Why are so many Americans quitting their jobs?

Bye. Goodbye. Adios. Sayonara. In recent times, workers have repeated such words to their bosses. Last week, the US Bureau of Labor Statistics reported that 4.3 million Americans, or 2.9% of the total workforce, left their jobs in August. It was a record month, building on previous record months. “The Great Resignation” is real and can be seen in virtually any industry.

It’s common to see a wave of quits when the job market is tight and there is a cornucopia of openings. But what’s happening now is unlike anything we’ve seen before. Economists and pollsters are still investigating what is going on. Do generous government benefits encourage people to quit smoking? Maybe, but there is some evidence to suggest it isn’t. Are people looking for a raise after decades of stagnant wages? Probably, yeah. Family pressures imposed by the closing of schools, the closing and reopening of businesses, the reshuffle of the population to different locations and industries, and the fear of the virus in face-to-face situations have also almost certainly played a role. . But the historic increase in quitting also appears to be more than all of this.

In a new working paper, UC Berkeley economist Ulrike Malmendier suggests that there is something existential behind the Great Resignation: The pandemic and the rise of remote working have changed the way we think about it our life and the world.

[Editor’s note: This is an excerpt of Planet Money’s newsletter. You can sign up here.]

The idea that our experiences shape our choices is hardly radical. And Malmendier isn’t the only one among academics to suggest that soul-searching during the pandemic helps explain the wave of abandonment. Texas A&M psychologist Anthony Klotz, who predicted and coined the term “big resignation” in May, attributes “pandemic epiphanies” to motivating many workers to quit their jobs for greener pastures. But “experience effects,” as Malmendier calls them, remain remarkably under-studied in economics, which tends to focus more on the cold material incentives that influence our behavior. Malmendier worked to change that.

Experiences that shape our economic lives

Malmendier says her journey to unravel the mysteries of how personal and collective experiences shape our economic choices began when she thought about her home. Malmendier is from Germany and she says the mores of her home country inspired her to investigate the idea that experiences can dramatically affect people’s economic decisions. The Germany she grew up in – and now looks at from afar – is an inflation-hyper-vigilant Germany. Whether in the Bundesbank (the central bank), the Bundestag (the legislature) or the Bundeskanzleramt (the equivalent of the White House), German leaders tend to be inflation hawks, flocking to money. tight, balanced budgets and price stability. These political preferences sometimes pitted Germany against other EU countries when they negotiated their common monetary policy at the European Central Bank.

A little over ten years ago, Malmendier was on the faculty at Stanford Business School with Stefan Nagel, also from Germany. “And we were talking about why we Germans are so obsessed with inflation,” she says.

The answer was pretty obvious to them, given their knowledge of their country’s history. If there is one nation that has illustrated the dangers of inflation, it is Germany. After losing World War I, Germany struggled with the burdens imposed by the Treaty of Versailles, which forced the nation to pay reparations for the war and hampered some of its major industries. The Weimar Republic solved its financial problems by spending deficit and printing a lot of money, and inflation took off. Prices quadrupled each month, on average, for nearly a year and a half between 1922 and 1923. Historians accuse the soaring prices of having destabilized the democratically elected government and facilitated the rise of the Nazi Party. In short, it did not end well.

“We asked ourselves whether the experience of hyperinflation at the start of the 20th century had been passed down from generation to generation, shaping us in a lasting way,” explains Malmendier. This led Malmendier and Nagel to research how past experiences can influence people’s behavior and economic attitudes.

Malmendier and Nagel’s first influential article in this area was titled “Depression Babies: Do Macroeconomic Experiences Affect Risk Taking?” They wanted to know if those who had grown up in the aftermath of the 1929 stock market crash were less likely to invest in the stock market. They found the answer to be a resounding yes. The Great Depression, they found, created an entire generation that was reluctant to invest in stocks. Those who came of age in the 1950s and 1960s, on the other hand, were much more enthusiastic about it.

And these experiences almost literally rewire our brains

In a new working paper, Malmendier sketches a prototype of how we should think about how personal and generational experiences can systematically affect our economic behavior. She scans the literature and finds models. Economic calamities like hyperinflation, stock market crashes, and spikes in unemployment tend to affect people’s attitudes and choices for a long time, but people are particularly responsive to what has happened recently. These “experience effects” tend to be “area-specific,” she says, so a stock market crash doesn’t seem to affect, for example, the buying of bonds by people.

Malmendier cites neuroscience research, which she says finds that our experiences almost literally rewire our brains. “The evidence for neuroplasticity shows that personal experiences and learning alter the strength of neural connections and adjust the structure of the brain to those past experiences,” she writes. It is known in the art as “use dependent” brain development.

Research shows this to be especially true for children. Childhood trauma, for example, can profoundly affect people’s outcomes in adulthood. This includes putting them at high risk for substance abuse, criminal and antisocial behavior, depression, dropping out of school and chronic health problems. A recent study found that this long list of problems includes greater financial pressure. In short, experiences, whether personal or collective, seem very relevant for studying inequalities, poverty and the economy.

When it comes to the effects of the pandemic, Malmendier predicts that the legacy of forced telework, home schooling, and other dramatic social and economic changes will continue to shape our choices long after the viral danger has subsided. At the very least, many of us will certainly take on new jobs. [Copyright 2021 NPR]

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