The ongoing cost-of-living crisis means workers are feeling the pinch – as prices rise, salaries aren’t going as far as they once did. Typically, in times of financial stress, employees stay in their current roles, collect a stable income and ride out the economic storm.
But amid soaring inflation more employees are leaving their jobs – or are strongly considering doing so.
In a June 2023 survey of 53,912 global workers by PwC, 26% said they intend to quit their job in the next year. Much of this is driven by the cost-of-living crisis, which is especially acute in the UK: 47% of UK workers said they had little to no savings left at the end of each month, with a further 15% also stating their household struggles to pay its bills.
Contrary to some past patterns, this financial precarity is pushing workers to move around the labour market – and in some cases, leave it entirely.
‘People may vote with their feet’
During periods of stress and economic uncertainty, people tend to cling on to what’s familiar to them – including their jobs, says Dana Peterson, chief economist at global economic think-tank The Conference Board, based in New York.
For example, the 2008 recession saw 2.6 million jobs lost in the US – and it was followed by record-low quit rates throughout the subsequent years. “When there’s a downturn, the number of vacancies shrink, and companies begin to get nervous, workers typically stay put,” she says.
However, there are signs that the cost-of-living crisis this time is leading to more workers shifting around the job market.
Much of this is down to a still-strong availability of open roles. In the UK, although vacancies are in decline, they still outnumber pre-pandemic levels. And in the US, the labour market continues to grow: 497,000 private-sector jobs were added to the economy in June 2023, the biggest monthly rise in a year.
As cost of living rises, workers are finding their salaries are not going as far as they used to (Credit: Getty Images)
Sarah Moore, head of people and organisation at PwC UK, says the aftermath of the Great Resignation means more employees may consider finding a better salary through a new role than they perhaps would have done before the pandemic. “We’re still seeing elevated quit rates following Covid-19, and pay is typically the main factor for finding a new role: in a time of crisis, people may vote with their feet.”
Many working parents, particularly mothers, are currently doing a cost-of-living-versus-salary calculus as expenses mount. In the UK, the average cost of sending a child younger than age two to nursery for 25 hours a week is £7,729 a year. In January, the US Department of Labor called childcare prices “untenable for families”, even in areas with a lower cost of living.
In some cases, the price of care exceeds many parents’ salaries, meaning it becomes more financially savvy to leave a job and move into a full-time carer role. “Looking at the cost of childcare against your wage and thinking, ‘Is it worth it?’ is nothing new – but it’s now intensifying,” says Melissa Gauge, founder of London-based SpareMyTime, a virtual assistance agency that predominantly employs working mothers.
A luxury to quit?
While the cost-of-living crisis is creating movement in the labour market for some workers, not everyone is able to change roles to put them in a better financial position.
Among the parents whose childcare costs outstrip her hourly earnings is UK-based Tayyaba, who is participating in the Changing Realities project, a collaboration between parents, carers and researchers at the University of York.
An NHS frontline worker, Tayyaba says she’s trapped in her role. “I’m not able to work part time, so three weeks ago I was about to quit. But then [I realised] it would mean that I couldn’t cope with the current crisis: quitting my job is not realistic
It’s just the start of the crisis and I cannot see the light end of the tunnel – Tayyaba
Tayyaba says she feels unable to let her employer know how much she’s struggling from the cost of living, as “they’ll hire someone else”. “Summer holidays are around the corner, and I’m worried how I’m going to manage,” she adds. “It’s just the start of the crisis and I cannot see the light end of the tunnel.”
Quitting may therefore be a luxury for some workers. As an alternative, employees who can’t hop around or drop out of the labour market may instead ask for more pay from their employer as interest rates climb and prices soar, says Moore.
In some cases, employers may rise to the challenge, especially to keep worker attrition rates low. Yet not every employee may get the pay rises they want, adds Moore – after all, companies are struggling with higher costs, too, especially amid inflation.
Some are offering more flexibility in lieu of higher salaries – another factor that may cause movement in the labour market, as workers search for more adaptable roles to help them navigate high cost of living. However, flexibility needs to be more than a token gesture, adds Moore – offering employees a longer lunch hour, for example, doesn’t help someone struggling to pay their rent.
Ultimately, says Moore, “that a quarter of the workforce intends to work for someone else within 12 months shows there are huge issues to address”.