A Nation of Quitters?

The labor force participation rate doesn't tell the whole story.


Has America become a nation of quitters? It might seem so.

As the COVID-19 pandemic progressed, workers abandoned their jobs in record numbers. In 2020, as the virus tore through the economy, the labor force participation rate saw its largest drop ever, from 63.2 percent in the final quarter of 2019 to 60.8 percent in the second quarter of 2020, according to the Federal Reserve Bank of St. Louis, which also noted that the first year of the pandemic saw about 2.4 million "excess retirements," involving people who in normal times would not have been expected to stop working for good. In November 2021 alone, according to the Bureau of Labor Statistics, a record 4.5 million people, nearly 3 percent of American workers, quit their jobs. As the end of the year neared, there were roughly 4 million fewer workers in the labor force than before the pandemic.

The industries hit hardest by the wave of quitting include tech, health care, and child care. The year 2020 saw 3.6 percent more health care employees quit their jobs than the previous year, according to the Harvard Business Review. According to the latest data available in December 2021, day care and education jobs were down 10 percent and 5.5 percent, respectively, from their pre-COVID February 2020 peaks. More than 1.5 million women were still missing from the labor force.

This phenomenon, which has been found not only in the U.S. but across the developed world, has been dubbed the Great Resignation. As the pandemic persisted, it became one of the central, inescapable traits of the U.S. economy. People are leaving their jobs in droves, reshaping the world of work in the process.

To some extent, the resignations were driven by the virus itself, especially during 2020. Many of the "excess retirees" were older workers especially vulnerable to COVID-19, who understandably decided to leave the workforce a few years early.

In addition, the St. Louis Fed noted in a 2020 report, the economic downturn that sprang from the pandemic featured an unusual twist: The value of assets like stocks and homes increased. Meanwhile, household spending on many categories, such as eating out, declined. People consequently had more money in their bank accounts. Economists typically expect that when people get richer, they will tend to work less.

Increased household wealth was also a policy choice. In the year or so following the March 2020 onset of the pandemic, Congress passed roughly $6 trillion in pandemic aid and economic stimulus—much of it, like expanded unemployment benefits, designed to put cash into people's pocketbooks. The personal savings rate spiked after federal pandemic-relief checks were sent to most households.

By summer 2021, Americans were comparatively flush, which meant that workers, especially those in lower-wage jobs, could be choosier about where (and whether) to work. Many simply chose not to, at least for a while.

As it turned out, Americans also could be choosier about how to work, and for whom. The Great Resignation is not merely a story of American workers choosing to exit the labor force. It is also a story of Americans using new tools and resources to work differently—in many cases, online and for themselves.

Since the start of the pandemic, according to Labor Department data, self-employed worker totals have shot up by half a million. Applications for federal tax identification numbers for new businesses increased by 56 percent during the first 10 months of 2021. As The Wall Street Journal reported in November, most of those new firms were not expected to hire any employees. Employment at large firms dropped for the first time in more than a decade and a half, while total self-employment hit a peak not seen in more than a decade. By most any measure, the economy is witnessing the biggest boom in entrepreneurship in a generation or more.

While the Great Resignation could be seen as an indication that Americans are tired of work, or at least tired of work under the strain of COVID, it might also be a sign that many Americans want to work differently, without the bureaucratic constraints and inflexibility of large organizations. Online tools and platforms, from Zoom to Substack to Etsy to Stripe, make this easier than ever. Some Americans, ever industrious, are using pandemic-era economic upheavals as an opportunity to reset and reorient. Americans quit, yes. But now they're getting back to work.