeles, his hometown.
“I wasn’t too worried about finding a job out here,” he said. “I knew that something would eventually play out.”
Once in Los Angeles, Mr. Divinity relied on freelance gigs while he took his time looking for the right match. In February, he found it with a boutique agency that creates social-media strategies.
The resurgence of job-hopping is particularly helpful for younger workers looking for footholds to launch their careers, said Erika McEntarfer, an economist at the Census Bureau. About 6.5% of workers under age 35 changed jobs in the first quarter of last year, versus 3.1% of those ages 35 to 54, according to census data.
“The people who are changing jobs, they skew young and they skew being placed in what you might call bad jobs, where the average pay is quite low relative to other jobs in the economy,” Ms. McEntarfer said. Job-hopping could lead them into higher-paying industries, she said.
One of those is Megan Freitas, a 21-year-old nursing student from Taunton, Mass. A few weeks ago, Ms. Freitas left a minimum-wage retail job where she had worked for more than two years and where her only raises came when the state increased its minimum wage, most recently in 2017 to $11 an hour.
Now, she works as a student-nurse intern at a hospital in Rhode Island, where she makes $14 an hour—more on some shifts—and where she hopes to land a permanent job once she graduates.
After she quit, the store kept asking her to work a few hours. “They just really needed help and they asked if I could come in,” she said. “They know I’m a sucker, so I said sure.”
She plans to tell them not to call her again. “Unless they want to give me a raise, then that’s it.”
Willingness to switch jobs may be a boon to workers, but it is a headache for some businesses.
Volk Packaging Corp. is attempting to add a second shift to meet growing demand for cardboard shipping boxes. But the Biddeford, Maine, company is finding that difficult when the region’s unemployment rate is below 3%, said Derek Volk, its president.
Mr. Volk raised average pay about 5% and is being more accommodative. He recently allowed an employee to push back her starting time because of a day-care conflict—for her dog.
“A few years ago, that would have been a ridiculous ask, but now you have to be flexible,” he said.
Increased worker turnover could diminish the benefits to productivity of workers finding better matches for their skills.
Some workers are using this opportunity to change career paths or move into higher-paying industries.
In particular, higher pay has been attracting workers to jobs in industries where employers complain about a severe labor shortage, such as construction, manufacturing or health care. Many have come from lower-paid positions in retail or restaurants.
In Colorado, for instance, construction firms now increasingly make more hires from outside the industry than from within, according to the census.
Dave Pavelka, president of Kenny Electric in Denver, has been recruiting and training inexperienced workers to deal with a desperate labor shortage. His firm has about 350 field electricians but could hire another 50, he said.
A number of recent hires have come from the hospitality industry, Mr. Pavelka said.
“I think the number-one driving force is the compensation part of it,” he said. “Not just the entry level, but the potential for expansion, to grow.”
Robert Maynard, chief executive of Famous Toastery, a Davidson, N.C., chain of 30 restaurants, said it doesn’t make sense to chase after every employee who asks for a $3-an-hour raise—especially if the employee threatens to quit just before a busy Sunday shift.
To retain employees, he has been meeting with rank-and-file workers to tout career opportunities at the chain, pointing to dishwashers who are now managers, and managers who now own franchise locations.
Still, he bristles at fellow business owners complaining about worker shortages. It is a sign customers have more to spend and that the benefits of a strong economy are reaching lower-paid workers, he said.
“The restaurant industry has enjoyed paying people very low salaries for a long time,” he said. “The employees deserve it—they waited 20 years—good for them.”