generic Larry Summers thinks quiet quitters are ruining the economy
Former Treasury Secretary Larry Summers is worried that “quiet quitters” are hurting U.S. worker productivity.
A veteran economist who previously served as president of Harvard University and chief economist at the World Bank, Summers is an unlikely figure to be discussing the new phrase that has caught fire on social media.
But in response to Nobel laureate Paul Krugman’s Friday New York Times op-ed, the 67-year-old said that he believes “quiet quitting,” an informal term for people who give up on going above and beyond at their jobs and just do the bare minimum, is one of the key reasons that U.S. workers’ productivity fell 4.1% in the second quarter.
The term “quiet quitting” took off on platforms like TikTok and Instagram earlier this year. After years of receiving “rise and grind” and “lean in” work advice, 80% of Gen Z and millennial workers say the trend appeals to them.
Summers fears that these quiet quitters will exacerbate already elevated inflation, which came in at 8.2% in September, forcing the Federal Reserve to continue raising interest rates and spark a recession.
“Given dismal productivity growth, likely caused by quiet quitting, wage inflation will have to come down significantly if sustained months near 2% inflation is to be attained,” Summers wrote in a Monday tweet. “I do not understand the basis for believing this is likely without a meaningful recession.”
In a 2005 paper, Treasury Secretary Janet Yellen, who at the time served as president and chief executive officer of the Federal Reserve Bank of San Francisco, described the connection between falling worker productivity and inflation that Summers is discussing here.
She wrote that when workers’ productivity drops, it forces businesses to hire more employees to complete the same job. That leads to rising costs, which businesses then pass on by raising prices. It’s a vicious cycle that Yellen admitted can cause “upward pressure on inflation” for a “considerable period.”
Is ‘quiet quitting’ really the cause of slowing worker productivity?
Summers’ argument about falling worker productivity exacerbating inflation has been backed up by research in the past. But his comments about how quiet quitting has factored in were immediately questioned by his fellow economists.
Summers struck a nerve among progressives, in particular, because his argument that workers will have to be paid less (with higher unemployment) to rein in inflation touches on how the quiet quitting trend has turned into a kind of Rorschach test for how economists think about labor. The progressives who criticized Summers say it’s just not as simple as higher unemployment being the macroeconomic solution.
Dustin Jalbert, a senior economist at Fastmarkets RISI, said that it may not be the best policy to look at trends like quiet quitting that aren’t backed up by empirical evidence when discussing Fed policy.
“It’s pretty funny to see heavyweight economists dishing out critiques of those not following empirical evidence on inflation from traditional macro frameworks, yet in the same breath assuming quiet quitting is real and not a meme from social media,” Jalbert wrote in response to Summers.
Jalbert went on to say that Summers deserves credit for correctly predicting the rise of inflation, but that he may be “clinging to labor market anecdotes” that fit his “worldview” even when the evidence is lacking.
Claudia Sahm, a former Fed economist and the founder of Sahm Consulting, went a step further, saying that she is “deeply disturbed by the economic analysis and policy advice” that Summers is dishing out.
“Disinflation is coming. The Fed needs to back off. It’s done enough,” she wrote in a Monday tweet, responding to Summers’ comments.
While quiet quitting has undoubtedly taken off on social media, there isn’t much evidence of the trend in real-world data, and there are several other potential causes for slowing productivity, like a post-pandemic jobs skills gap and slowing consumer spending.
Take worker engagement polls as an example. In 2000, Gallup found that 26% of employees said they were engaged at work, while 18% said they were “actively disengaged.” But last year, 34% of workers said they were engaged at work, while only 16% said they were “actively disengaged.”
Gallup’s worker engagement polls from the past two decades consistently show that, despite any recent TikTok trends, workers have become more engaged at work, not less engaged.
That trend may change, but for now, there is limited evidence that “quiet quitting,” which many have pointed out is in fact people just doing their jobs, is having any real impact on the economy.
“I don’t think quiet quitting is real or affecting productivity growth,” Adam Ozimek, chief economist at bipartisan public policy organization Economic Innovation Group, wrote in a Monday tweet. “I think more likely it is actual quitting, and resulting high levels of churn and onboarding. And this will come down with rate hikes and labor supply growth, and indeed it already is.”
This story was originally featured on Fortune.com
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