Larry Summers Blames 'Quiet Quitters' for the Economic Slowdown. Here's Why He's Wrong

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KEY POINTS

  • Former Treasury Secretary Larry Summers says quiet quitters are responsible for the U.S. drop in productivity.
  • Quiet quitting may be trending on social media, but it isn't as significant a movement as it seems.
  • The popularity of quiet quitting is more likely to be a consequence of economic issues than the cause.

Quiet quitters are a drop in the economic ocean compared with interest rate hikes and rising inflation.

The concept of "quiet quitting" struck a chord on social media this year. The idea is to act your wage and only work the hours you're paid to do. It challenges the expectation that workers will -- or should -- always go above and beyond, and it's garnered its fair share of praise and criticism. 

One of the critics is economist and former Treasury Secretary, Larry Summers. The reason? Summers thinks quiet quitters have caused a drop in productivity. Non-farm productivity fell by 4.1% in the second quarter of 2022, according to the U.S. Bureau of Labor Statistics. 

"Given dismal productivity growth, likely caused by quiet quitting, wage inflation will have to come down significantly if sustained months near 2 percent inflation is to be attained," tweeted Summers in response to a New York Times piece on inflation. 

Here are three reasons why Larry Summers is wrong.

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1. Quiet quitting isn't that big of a movement

Quiet quitting has attracted more than its fair share of attention on both mainstream and social media. It's a catchy term and it tapped into some very real feelings of disengagement and post-pandemic burnout. But that doesn't mean everybody's coasting their way through work -- or no more than they used to. 

A recent Gallup poll into worker engagement shows the number of employees who are actively engaged at work has decreased since it peaked in 2020. Similarly, the level of disengagement bottomed out in 2019 and is now increasing. However, that doesn't necessarily reflect a huge move toward working less. Many people threw themselves into work during the pandemic, so it's more realistic to view this as a return to pre-pandemic levels.

Plus, as economists told Fortune, productivity is a technical term that doesn't necessarily translate to how hard people work. It could be that productivity is down because the restaurant industry is picking up and hiring again. Economists categorize restaurant work as lower productivity jobs, which will have an impact on the figures.

2. Quiet quitting isn't as simple as it seems

Let's be honest, some of the furor over the idea of quiet quitting is down to generational prejudices. There's a narrative that Gen Z and millennials somehow don't want to put in the hours. That's simply not fair. For starters, quiet quitting isn't a new thing -- it just has a different name right now. It's also not unreasonable or lazy for workers to want to be paid for the hours they work.

More importantly, the trend of quiet quitting reflects some serious issues in the workplace, particularly for younger generations. One McKinsey study found that ​​55% of Gen Zers had struggled with some form of mental illness. Over a quarter say their pay doesn't give them a good quality of life. Workers are burnt out, and the pressure of spiraling costs and another potential recession is squeezing their savings accounts.

3. There are much bigger factors at play

Many top economists now warn that a recession is very likely in 2023. It isn't a certainty, but a number of indicators are pointing that way. Inflation and the Federal Reserve's moves to counter it both play a big role. Russia's invasion of Ukraine has also had a big impact on the global economy. 

Prices are rising faster than people's wages. While the job market is still relatively strong, the increased cost of living is starting to impact the economy. Plus, the Federal Reserve continues to aggressively raise interest rates in an effort to curb inflation. This makes borrowing more expensive and could trigger a recession in the U.S.

Finally, we're coming out of a global pandemic. This unprecedented situation is one of the reasons economists disagree about what might happen next and how best to handle it. One thing's for sure. A small percentage of people opting to work only the hours they are paid for is unlikely to make that much of a difference to the way these major economic wheels are turning.

Bottom line

There's a lot of stress and insecurity around the future, and many Americans don't have enough money in their bank accounts to handle more problems. The way the idea of quiet quitting went viral is a reflection of the high levels of malaise in the workplace. But those individuals are not responsible for the economic downturn. Quite the contrary. In fact, it would be more accurate to say quiet quitting is a consequence of the economic downturn not the cause.

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