Claudia Sahm, Jain Family Institute Senior Fellow, joins Yahoo Finance’s Time For Change to talk about the outlook for the labor market and what to expect post-pandemic.
MARQUISE FRANCIS: Welcome to A Time for Change. I'm Marquise Francis. Americans are quitting jobs in record numbers. It's what everyone seems to be talking about right now. But exactly who is doing the quitting? And where are they actually moving along to? Here to dissect what many are calling the great resignation is Claudia Sahm, senior fellow at the Jain Family Institute and a former economist at the Federal Reserve and White House. Claudia, thank you for joining us this afternoon.
CLAUDIA SAHM: Great, thank you for having me.
MARQUISE FRANCIS: Great. So a number of Americans are quitting their job in record numbers to the tune of 4.4 million in the month of September alone. These people are basically saying, thank you, job. But no. I'm good. Can you break it down for us by age, race, and gender? What are you seeing?
CLAUDIA SAHM: Well first, just stepping back, the quit rate, so the people who are able to go in and say, I'm out of here, I'm going to a new job, that is one of many signs of a labor market that is still coming out of this pandemic. In addition to these really high quit rates, which are a good sign, that is often people moving up a career ladder, getting higher pay. We also have nearly five million fewer workers on the job than we did before the pandemic. We've seen real wages, inflation adjusted increase.
So we have this mixture of good, and bad, and unprecedented with a lot of these statistics. You can go further back. To your question about, how do we think about that big headline number of the rate of quits? It is absolutely important now and always to recognize that we have many different labor markets in the United States. We don't all apply for the same kind of jobs. And one area where it is clear now and always is is when you look at workers by their racial backgrounds, their ethnic backgrounds, we see big differences in the recovery.
We see big differences in the opportunities that they have. And so one good sign of the quits, and what often is referred to as a hot labor market, we also have a lot of employers that are struggling to bring workers back. That's an opportunity for people who would often be left on the sidelines, who wouldn't have the quote unquote, "qualifications" that they're looking for, employers are going to give them a shot because they need to fill those jobs. So we have this moment where we're seeing what can happen.
Low wage workers can get a raise. This is not impossible, though it hasn't happened for a long time. But all of this is incredibly messy. And it's hard for us to step back and be like, OK, what does this mean? What does this mean about right now? What does it mean about the next six months, the next year? So I'm very wary of picking out the latest statistic and the big number on the top because we really, really have to look under the hood, understand different people's experiences. And we have to look across a wide range of measures that we have about what's happening on the job in people's employment lives.
MARQUISE FRANCIS: Yeah, I appreciate that distinction. Because when I'm thinking, when I'm reading some of these reports and these headlines of the great resignation and actually talking to friends or colleagues of mine, it's really two different things. And so a lot of people are wondering, are people actually quitting and getting better jobs? Or are they saying no to the workforce altogether? And I think what you're getting at is it depends who you're talking to. It depends their socioeconomic background. So is that what you're kind of getting at?
CLAUDIA SAHM: Right. Again, there's all these different "labor markets" quote unquote. I have had I've been very critical of the great resignation story in the sense of the pandemic has had people step back and rethink their lives. And now they're going to work less or pursue some other passion. The reality is the quote unquote "rethinking" our lives is a privilege and something that professional workers, higher income workers, are able to do. And that is frankly not a choice that most American workers can have.
So I think what's happening, like I said, and this is a good sign, is people are getting better job offers. Maybe they're moving sectors, that they used to work in a fast food restaurant, and now they're working at a warehouse. So you see this massive amount of people switching jobs, which can be good. It can also be a bad sign like they were in a really bad job before. Or there's something just disruptive in the economy. And that-- and then the other place that the great resignation-- so I don't think it's people rethinking their lives in terms of, I'm just going to go hang out or do something wonderful, peaceful with my time.
I think a lot of it is people getting better jobs and moving around. And that's good. The other piece of the great resignation that I've been very skeptical of is we've seen many workers retire, retire at a rate faster than we would have expected without the pandemic. And there's been a lot of, well, they're not coming back. So we can't run this economy too hot because employers just aren't going to find these workers because they're retired. The reality is that retirement is often a very socially acceptable, a personally easier to deal with form of unemployment.
You might still be putting jobs out. But if somebody asks you, even in a survey, you say I'm retired. Because frankly, it's more dangerous if you are an older individual to be working. COVID is still here. What we have seen very recently is some signs that workers, particularly the older workers, we might think are most potentially affected by COVID, they're starting to come back. I wouldn't expect everyone who's retired to come back. Frankly, a lot of them deserve and probably have some nest egg built up to retire.
But we have to be really, really careful about interpreting big life changes from an event, this pandemic, that will pass. And it's not clear-- this is not the kind of thing that can rewrite our path. It is disruptive. We can't assume that.
MARQUISE FRANCIS: No I appreciate that. And I want I want to jump in here really quickly because you talk about those positives, the higher wages, the bargaining power that we're seeing in this moment. But I'm curious, what happens when the surge in the demand subsides? Are we entering a new labor industry? I know that 30 to 45-year-olds are the big ones driving a lot of this resignation. But also tech and health care are some of the leading industries where we're seeing a lot of this turnover.
So is this kind of a new [? ways ?] that we're seeing?
CLAUDIA SAHM: Well those positive things that we're seeing in the labor market, people being able to move up the career path, lower wage workers finally getting those raises, I would like to see those staying. I am extremely skeptical that we will see the same staying power. Some people are going to keep those better jobs. Those raises in some cases will stick. But to have long run transformational change that reverses or even starts to reverse decades of decline of worker power, a decline in career paths, that is going to take transformational legislation, changes in worker-- changes particularly in employer behavior, who they hire, how they train them.
And as much as I want that to continue, we can't bank on that. That's not a given. What I think the economy today has shown us, it's shown us what's possible. We can have a better labor market. We can pay people living wages. But we can't count on that happening without more legislation such as the, like I like to call it, the kids, care, and climate legislation, or the Build Back Better that's in Congress right now.
We need to do something that really fundamentally over the long term changes workers' lives and opportunities.
MARQUISE FRANCIS: Absolutely. Somehow, some way it seems to always go back to legislation. Claudia Sahm from the Jain Family Institute, senior fellow. Thank you for joining us today.