Larry Summers thinks quiet quitters are ruining the economy

Former Treasury Secretary Larry Summers is concerned that “silent quitters” are hurting US workers’ productivity.

As a veteran economist who was previously president of Harvard University and chief economist at the World Bank, Summers is unlikely to discuss the new phrase, which 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 he believes “quiet quitting,” an informal term for people who give up trying to excel at their job and only do the bare minimum, is one of the main reasons US productivity of employees declined 4.1% in the second quarter.

The term “silently quitting” caught on 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 Millennials say the trend appeals to them.

Summers fears these quiet slackers will add to already elevated inflation, which stood at 8.2% in September, forcing the Federal Reserve to hike interest rates further and trigger a recession.

“Given dismal productivity growth, likely caused by quiet giving up, wage inflation needs to come down significantly if sustained months near 2% inflation are to be achieved,” Summers wrote on a Monday tweet. “I don’t understand why this is likely without a significant recession.”

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In a 2005 paper, Treasury Secretary Janet Yellen, then President and Chief Executive Officer of the Federal Reserve Bank of San Francisco, described the link between falling labor productivity and inflation, which Summers discusses here.

She wrote that when worker productivity falls, it forces companies to hire more workers to do the same job. This leads to rising costs, which companies then pass on through price increases. It’s a vicious cycle that Yellen can lead to “upward pressure on inflation” for a “significant period of time.”

Is Quiet Quiet Really the Cause of Labor Productivity Slowdown?

Summers’ argument that falling labor productivity is making inflation worse has been supported by research in the past. But his comments about how quietly the cessation was factored in were immediately challenged by his fellow economists.

Summers struck a chord, particularly among progressives, because his argument that workers would need to be paid less (with higher unemployment) to curb inflation touches on how the quiet trend towards giving up is becoming a sort of Rorschach test of public opinion Economists has developed work. The progressives who criticized Summers say it’s just not that simple that higher unemployment is the macroeconomic solution.

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Dustin Jalbert, a senior economist at Fastmarkets RISI, said that when it comes to Fed policy, looking at trends like quiet quitting that aren’t supported by empirical evidence may not be the best policy.

“It’s quite funny to see top-notch economists dish out criticism for those who don’t follow empirical evidence on inflation from traditional macro frameworks, but in the same breath assume that the quiet cessation is real and not a social media meme” , Jalbert wrote in response to summer.

Jalbert went on to say that Summers deserves credit for correctly predicting how inflation would rise, but that he “sticks to labor market anecdotes” that fit his “worldview,” even in the absence of evidence.

Claudia Sahm, a former Fed economist and founder of Sahm Consulting, went a step further and said she was “deeply disturbed by the economic analysis and policy advice” Summers is dishing out.

“Disinflation is coming. The Fed must withdraw. Enough has been done,” she wrote in a Monday tweetin response to Summers’ comments.

While the quiet on social media has undoubtedly increased, there’s not much evidence of the trend in real-world data, and there are several other potential causes of the productivity slowdown, such as a post-pandemic skills gap and a slowdown in consumer spending.

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Take employee engagement surveys as an example. In 2000, Gallup found that 26% of employees reported being engaged at work, while 18% reported being “actively disengaged.” But last year, 34% of workers said they were engaged at work, while just 16% said they were “actively disengaged.”

Gallup’s employee engagement surveys over the past two decades consistently show that despite all the recent TikTok trends, employees have become more, not less, engaged at work.

That trend could change, but for now there is limited evidence that the “quiet cessation,” which many have pointed out, that people are actually just doing their jobs, is having any real impact on the economy.

“I don’t think quiet quitting is real or hampering productivity growth,” wrote Adam Ozimek, chief economist at the non-partisan public policy organization, Economic Innovation Group, on a Monday tweet. “I think it’s more likely that it will actually stop and there will be a high level of churn and incorporation as a result. And that will come with interest rate hikes and labor supply growth, and in fact it already is.”

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