The Job Market Shift: How the Cost-of-Living Crisis is Driving Job Changes

Rising prices and interest rates are prompting workers to consider moving within the labor market rather than sticking with their current employers.

The ongoing cost-of-living crisis is causing financial strain for workers as prices increase, making salaries stretch less than before. Typically, during times of financial stress, employees stay in their current roles to secure a stable income and weather the economic storm.

However, the current surge in inflation is leading more workers to leave their jobs or seriously contemplate doing so.

According to a June 2023 survey by PwC of 53,912 global workers, 26% expressed an intention to quit their jobs in the next year. The cost-of-living crisis is a significant driver of this trend, particularly in the UK, where 47% of workers reported having little to no savings left at the end of each month, and an additional 15% struggled to pay their household bills.

Contrary to previous patterns, financial insecurity is motivating workers to explore opportunities in the labor market or even exit it entirely.

“People may vote with their feet,” says Dana Peterson, chief economist at The Conference Board, a global economic think-tank based in New York. During periods of economic uncertainty, individuals typically cling to what is familiar, including their jobs. For instance, during the 2008 recession, the US experienced a significant loss of 2.6 million jobs, leading to record-low quit rates in subsequent years. Peterson explains, “When there’s a downturn, the number of vacancies shrinks, and companies begin to get nervous, so workers typically stay put.”

However, the current cost-of-living crisis is different, as there are still abundant job opportunities available. In the UK, despite a decline in vacancies, they still exceed pre-pandemic levels. Additionally, the US labor market continues to grow, with the economy adding 497,000 private-sector jobs in June 2023, marking the largest monthly increase in a year.

Sarah Moore, Head of People and Organization at PwC UK, notes that in the aftermath of the “Great Resignation,” employees are more inclined to seek better salaries through new roles compared to pre-pandemic times. “We’re still seeing elevated quit rates following Covid-19, and pay is typically the main factor for finding a new role. In times of crisis, people may vote with their feet.”

Many working parents, especially mothers, are conducting a cost-of-living versus salary assessment as expenses continue to rise. In the UK, the average cost of sending a child under the age of two to nursery for 25 hours a week is £7,729 per year. The US Department of Labor has labeled childcare prices as “untenable for families,” even in areas with a lower cost of living.

In some cases, childcare costs exceed parents’ salaries, making it financially wiser to leave a job and become a full-time caregiver. Melissa Gauge, founder of SpareMyTime, a virtual assistance agency in London that primarily employs working mothers, says, “Evaluating the cost of childcare against your wage and deciding if it’s worth it is nothing new, but it’s becoming more intense.”

While the cost-of-living crisis is prompting job changes for some workers, not everyone has the luxury to switch roles for improved financial conditions.

For instance, Tayyaba, an NHS frontline worker based in the UK, is participating in the Changing Realities project. Her hourly earnings are insufficient to cover childcare costs, leaving her in a challenging situation. “I’m not able to work part-time, so three weeks ago, I was about to quit. But then I realized it would mean that I couldn’t cope with the current crisis. Quitting my job is not realistic,” she explains.

Quitting may be a luxury for certain workers. Instead, employees who can’t easily switch jobs or leave the labor market may negotiate for higher pay from their current employers as interest rates rise and prices soar. Moore suggests that some employers may rise to the challenge to keep attrition rates low. However, not all employees may receive the desired pay raises, as companies are also grappling with higher costs, particularly in the face of inflation.

To retain talent, some companies are offering greater flexibility as an alternative to higher salaries. This flexibility can drive movement in the labor market as workers seek roles that accommodate the high cost of living. However, Moore emphasizes that flexibility should go beyond token gestures. Offering a longer lunch break, for example, doesn’t help someone struggling to pay rent.

Ultimately, Moore states, “The fact that a quarter of the workforce intends to work for someone else within 12 months indicates significant issues that need to be addressed.”