Why Workers Are Increasingly Changing Directions

U.S. employers aren’t just having a hard time attracting workers, they’re increasingly struggling to hold onto them.

MGM Resorts International will hire 500 to 800 people during a week, only to lose 300 to 400 others, its CEO recently said. In restaurants, there’s a new buzzword for employees who leave after a few days to go work elsewhere: “ghosting coasting.” And at the warehouses of grocery supplier SpartanNash Co., turnover is 70 percent, nearly triple historical rates.

“It really is a war for talent,” SpartanNash CEO Tony Sarsam said in an interview. “About 10 percent of our hires now don’t show up for the first day. People are getting multiple offers at the same time, and then they’re cherry-picking.”

Turnover is getting worse across certain sectors and types of jobs, with quit rates at record highs in healthcare and retail, data from the Bureau of Labor Statistics show.

For employers, this trend means needing to offer higher salaries to keep workers from leaving and expecting lower revenue because of the lack of staff. In a self-feeding loop, the sign-on bonuses and other incentives many businesses are offering to attract applicants are fueling churn.

Workers in high-demand sectors are getting poached, and the record number of job openings gives them the power to shop around for better wages, more flexible hours, or simply more enjoyable work. For employees who stay, elevated churn often means additional workload to make up for the lack of staffing, which increases the chance of burnout and stress—leading to more turnover.

Across the broader economy, rising wages are adding to inflationary pressures, on top of supply-chain constraints, said Sarah House, senior economist at Wells Fargo & Co.

The Federal Reserve’s latest Beige Book is full of examples from across the country of how retaining employees is a growing problem for businesses. One metalworking firm told the Cleveland Fed that a quarter of its staff have been with the firm for three months or less. A company in the hospitality sector told the San Francisco Fed that nearly half of new employees leave after a month or two.

No-Shows

A few months ago, many employers were hopeful that the end of pandemic-era supplemental unemployment benefits would bring workers back to the labor market. Instead, they’ve faced a surge in Covid-19 infections and continued to struggle with staffing levels and a so-called “gray wave” of early retirements, particularly in occupations like nursing.

Another rising issue: no-shows. David Allen, who runs Salt Lake City, Utah–based catering company Cuisine Unlimited, said 6 of his 10 most recent hires have stopped showing up for shifts.

Vaccine mandates aren’t helping. In New York City, where vaccination is required for restaurant employees, workers are quitting to work in retail or hotels, which have no such mandate, according to Art Depole, co-owner of the Mooyah fast-casual burger restaurant in Times Square. Seasoned cooks and cashiers don’t seem to be coming back, he said, and applicants skew younger and less experienced, which means they’re more likely to call it quits.

Retaining top talent is either somewhat or very concerning for about 70 percent of respondents in the restaurant and hospitality industries, and about half of those in the construction and entertainment sectors, according to an August poll of about 600 small and midsize businesses by Morning Consult on behalf of Verizon Communications Inc. Similarly, the third-quarter edition of Deloitte’s CFO Signals report, which collected responses in the first half of August, shows that concerns over talent and labor-related issues—including retention and morale—are even more pronounced than in prior quarters.

Companies are getting creative in their efforts to keep employees—or to lure them from rivals. Large organization, in particular, have the financial means to offer bigger wages and perks.

Walmart Inc. is investing $1 billion over five years to pay tuition costs to help retain existing workers, and Charles Schwab Corp. announced a special 5 percent pay increase for most employees last month. Kohl’s Corp. is doling out bonuses of as much as $400 for hourly employees who work for the department store through the holiday season.

The nature of the churn has flipped completely in about a year. At the onset of the pandemic, turnover was fueled by widespread layoffs during shutdowns, with millions losing jobs in a matter of weeks. Now, the number of job cuts announced by U.S. companies has fallen to its lowest level in more than 24 years, according to August data compiled by Challenger, Gray & Christmas Inc.

“Companies are much more concerned about their talent getting poached than with finding ways to cut staff,” Andrew Challenger, senior vice president at the job-placement firm, said in the job cuts report. “They are in full retention mode.”

—With assistance from Christopher Palmeri & Katia Dmitrieva.

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