During the Great Resignation, millions of workers took advantage of a tight labor market to secure better pay, perksand positions, but times have changed, Lars Schmidt, the founder of HR consulting firm Amplify, wrote in Fast Company.

The Great Resignation era’s zero interest-rate policy—when a central bank sets its target short-term interest rate at or close to zero—resulted in easy money, particularly in the technology sector, and to salary inflation. That inflation has left "a complex legacy, marked by subsequent layoffs and a reevaluation of compensation strategies across industries,” Schmidt  wrote.

The zero interest-rate policy enabled companies, particularly in technology, to gain access to cheap capital, fostering an environment of aggressive growth and expansion, Schmidt wrote. That resulted in businesses increasing their workforce rapidly and offering high salaries and good perks. The easy money also allowed companies to invest in ambitious projects, expand their operations and increase hiring. 

But, as interest rates rose, companies adjusted by laying off workers and hiring more slowly.

At the height of the pandemic in 2021, 4 percent of the workforce left their jobs to seek better opportunities. In December 2021, U.S. wages for existing job holders rose by a record 5.9 percent  compared to the previous year, while those who switched jobs saw an average wage increase of 8 percent, the ADP Research Institute reported.

These factors contributed to widespread salary increases, up to 20 percent in some sectors, as companies sought to retain talent. That, in turn, led to inflationary pressures. The Federal Reserve Bank of Chicago noted that the Great Resignation raised inflation by around 1 percent over 2021, Ghost Mountain reported.

This resulting wave of layoffs was felt mostly in tech. According to Layoffs.fyi, a tracker of tech layoffs, more than 500,000 tech workers have been laid off since 2022.

The long-term effects of salary inflation on employment hurt workers with high salaries, who may now be deemed to be expensive and thus vulnerable to layoffs. This has led to job insecurity and dampened wage growth prospects for the remaining employees, he wrote.

Companies are reevaluating their compensation strategies, with many moving to a performance-linked bonus and benefit and model that is aligned more closely with business outcomes and economic conditions. This could pose challenges for employees accustomed to high fixed salaries.

“As we move forward into a world of work with more pay transparency, both employers and employees will need to navigate the complexities of a transformed workplace landscape,” Schmidt wrote. “The lessons learned from the Great Resignation could well inform future strategies, making total rewards and flexibility, performance, and sustainability key components of compensation packages.”

He advised employers to get better at telling the full story of what employment entails, beyond compensation. That story includes career growth, how workplace flexibility is approached, training and work environments. All, he wrote, will be data points that candidates will assess when making career decisions.

“As we continue to untangle the effects of the Great Resignation, it is clear that a thoughtful approach to compensation will be crucial to creating win-win long-term economic stability for companies and job security for employees,” Schmidt wrote in conclusion.