It’s been almost 45 years since Johnny Paycheck sang David Allan Coe’s famous lyrics, “Take this job and shove it, I ain’t workin’ here no more.” But that seems to be the theme song of many workers today. Almost every month, record numbers of employees are leaving their jobs.

And that could be a good thing.

This is not the first time the labor market has turned in favor of workers. And it is not the first time that the number and rate of people resigning (or quitting) their positions voluntarily has increased. It’s not surprising that when the unemployment rate falls and job openings rise, people willingly switch employers at an accelerating pace.

In the past, though, when extreme worker shortages appeared, the pace of worker movement didn’t suddenly surge, as it has recently.

It wasn’t as if there weren’t any job openings: There were plenty of them. It’s just that workers held on to their jobs much more tightly than they are doing right now.

So, what has changed?

First, let’s understand why people weren’t quitting their jobs, when jobs were plentiful but workers weren’t.

For an economist, that’s a hard thing to reconcile. Consider the recovery after the Great Recession ended in June 2009. It was slow and steady, but the unemployment rate did average a very tight 4 percent for the 2017 through 2019 period. Businesses constantly bemoaned the lack of workers.

Yet employees didn’t make use of their relative labor market advantage to better their situations. Over that three-year period, inflation-adjusted wage compensation grew by a modest average of 1.4%. Yes, the number and rate of workers leaving their jobs increased, but it took nine years before the quit rate rose back to where it was before the Great Recession hit. Employers largely controlled the market, even in a labor shortage environment.

Why did workers act so passively? It might have been the scarring from the Great Recession.

From March 1991 until December 2007, the economy was in recession just eight months. And the only recession during that time frame, in 2001, was extremely mild. The unemployment rate rose less than two percentage points and peaked just over 6%, while GDP barely declined. If you blinked, you probably missed it.

At the same time, the labor force grew solidly. When you factor in retirements, deaths, and dropouts, it is likely that upward of half the workforce hadn’t lived through a major downturn when the financial crisis cratered the economy.

For many workers, the Great Recession’s massive economic fallout created fear of the unknown, that being a different workplace or employer. “Comfort” with the devil they knew overcame lousy working conditions, poor pay increases, and the desire to tell employers what to do with their jobs.

Eventually, workers did start quitting, but over an extended period. In the month when the Great Recession ended, in 2009, about 1.5 million people left their jobs. Just before the pandemic hit, 3.4 million workers terminated their employment. It took 10 years, but the willingness to move had finally gained speed.

Now, the pedal is to the metal.

When the pandemic closed things down, the monthly number of quits declined to 1.9 million. Within one year, by March 2021, it was back up to 3.4 million. And the willingness to change jobs has accelerated over the last six months. The number of those jumping ship rose to over 4.2 million in September.

Workers’ new approach

A new psychology had taken hold in the workforce: Employees are now telling their bosses they have had it.

So, is it bad that the number and rate of those quitting is at record highs and rising? No.

With the record number of job openings 50% higher than when the pandemic hit, it is relatively easy to find a new position. And unlike the post-Great Recession period, businesses are starting to pay up to attract workers. Let’s see: Available jobs at higher pay is inducing workers to change employers. Should that be a surprise?

More important, the churn in the workforce could turn out to be good for both employers and employees.

Productivity in the 2010s was disturbingly low. That matches up well with employee fear of moving. Burned out, angry, tired, underpaid and/or frustrated workers are usually not very productive. If they cannot change jobs or are afraid to, they remain in unsatisfactory positions and go through the motions.

That raises the question: Why are employers continuing to hold on to their employees so tightly? The low level of new unemployment claims points to that happening.

Pay is rising

The obvious reason is the inability to find a replacement for a worker who leaves. This places employers in a no-win position: If they let employees go without trying to retain them, they may not be able to replace them. That would reduce productive capacity. But if they pay up to retain the worker, they are likely stuck with a still dissatisfied, less productive, but now higher-paid employee.

There is an option, though it is expensive. Pay up for a new worker — and then do everything to hold on to that person. In the near-term, the difference in costs could be significant. However, if the difference in productivity is greater, the new employee pays for the higher salary, and also adds to profits.

The truly debilitating fear in the labor market is no longer workers’ fear of quitting. It is the employers’ fear of losing their workers. Reasonable churn in the employment base can be beneficial. Workers get paid more, are invigorated, and become more productive. Business labor costs, in terms of compensation may rise, but that could be offset by a more productive, more desirable workplace.

Workers are finally cashing in on their economic advantage. Nevertheless, the current shakeout in the workplace has the potential to create a more efficient economy, with better-paid employees, and that is a win for everyone.