The Economics of Quiet Quitting: Taking Stock and Looking Ahead

In the wake of the reopening and recovery of the United States economy following COVID-19, such an increase in the number of job openings is to be expected. However, during this same period, the reported rate of job quits reported monthly by BLS has also increased. From January 2012 to December 2020, the rate of employees who have quit increased from 1.5 percent to 2.4 percent, while from January 2021 to September 2022, the “job quits rate” increased to 2.7 percent (peaking at 3 percent in December 2021).

Placing this Great Resignation in longer-term perspective will draw attention to and particularly focus on a corresponding labor market trend, recently dubbed “quiet quitting.” My purpose here will neither be to dismiss nor lend credence to whether quiet quitting is something new, per se. Rather, by taking stock of past trends, my goal will be to suggest, not predict, what we can expect in the future by explicating an economic rationale to “quiet quitting.” My argument is that what is known today as “quiet quitting” is simply a new manifestation of labor market turnover, and therefore a difference of degree, rather than of kind, in labor market trends.

According to a Wall Street Journal article, quiet quitting “isn’t about getting off the company payroll.” Rather, “the idea is to stay on it—but focus your time on the things you do outside of the office.” Quiet quitting, unlike quitting in the traditional sense of the term, suggests that employees continue to work, but become less invested in their current employment, doing enough not to get fired, but not enough to accrue the human capital investments necessary for advancement, such as learning additional job skills specific to one’s current employment. While the term “quiet quitting” is new, and therefore continues to evolve, what it implies is that more time on the job is spent, as Ellis and Yang state, “on the things you do outside of the office.”

Much of the attention that has been drawn to quiet quitting has been based on a poll conducted by Gallup since 2000, measuring “the percentage of U.S. employees who are engaged at work.” “Employee Engagement,” according to Gallup, is defined as “the involvement and enthusiasm of employees in both their work and workplace.” According to an article entitled “Is Quiet Quitting Real?” by Jim Harter, Chief Scientist for Gallup’s workplace management practice, these data imply half of the U.S. work force currently employed is quietly quitting. Only 32 percent of employees reported to be “engaged”, while 50 percent were “not engaged” and 18 percent are “actively disengaged” (or “loudly quitting”) at work.

However, according to Derek Thompson at The Atlantic, quiet quitting is a “fake trend” and therefore unreflective of anything new in the labor market. Rather, “quit quitting” is but a reversion to the mean in labor market trends from the standpoint of Gallup’s data. Although indeed Thompson concedes the fact that worker engagement has decreased 36 percent in January 2020 to 32 percent in September 2022, both figures are still above the reported figure of 26 percent of workers being “engaged” at work reported in 2000. This is much is admitted in another article by Jim Harter, who states that, with the exception of 2020, “[e]mployee engagement has been a steady metric without sharp ups and downs since Gallup began tracking it in 2000.”

My point in providing this summary has not been to give an exhaustive account of what appear (or do not appear?) to be opposing arguments regarding whether quiet quitting is “real” or “fake” by appealing to working polls that “measure” a worker’s psychological attachment to their work. I do not wish to discount claims that “quiet quitting” can be attributed to psychological reasons, nor do I suggest that COVID-19 has not affected worker attitudes toward their employment. But claiming that workers are “quietly quitting” by describing them as “detached”, “burned out”, or “lazy” gives too myopic a rationale centered on COVID-19 that misdirects attention to explaining “quiet quitting” as a phenomenon that has been recently accelerated, but not caused by COVID-19. Describing a particular phenomenon by appealing to psychological reasons is not the same as providing an economic explanation. As F.A. Hayek best states this point:

• It is a mistake, to which careless expressions by social scientists often give countenance, to believe that their aim is to explain conscious action. This, if it can be done at all, is a different task, the task of psychology. For the social sciences the types of conscious action are data and all they have to do with regard to these data is to arrange them in such orderly fashion that they can be effectively used for their task (emphasis original, [1952] 1979: 68).

To be fair, I am not suggesting that economic explanations have not been provided. In fact, Greg Rosalsky and Alina Selyukh have argued that “quiet quitting” should be understood as a principal-agent problem. As they argue: “In this model, the principal (the boss) enlists an agent (the worker) to do a specific job for them. The problem: the principal doesn’t have complete information on exactly what their agent is doing. Is their agent being productive on the job? Or are they slacking? In order to make sure the agent is doing their bidding, the principal must figure out ways to incentivize and monitor them. The model has implications for the dramatic changes in office life—or lack thereof—we’ve seen in recent years. With the mass adoption of remote work, many managers seem to be struggling with how to effectively monitor and motivate their employees.” It is on this basis, they argue, that what is known as “The Great Resignation” should be relabeled “The Great Renegotiation.”

While I do not disagree with the economic basis of Rosalsky and Selyukh’s conclusions, the implications of their argument are incomplete. They suggest that “The Great Resignation” shows “a large chunk of our labor force was always phoning it in, but now they have a loud social-media presence and better branding.” Indeed remote work presents a principle-agent problem between employers and employees. Yet this claim misdirects attention to the fact that, whether “quiet quitting” is “real” or “fake”, to imply that “quiet quitting” is simply consumption of on-the-job leisure overlooks that what can also be understood as an “idle labor resource” that is employed seeking information about alternative job opportunities.

My reframing suggested here is not new but based on the work of economists William H. Hutt ([1939] 1977) and Armen A. Alchian (1969) and is consistent with the observations made earlier by Jim Harter and Derek Thompson. As Harter states: “Most employees who are not engaged or actively disengaged are already looking for another job” (emphasis added); and according to Thompson: “most people weren’t quitting to retire; they were quitting to take a new job” (emphasis original).

Returning to my introduction, and consistent with BLS data, increased turnover along with a corresponding increase in job openings was not caused by COVID-19, per se, but accelerated by government responses to the pandemic. What COVID-19 lockdowns accelerated was the use of already-available computer technology and other platforms, such as Zoom, that could not only transfer work to remote locations. More importantly, these same uses decreased the relative costs of employees seeking information about alternative job opportunities from other employers virtually. Whereas in the past, as suggested by Hutt and Alchian, workers would actively quit their job in order to become actively “employed” in discovering information about alternative employment opportunities,” the relative decline in the cost of discovering information about alternative job opportunities has allowed workers, more than ever, to seek new employment elsewhere while remaining currently employed, although in a passive or “quiet” manner.

Rather than taking a temporary wage cut by becoming unemployed to seek information specific to other jobs, the wage cut incurred through “quietly quitting” comes in the form of foregone human capital investments specific to their current employment that would have allowed workers to command higher wages from their current employer. Hence, if we are to seek an economic rationale for “quietly quitting” which fits with longer-term labor market phenomena and gives us some reliable expectations about continued labor-market trends, it must be understood not as a change in preferences in employees, but due to primarily to a decline in information costs for employees seeking alternative employers while remaining currently employed.

Footnotes

[1] Bureau of Labor Statistics’ Job Opening and Labor Turnover Survey, accessed 11/29/2022.

[2] Lindsay Ellis and Angela Yang, “If Your Co-Workers Are ‘Quiet Quitting,’ Here’s What That Means.” The Wall Street Journal, August 12, 2022.

[3] Also of importance, though not the focus here, are labor market policies that have led to labor market distortions that had accelerated a fall in the labor force participation rate, which has steadily declined in the United States since 2000. See Mulligan (2012) and EconTalk podcast episode Edward Glaeser on Joblessness and the War on Work, March 26, 2018.

[4] Gallup, Employee Engagement. Accessed 11/29/2022.

[5] Derek Thompson, “Quiet Quitting Is a Fake Trend.” The Atlantic, September 16, 2022.

[6] Greg Rosalsky and Alina Selyuch, “The economics behind ‘quiet quitting’—and what it should be called instead.” Planet Money, September 13, 2022.