Quiet quitting: The burnout phenomenon hitting business

The trending rejection of hustle culture that’s been going wild on TikTok actually has its roots in shrinkflation and long-term workplace trends.

Millions of Australians are experiencing the decline of real wages. Employers have resisted increasing salaries, referring to increasing impacts on profits.  

But continuing down this path – particularly when it comes to a skilled workforce – could end up harming the companies’ bottom lines in any case. 

Enter: the quiet quitting trend. Trending on social media platforms such as TikTok, the slow-it-down movement of quiet quitting can be seen as a rejection of the hustle culture mentality that has ruled the roost for the past decade or so, particularly for millennials and the emerging young people/Gen Z set. 

What can workers do instead of quitting? Quiet quit 

Are you a quiet quitter?  

‘Quiet quitters’ are those no longer going the extra mile and slogging away at work, going above and beyond at your job. Perhaps you have been doing unpaid overtime, working nights or weekends, or have become super-normally efficient, alongside your co-workers.  

You have gone through the pandemic and lockdowns with increasing workloads, stress and damage to mental health, but with stagnant or falling wages. As you keep working – with no pay rise in sight – your work-life balance falls. 

This is the situation many highly skilled workers find themselves in. But how do they respond? 

They know their market value and can see a tight labour market and can see how much value they have to give at a company with better work culture. Why should they give anything more than the bare minimum to a company that has failed to reward them?  

So they merely do their duties as per their job description but do not go above and beyond. 

How is quiet quitting related to shrinkflation? Consider Tim Tams 

Declining real wages – and stagnant nominal wages – have led to this alleged trend. It could also be seen as labour force shrinkflation. 

Let me explain using the metaphor of the humble Tim Tam packet. 

Shrinkflation involves keeping the price the same but reducing the quantity supplied. So, the price of a packet of Tim Tams might not change, but the buyer will get fewer biscuits per dollar.  

When it comes to businesses creating an environment that is pushing people to ‘quiet quit’, we risk labour force shrinkflation. Wages stagnate but workers provide fewer units of effort per dollar. 

Why is workforce shrinkflation coming? 

Wage growth has not kept up with inflation, meaning workers have less purchasing power as we enter a cost of living crisis. 

This has become a significant issue in 2022, where inflation has soared, and wages have only increased marginally. Consumer Price Index (CPI) inflation recently hit 6.1 per cent. The Australian Treasurer – Jim Chalmers – indicated it could soon rise to 7.5 per cent. On the other side, wage growth has stalled, increasing only 2.4 per cent. 

This pressure exacerbates an even greater problem when we consider 2020 and 2021. During these years, companies often kept pay unchanged, reduced pay, or increased employees’ workloads and extended them to long hours.  

Employees are unsurprisingly pushing back against businesses that seem to be taking advantage of them. This is especially true when it comes to highly skilled labour with outside opportunities. 

It isn’t rocket science but can be linked to the economic theory of ‘Utility theory’. Utility theory aims to model factors that increase individual ‘utility’ (i.e., welfare or sense of wellbeing). In this case, it boils down to the idea that welfare increases with money and decreases with effort and risk.  

So, if wages are decreasing, then the only way for workers to maintain their sense of wellbeing? Work less.  

Does the new trend mean workers perceived as ‘slackers’ may lose their job? 

When unemployment is high, workers must often stomach this damage to their wellbeing, knowing that they have limited outside options. But unemployment is currently at decade lows at 3.6 per cent in the US, and 3.5 per cent in Australia. 

This makes it the company’s problem.  

Falling effort levels can reduce output quality and/or quantity. If a talented employee could have produced an item, closed a sale, or otherwise improved revenue, but now stops working those extra hours, revenue will clearly fall.  

Is quiet quitting a new trend? 

The trend of ‘quiet quitting’ has been clear for decades, particularly when it comes to CEOs. It is well established that an ‘entrenched’ CEO might decide to ‘live the quiet life’ when they are poorly incentivised to do otherwise.  

A badly motivated CEO might also undertake ill-disciplined investments, like overpaying when doing takeovers, safe in the knowledge that such transactions will not harm their future careers. Or they might just focus attention on pet projects, such as philanthropy designed to cater to their own interests or ego. 

To counteract this, firms incentivise CEOs with stock and equity in order to align their goals and objectives with those of shareholders. There is no reason to believe that other skilled employees would act differently if offered a pay rise or similar. 

What can companies do about quiet quitting? 

Companies’ margins are under pressure, and it is not always realistic to expect a company to increase wages. This is especially for small and medium enterprises. Tying wages to inflation can also trigger a wage price spiral.  

How then to motivate employees? Companies have a clear solution: incentives linked to performance and value creation. This is especially obvious where employees produce discrete pieces of work or have clear measurable outcomes.  

For example, if that employee creates, sells, or runs a product that might create value, provide commissions, a slice of revenue, or a slice of gross profits. Or, if doing a better job – which takes more effort – helps the bottom line, incentivise that effort that increase job satisfaction. 

Companies should not bury their head in the sand when faced with quiet quitting. If skilled employees are balking at falling wages, increased workload demands, and are less willing to work additional hours, ignoring the problem will make it worse. Top talent will leave. And this ultimately will harm the bottom line.  

Instead, they can be part of the solution and can grow the pie for themselves and talented workers. But ignoring workers’ concerns will undermine profitability long term. 
 

Associate Professor Mark Humphery-Jenner, School of Banking and Finance at UNSW Business School, is available to comment further on quiet quitting and its impact on business. He can be reached at mlhj@unsw.edu.au