In this era of unprecedented labor market activity, in which job openings are skyrocketing, wages are rising, and fewer workers are transitioning from unemployment to employment, there have been several developments that have exacerbated these seemingly contradictory trends. Although much of the story surrounding the current labor market has been focused on the barriers to re-entry for the unemployed, the current conditions are also greatly affecting those who continue to work. That is, the tight labor market has resulted in an inordinate rate of workers quitting their jobs. And while part of this phenomenon is easily explained, a closer look at the evidence suggests that there are unique problems facing low-wage service industries—including widespread understaffing and workplace harassment.
When job opportunities are widely available, as they are now, it is not uncommon to see higher than average quit rates (i.e. the percentage of all employees who quit their jobs). And throughout the end of the pandemic and the early stages of the recovery, quit rates were indeed above average, but certainly not a cause for concern. Since January, however, quit rates have been steadily climbing, reaching an all-time high of 2.8 in April, and falling to a still shocking 2.5 in May.
According to a recent analysis by the Peterson Institute for International Economics, the all-time high quit rate in April is not surprising given the unprecedented number of job openings. In fact, considering the historical relationship between the number of job openings and the quit rate, April’s record-high mark is almost exactly what would have been predicted. However, the researchers also performed industry-by-industry predictions for quit rates, and compared them to the real levels. Almost all industry-level predictions mirrored the real rate, with a glaring exception: retail trade. The authors’ model predicted a quit rate of only 3.9, whereas the real quit rate was 4.3 (the only larger difference came from the transportation, warehousing, and utilities sector, with a difference of 0.8). And although the researchers accurately predicted the quit rate in the leisure and hospitality industry, most recent measures remain extremely high, at a rate of 5.3 percent.
This finding suggests that there are factors beyond the number of job openings fueling the unprecedented quit rates in public-facing industries. Chief among these reasons are the pressures that service workers face in understaffed places of employment, and the regularity of disrespect that they encounter in their places of employment.
First, understaffed employers have required employees to adopt greater levels of responsibility for the same pay. While there is little empirical data that measures changing levels of responsibility, this phenomenon lies beneath the survey data. According to a report from the from HR researchers at Traitify, unpredictable working hours were common throughout the pandemic. The survey results found that, “for many workers in the high-volume sector, relative job unpredictability is already the norm…” Additionally, a recent survey conducted by One Fair Wage, an advocacy group seeking to eliminate the sub-minimum wage for tipped workers, found that low wages are causing many restaurant workers to drop out of the labor force. Taken together, these surveys suggest that the labor shortage itself may be exacerbating attrition from public-facing work. While workers in such industries are used to unpredictability, the persistence of the labor shortage has all but guaranteed that service workers must adopt more responsibility than traditionally allotted to them. And while hourly service workers testify to suboptimal wages, they are also effectively testifying to uncompensated growth in responsibilities.
However, burgeoning levels of responsibility in public-facing industries does not explain the increasingly common phenomenon of workplace harassment and subsequent “rage quitting.” As noted in previous research, workers in the service industry are facing an epidemic of disrespect, causing many to leave the industry altogether. More precisely, the crisis of disrespect is two-pronged, with many employees feeling pressure from both suspect managerial practices and customer harassment. According to a recent survey by Joblist, “over 50% of former hospitality workers who are looking for other work say that no pay increase or incentive would make them return to their old restaurant, bar or hotel job” (emphasis added). This finding, though shocking in principle, is less surprising considered the inordinate frequency of reported harassment and assaults by customers in service industries. While many of these incidents are often linked to tensions over COVID-19 restrictions, many are associated with problems related to understaffing. Certainly, these incidents have been increasingly common since the reopening of the economy, but disrespect of low-wage workers is an issue that long predates the pandemic, and is likely fueling service workers’ departure from the industry.
Although the current record high quit rates are predictable across most industries, there are additional factors pressuring workers in customer-facing industries to leave the industry behind. These include the self-inflicted wound of uncompensated increases in employees’ level of responsibility, and the ongoing crisis of disrespect faced by service workers. Because the labor shortage itself is causing understaffing and rising responsibility, one tangible intervention centers around fostering better workplace environments. Eliminating the crisis of disrespect in public-facing industries may be beyond the control of individual employers, but by insulating service workers from customer mistreatment, and ensuring best practices from management, the industry would be better equipped to attract and retain talent.