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Forget America's Great Resignation. It's the Great Upgrade

New York(CNN Business) The churn in the American job market is without precedent.

A record number of American workers quit their jobs last year — of the 68.9 million separations in 2021, 47.4 million jobs were left voluntarily.

Despite a historic number of job openings, many of the workers who quit never looked for a new gig. Millions of people have left the labor force altogether — to take care of family, retire early, live on savings or otherwise reassess their lives in Covid.

The challenge now is how to get them back. It won't be easy and it won't happen overnight.

Here's the math from the economists at Goldman Sachs: Some 2.5 million people are missing from the workforce. About 800,000 of those have retired early, many supported by rising home equity and stock portfolios. That leaves 1.7 million people to entice back into the jobs market, many of them "prime age" workers with many years ahead of them in the job market.

What's holding them back?

"They have Covid-related concerns, they have a financial cushion, or their lifestyle has changed," Goldman economists wrote. "Some people are likely to come back if virus spread falls or antiviral pills reduce health risks, and others are likely to come back once they exhaust their savings."

Goldman figures a million people will come back into the workforce this year, raising the labor force participation rate to a healthier but still substandard 62.6% by the end of the year. More workers will come back into the job market in the years ahead, the economists note.

"Even so, the depressed participation rate implies that workers will be even harder to find than the unemployment rate suggests," the Goldman economists said.

Harder to find and with a new perspective. It's safe to say people aren't coming back to the jobs, wages, and work-life balance they left. In fact, millions of those so-called "quitters" didn't leave the workforce at all — they upgraded.

It was Bharat Ramamurti, the National Economic Council Deputy Director, who last month coined the phrase "The Great Upgrade."

Companies are paying higher wages, offering signing bonuses and adjusting schedules to attract and retain talent. A growing number of companies now pay student debt benefits, hoping to keep good workers from hopping to other employers.

"We're seeing a lot of churn in the jobs market," Nela Richardson, chief economist at payroll processor ADP told me. "But one thing we are seeing is that hires are higher. They're not leaving the jobs market, they're leaving for other jobs in the same industry."

The opportunity for American workers has never been greater, and they're getting rewarded for quitting.

"Job openings are at record highs. The pay to switch jobs we found in our own data is also at record highs. Companies are paying up for the talent," Richardson added."

Friday's jobs report showed annual wage growth of 5.7%. Inflation, of course, eats into those pay gains, but it was the fattest pay raise in years for the typical worker.

Still for many workers, it's not just about the money. They won't be satisfied with their old jobs. They're leaving for better treatment, better schedules and better benefits.

For now, the job-seekers hold all the cards. Employers of all sizes are in a dogfight for workers, offering better working conditions and more professional development to fill the nearly 11 million positions that were open in December.

With such an imbalance between employers looking to hire and workers looking for an upgrade, Richardson said she believes the worker-empowerment era has legs.

"The employer is always driving the car. They're the ones who are deciding the opportunities, the pay, the skills, the job description, the hours," Richardson says. "But they are more than ever listening to the workforce and trying to incorporate that and be sensitive."

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