While job satisfaction should trump economics when making career decisions, it’s also important to pay attention to the bigger picture.
For almost a full year workers have been enjoying the most candidate-friendly job market in a generation. A changing global economic landscape, however, could pose some new challenges to those who are running late to the job-hopping party.
The Great Resignation, which saw record numbers of job transitions starting in the summer of 2021, is far from over. According to a June 2022 study by the World Economic Forum, one-fifth of the global workforce intends to quit this year. According to the survey of 52,000 workers across 44 countries and territories, pay remains the primary driver of career decisions, with 71% citing it as the main reason for switching jobs. Workers also cited some non-monetary motivations, however, with a majority also citing job fulfillment and psychological safety – or the ability to be their true self at work – as reasons for seeking new opportunities.
At the same time, however, today’s economic conditions differ dramatically from those witnessed at the start of the Great Resignation. Inflation is rising globally, as are interest rates, leading many to fear that a recession is just around the corner. That could spell disaster for those who have made a recent change, and those who intend to job hop in the months ahead, thanks to what’s known as the ‘last in, first out’ principle.
The concept suggests that the most recent hire is typically the most vulnerable in the event of downsizing. That means that if economic circumstances were to suddenly change and restricting becomes necessary, those who joined the company most recently are likely to be let go first.
While you won’t see the words ‘last in, first out’ or any similar policy in an employee handbook, the principle is widely followed for very practical reasons. Firstly, more tenured staff have more of an opportunity to make an impression, and to develop a strong personal relationship with managers and decision-makers. More recent hires represent more uncertainty, and when difficult decisions need to be made most employers will go with the safer option. It should also not come as a surprise that managers generally seek to protect their longest-serving and most loyal employees over those more recent hires.
Furthermore, it often makes economic sense to cut the most recent hires first. Depending on the jurisdiction and employment agreement, employers can typically cut staff without cause or severance during the probationary period that comes in the first few months of their employment. On the other hand, more tenured staff members are typically entitled to severance pay, which can be equivalent to multiple years of salary.
How much should economics affect your career decisions?
So what does that mean for job seekers? Just how much should interest rates and inflation and a potential recession affect their decision to pursue new career opportunities? Did those who hesitated to switch employers miss their opportunity to be part of the Great Resignation? Like most things in life the answers to these questions are an unsatisfactory, “it depends.”
First, it depends on your industry, role, and employer, and how exposed each is to an economic decline. While some industries, job functions, and companies could get crushed by a global recession, others are actually positioned to thrive in difficult economic times.
Research has found that medical professionals, utility providers, educators, and financial services providers, for example, tend to fare better in a slowing global economy, while those in hospitality, retail, real estate, and travel tend to suffer most during downturns.
However, if your employer provides a low-cost alternative – even within a highly exposed industry – they might be better positioned to withstand a recession than higher-priced competitors. Before making any major career decisions it’s important to consider whether your new employer is likely to win or lose business in a slowing global economy; how your industry typically fares in poor economic conditions; and whether your new role becomes more or less vital during a recession.
It also depends on why you’re seeking a career change in the first place. If the answer is more money – as is often the case – it’s important to look at the full picture, not just your base pay. For example, if your current or former role is commission based, it’s important to consider how a recession might affect sales. If you are currently entitled to a significant severance payout, it’s important to take that into consideration as well.
If, however, your decision is based on something other than compensation – such as flexibility, long-term career advancement, and overall career satisfaction – then perhaps recession fears are entirely beside the point. If you’re in a role that makes you miserable, or if a new role could offer a significantly greater quality of life, then switching jobs is probably a worthwhile decision in any economic climate.
No matter your situation, a changing economic outlook shouldn’t be the primary driver of your career decisions. At the same time, however, you shouldn’t ignore what’s happening in the world around you, either. At the end of the day, you’ll be much better off by taking the full picture – including potential severance pay, your role/employer/industry’s exposure to a recession, and the ‘last in, first out’ principle – into consideration before making any major career decisions.