Eight times each year, the Federal Reserve releases a report called the Summary of Commentary on Current Economic Conditions, more commonly known as the Beige Book. This report includes anecdotal evidence of the US economy’s health, gathered from sources such as business leaders, economists, market experts, and more. The most recent Beige Book sheds some light on the idea that many business leaders, such as Elon Musk, are hoping for high employee turnover rather than layoffs. It is more cost-effective and better for the reputation to have employees quit than to pay severance and announce layoffs. A 2016 study found that after layoffs, the remaining employee's experience ‘survivor syndrome’ which reduces performance, increases stress, and decreases commitment to the employer.
Since 2012, the median job tenure of American workers has decreased from 4.6 years to 4.1 years. Especially under the age of 24, the average tenure is only 1.2 years, and for those aged 25-34, it is 2.8 years. During the pandemic, when many workers were financially secure from stimulus checks, the attrition rate at many companies has risen. Bank of America CEO Brian Moynihan reported a 3% increase in attrition rate, which translates to an annual increase in turnover of 6,000 employees.
Despite the slowing hiring rate, from December 2019 to November 2020, a record number of Americans voluntarily chose to quit their jobs. This trend has been labeled “the great resignation” by the media and has made it difficult for some employers to fill open positions. Despite the current economic downturn, the unemployment rate remains low at 3.5%, and jobless claims have recently fallen to their lowest level in months.
Rather than enacting mass layoffs, due to the costly expense of severance packages and accrued paid time off, many employers are utilizing “quiet firing” or “gentlemen’s layoffs” tactics to right-size their workforce. This involves using natural attrition, refraining from hiring, and making employees’ lives difficult at work in order to prompt them to leave the company without having to announce layoffs. Examples of this can be found in companies such as Bank of America, Ubisoft, and Cisco, which are all utilizing natural attrition strategies in order to cut costs without officially laying off employees.
According to a wage growth tracker from the Federal Reserve Bank of Atlanta, employees who switched jobs between December 2021 and December 2022 received an average raise of 7.7%, compared to only 5.5% for those who stayed in the same position. Additionally, a recent survey from ZipRecruiter revealed that workers who quit their jobs in late 2021 saw an even larger salary increase than those who left earlier in 2022.