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Pandemic resignations could have been caused by rising home prices: UBC research

Working paper based on U.S. data may help shed light on changes in Canadian employment.
The exodus of employees from the labour market in 2020, also known as the “great resignation,” was concentrated among older individuals, according to UBC study.

Changes to the workforce are no surprise following the height of the pandemic, but some adjustments may be attributable to market conditions beyond COVID-19.

The “great resignation” in the U.S. could be in part caused by soaring home prices seen during the pandemic housing boom, according to a new working paper from the University of British Columbia (UBC).

 While the paper’s data only accounts for the U.S., findings could be applicable to Canada as well, according to Jack Favilukis, an associate professor in the finance division at UBC’s Sauder School of Business.

The exodus of employees from the labour market in 2020, also known as the “great resignation,” was concentrated among older individuals, according to the study.

“When house prices are rising, there's just one group that is really affected and that group is homeowners around retirement age,” said paper co-author Favilukis. He said this is true for not just for the pandemic, but generally throughout history.

“According to our study, everything's been driven by the housing crisis. So it's not that older people are particularly afraid of getting sick, it's that they just got rich off of high house prices. They don't feel the need to work anymore.”

More than 47 million U.S. workers voluntarily quit their jobs in 2021, according to the U.S. Bureau of Labor Statistics.

At this time, home prices increased in both Canada and the U.S.

New home prices increased in Canada by 10.3 per cent between 2020 and 2021, according to Statistics Canada. At the time of the data’s publication in 2022, that figure represented the largest annual increase since 1989.

The impact of home prices on retirement can be seen in several different ways, said Favilukis. A retiree can sell their home to unlock equity, take out a reverse mortgage or home equity loans, downsize or simply do nothing and enjoy the reassurance of having more value in their home.

Favilukis emphasized that equating the U.S. findings to Canada is conjecture and is not based on data in the study.

“The aggregate labour force participation rate in Canada during and post-COVID-19 looked very much like the U.S. – big fall during COVID-19, then a quick rise but not quite to the pre-COVID level, then [a] stubbornly slow rise and still below pre-COVID-19 levels. So, the ‘great resignation’ happened in Canada, too,” Favilukis said in an email following the interview.

“Of course, house prices in Canada boomed just like in the U.S. So I would conjecture that the Canadian experience is similar.”

BIV reported last year that the tech sector took a heavy hit from these resignations.

Meanwhile, the number of Canadian employees who quit their jobs in February 2022 was lower than in February 2020, according to Statistics Canada.

The government agency’s 2021 census also noted that the country's working age population has never been older. A little over one in five working-age employees are close to retirement age, “an all-time high in the history of Canadian censuses,” said the agency’s report on the data.

And census data showed B.C. is home to the top seven municipalities in Canada with the oldest populations, as of April 2022.

Going forward, more research is needed to identify how retirees are taking advantage of this increase in home equity, said Favilukis.

“Is it home equity loans, downsizing, moving to a different city? We don't know right now which of those channels it is and we would love to find out,” he said.

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