Why inflation and the Great Resignation are linked

Inflation is really just part of the same coin as the Great Resignation.

When you have a load of folk who can afford not to work, and want to sit back and live off what they accumulated to that point, then the economy experiences a slight “vacuum” in that these people’s work was there, the other molecules of the economy were used to them and the space or volume was available for them.

Nature, and the economy, abhor vacuums. So what happens? Less producers means less “stuff”, to use the terminology of the article, there’s more money than stuff, and so the stuff is the scarce resource and its price goes up.

This then means that those who have resigned from the workforce expecting their savings to carry them receive an inflationary challenge. The current players in the workforce have first dibs (usually, not always) at getting their salaries increased in some response (usually less, sometines even more) than inflation, as the employer is like “can’t lose Fred, he’s all we have left” and there may be reticence at killing the fatted calf for prodigals returning to the workplace, as the employer is not exactly the Father in Luke 15.

The Great Resigners then start to find their ranks withering as some rather sheepishly go back into employment with holes in their CVs and a learning curve ahead of them to recover and catch up their unutilised skills. Production is then able to recover, the economy rebalances. Everyone remembers when a pint of beer cost half what it does then, but they also remember earning half what they do at that future time.

Fossil fuels and other things are continually getting more scarce, we move towards peak this and peak that, but also the 8 billion people we are about to hit later this year might also prove to be peak human. Everything in the end comes back into balance.

Flexibility and keeping at it are the core of resilience. Great Resigning is neither the one nor the other.