The Great Resignation and labor productivity in Indiana through the pandemic

The COVID-19 pandemic spurred widespread economic disruptions, affecting nearly every aspect of the economy from global supply chains to the labor markets. Nationally, the unemployment rate peaked at 14.9% in April 2020 (seasonally adjusted), but has since dropped steadily, standing at 3.9% in April 2024. The job quit rate, as measured by the U.S. Bureau of Labor Statistics (BLS) Job Openings and Labor Turnover Survey (JOLTS), was on the rise one year into the pandemic, recorded at 2.5% in March 2021, 2.8% one month later and a peak of 3.0% in both November and December of 2021.¹ This translates into more than 47 million Americans quitting their jobs in 2021, a phenomenon that has since been referred to as ‘The Great Resignation.’

According to a Pew Research Center survey, the top four reasons workers left their jobs in 2021 were low pay (63% of surveyed respondents who left their job in 2021), no opportunities for advancement (63%), feeling disrespected at work (57%) and childcare issues (48% of respondents with a child younger than 18 in the household).² An article in the Harvard Business Review identified five factors—termed the ‘5Rs’ and intensified by the pandemic—that yielded these mass resignations: retirement, relocation, reconsideration (of work-life balance), reshuffling (localized switching among industries) and reluctance (to return to in-person jobs).³

The U.S. labor force participation rate stood at 61.7% in 2021, down from 63.1% in 2019, suggesting that some of those who quit their jobs exited the labor force. But did the labor force participation rate across Indiana’s counties mirror the national trend?

Labor force participation rates for Indiana counties

Given the regional nature of labor markets, it is worthwhile to examine labor force participation rates (LFPR) at the local level within a state. Further, the working population is an important indicator of both the economic and social well-being of local areas within the state. A county’s LFPR captures the local area’s active workforce, calculated as the proportion of the civilian, non-institutionalized population ages 16 and over who are employed or actively seeking employment.

This article employs LFPR data from the American Community Survey (ACS) 5-year estimates where county-level data is available.⁴ The ACS data provides a breakdown of LFPR across various sociodemographic groups. This allows us to examine variations in patterns across sub-groups of the local labor force not necessarily apparent when simply looking at the overall LFPR. Along with the overall LFPR, we observed 15 categories, including various age groups, races, those with a high school diploma or equivalent, those with a bachelor’s degree or higher, gender, females with children under six years old and those below the poverty line (see Figure 1).

Figure 1: Average Indiana county LFPR across select sociodemographic groups

Note: The male and female groups are for ages 25 to 64.
Source: American Community Survey (ACS) 5-year estimates, U.S. Census Bureau

The average LFPR across all 92 Indiana counties before the pandemic (2019) was 61.6%. This was lower than the national average of 63.1%. Through the pandemic, the overall LFPR in Indiana remained relatively stable, increasing by 0.04 percentage points in 2020, 0.02 percentage points in 2021 and 0.003 percentage points in 2022. In contrast, the U.S. LFPR dropped by 1.4 percentage points at the onset of the pandemic and is still below the pre-pandemic level with an LFPR of 62.2% in 2022. In Indiana, the ‘Great Resignation,’ as measured by the overall LFPR across all 92 counties, did not reflect the national trend.

Additional insights on the LFPR can be gleaned by a closer look at specific sociodemographic groups. The highest LFPR among the groups is for those with a bachelor’s degree or higher, boasting a rate of 87.1% before the pandemic and 87.9% in 2022. This is followed by the LFPR among males (25-64 years old) at 81.9% in 2019 and 82.1% in 2022. The third-highest rate is among the 25-to-34 and 35-to-54 age groups, both with LFPRs of 81.2% in 2019 and rates of 81.8% and 81.5%, respectively, in 2022. These trends are expected since these groups likely comprise the bulk of the working population. Those 75 years and older had the lowest LFPR at 7.0% before the pandemic and 6.8% in 2022. This is followed by the LFPR for the 65-to-74 age group, which has hovered between 24% and 25%. Not surprisingly, the LFPR among the older working population, those closer to retirement age, is the lowest. Lastly, we can also observe gender, racial and educational gaps in LFPR, a manifestation of both labor market needs and variations in opportunities and barriers among these groups.  

Across all the age groups, the LFPR follows a typical inverted U pattern of the lifetime income of a worker. In 2019, the LFPR of the youngest age group (16 to 24) was 62.1%. The rate steadily increased to 81.2% for the next two age groups before dropping to 64.2% for those ages 55 to 64. As workers drew closer to retirement age, the LFPR decreased to 24.2% for those ages 65 to 74.

Figure 2 illustrates the year-to-year change in the LFPR through the pandemic. The prime-working-age group (ages 35 to 54) seemed to exhibit the ‘Great Resignation’ early into the pandemic, dropping by 0.10 percentage points in 2020, but this group rebounded by 2022. This age group and those 75 years and older were the only age groups that exhibited a drop in the LFPR when the pandemic began. The oldest working populations across Indiana counties also seem to follow the national trend. The LFPR among workers 75 years and older continued to decline through 2022, while the 65-to-74 age group showed declines in LFPR in 2021 and 2022.

Figure 2: Year-to-year change in Indiana county LFPR across select sociodemographic groups in Indiana

Source: Authors’ calculations from ACS 5-year estimates

Among the other sociodemographic groups, the LFPR of Blacks, those below the poverty line, males (ages 20 to 64) and whites declined in 2020, by 1.65, 1.37, 0.03 and 0.01 percentage points, respectively. The decline in LFPR for those below the poverty line, males and whites continued through 2021. In addition, the LFPR of Hispanics, those with a high school degree and females (ages 20 to 64) also declined in 2021. The three groups with the largest decline in LFPR in 2021 were those below the poverty line, those with a high school degree and Hispanics—by 1.28, 0.40 and 0.34 percentage points, respectively. In 2022, the LFPR of females (ages 20 to 64) with children under six dropped by 1.08 percentage points. The declines in the LFPR across these groups through different points during the pandemic are likely a reflection of a combination of reluctance, reconsideration, reshuffling and relocation factors brought about by the pandemic.

On the other hand, three groups consistently exhibited steadily rising LFPRs through the pandemic—those with a bachelor’s degree or higher, workers ages 25 to 34 and workers ages 16 to 24. This trend indicates the abundance of labor market opportunities for workers who are highly educated and/or in the relatively early stages of their careers.

Figure 3: Ratio of Indiana county LFPR and pre-pandemic LFPR across select sociodemographic groups

Source: Authors’ calculations from ACS 5-year estimates

Figure 3 illustrates how the labor force participation rate transitioned through the pandemic across all the sociodemographic groups relative to their pre-pandemic levels. The data is presented as the ratio of the LFPR in the selected year (2020-2022) to the LFPR in the base or pre-pandemic year (2019). The horizontal yellow line indicates the 2019 levels. In the ensuing years, the LFPR for those below the poverty line, whites, high school graduates and those in the 75+ age group did not recover to their pre-pandemic rates. The LFPR among males (ages 20 to 64) dropped in 2021, while the LFPR among the prime-working-age group of 35 to 54 immediately dropped during the pandemic (in 2020 and 2021), but has since bounced back to its pre-pandemic rate by 2022.

What about output and productivity?

The impact of the pandemic on labor markets may have long-term implications on employment, income and working conditions. Ultimately, these factors will also impact output. However, a decline in LFPR will not necessarily pull output down. If total factor productivity is increasing, then output may increase, despite declining LFPRs. A quick examination of Indiana’s quarterly real GDP through the pandemic, the broadest measure of output, is presented in Figure 4. We can see that Indiana’s aggregate output steadily increased through all quarters of 2019, then dropped in the first quarter of 2020 as the pandemic hit. GDP bottomed out in the second quarter of 2020 and has been recovering since then. By the first quarter of 2021, output had already recovered to its pre-pandemic level.

Figure 4: Indiana quarterly real GDP (quantity index)

Source: Real GDP data from the U.S. Bureau of Economic Analysis (BEA)

As a crude measure of average worker productivity across all Indiana counties, we calculated the ratio of the counties’ real GDP to the number of employed workers (see Figure 5). The ratio of output to employment exhibited a steady increase from 2019 through 2021. The average worker productivity ratio was nearly 89 in 2019 and increased to 92.2 in 2020, even at the height of the pandemic. Between 2021 and 2022, however, average worker productivity declined by 0.15 percentage points. Some of the work arrangement measures instituted during the pandemic (including remote work policies) may have contributed to this recent drop in labor productivity. This slight drop in labor productivity between 2021 and 2022 is consistent with the U.S. Bureau of Labor Statistics’ annual labor productivity estimates for private nonfarm workers, although the BLS estimate is larger at a 0.4 percentage point decrease.  

Figure 5: Ratio of real GDP to employment for Indiana counties

Source: Authors’ calculations using real GDP data from the U.S. Bureau of Economic Analysis and employment data from the U.S. Bureau of Labor Statistics

Overall, it appears that the drop in LFPR among workers ages 35 to 54, workers ages 75 and older, those below the poverty line, males (ages 20 to 64), whites and Blacks at the onset of the pandemic (see Figure 2) was not enough to decrease average productivity per worker, although the aggregate output was also down. On the other hand, the drop in average worker productivity between 2021 and 2022 mirrored the declines in the LFPR of females (ages 20 to 64) with children under six, whites and the older age groups (65 to 74 and 75+) during the same time. Examining these pandemic trends in Indiana’s local working population is important because they impact the supply of labor, the productivity of workers and firms, and the economic and social well-being of households.

Notes

1. Gittleman, M. (2022). The “Great Resignation” in perspective. Monthly Labor Review.
2. Parker, K. & Horowitz, J. M. (2022). The majority of workers who quit a job in 2021 cite low pay, no opportunities for advancement, feeling disrespected. Pew Research Center.
3. Fuller, J. & Kerr, W. (2022). The Great Resignation didn’t start with the pandemic. Harvard Business Review.
4. The ACS 5-year estimates are “period” estimates that represent data collected over a five-year period, increasing the statistical reliability of data for less populated areas and small population subgroups. ACS also produces 1-year estimates for the state, although 2020 data is not available due to COVID-19.