The ‘Big Stay’: Why Workers Are Settling In as the Great Resignation Fades

The seismic shifts that defined the post-pandemic labor market, famously dubbed the ‘Great Resignation,’ are now giving way to a new era: the ‘Big Stay.’ What was once a period of unprecedented worker mobility and soaring pay incentives for job switchers has dramatically cooled, ushering in a more stable, albeit less dynamic, employment landscape.

The Fading Lure of the Job Switch

For a significant period following the initial COVID-19 upheaval, employees enjoyed a distinct advantage. Companies, desperate to fill vacancies and retain talent, offered substantial pay bumps to those willing to jump ship. This led to a record 4.5 million Americans quitting their jobs in March 2022, chasing greener pastures and higher salaries.

The Collapsing Pay Gap

However, the financial incentive to switch jobs has all but evaporated. Data from payrolls processing firm ADP reveals a stark transformation: the disparity between average annual pay increases for job switchers versus those who stayed put has plummeted from a peak of 8.4 percentage points in April 2022 to a mere 1.9 percentage points in January. This is the lowest gap recorded since ADP began tracking this metric in November 2020, signaling a profound shift in worker calculus.

The Bureau of Labor Statistics (BLS) corroborates this trend, showing that the level of ‘quits’ has contracted by nearly one-third since its early 2022 peak. Concurrently, job openings have nearly halved, and the pendulum has swung from a market with more than two job openings per unemployed worker to one where available workers now outnumber openings.

A Stable Yet Stagnant Market?

Nela Richardson, chief economist at ADP, describes the current environment as a “very stable labor market,” characterized by “very little hiring, very little firing.” This ‘low-hire, low-fire’ dynamic is a direct outgrowth of the pandemic’s initial disruption, where a severe labor supply shortage and skills gap drove intense competition for talent.

Industry-Specific Nuances

While the overall trend points towards diminished incentives for switching, the granular data reveals interesting industry-specific variations. In high-turnover sectors like leisure and hospitality, job stayers are actually seeing better pay gains, with a 2.5% advantage over switchers. Conversely, the construction industry, grappling with labor supply issues exacerbated by U.S. immigration policies, still offers a significant 6.6 percentage point advantage for those who change employers.

Despite the narrowing gap, job switchers still command higher average annual pay growth (6.4% in January) compared to stayers (4.5%). Yet, the trend is clear: the gap is closing, and the once-lucrative premium for mobility is diminishing.

The Long-Term Implications

The shift towards the ‘Big Stay’ comes with its own set of challenges. While layoffs remain low and the unemployment rate stands at a healthy 4.3%, experts are expressing concern over a “lack of dynamism in the labor market.”

Concerns Over Dynamism and Productivity

Indeed Hiring Lab reports that job searches were up 31% in January from December, yet job postings remained largely unchanged, and hiring timelines are lengthening. This suggests a more competitive environment for job seekers. ADP’s Richardson warns that a ‘low-hire, low-fire’ state isn’t ideal for long-term economic health. “The churn is important to the productivity growth,” she explains. “You want to see the most talented go to the places where that talent is the most rewarded. And if we are in this really stable period, that means that talent is not being repositioned to its best use.”

This lack of talent repositioning could hinder innovation and overall economic productivity, as the most skilled workers may not be finding their optimal roles in a less fluid market.

Navigating the Evolving Landscape

As the labor market continues to evolve beyond the ‘Great Resignation,’ both workers and employers must adapt. For workers, the era of easy pay bumps for switching jobs appears to be over, emphasizing the value of internal growth and skill development. For employers, fostering internal mobility and competitive compensation for existing staff will be crucial in retaining top talent in this new ‘Big Stay’ environment.

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