Abstract

A fundamental tradeoff in economics is allocating time between work and leisure. The COVID-19 pandemic disrupted conventional work patterns, prompting individuals to reconsider how they had previously allocated their time. A modest but growing body of literature has identified a structural shift in the labour market, termed “quiet quitting.” The term quiet quitting refers to disengaging from one’s job and completing only the minimum required work, driven by a desire for greater work-life balance. Since 2020, this phenomenon has emerged as a key topic in research, with studies focusing on its impact and the urgent need for employers to address it. This structural shift has been particularly evident along the intensive margin, as individuals engaged with quiet quitting do not exit the labour force. Despite the growing body of literature, there is a lack of research quantifying quiet quitting and measuring its impact on the economy, particularly using dynamic stochastic models. This paper explores the impact of quiet quitting on the economy using the Hansen (1985) real business cycle model with indivisible labour. I identify two key parameters of the model that influence both aggregate and individual-level hours and conduct a series of experiments by introducing exogenous shifts into these parameters. The model effectively captures key features of quiet quitting and its impact on key economic variables, including output, consumption, capital and investment. The results show that when quantifying quiet quitting by the drop in hours between 2019 and 2022, output, consumption, investment and the capital stock decrease by 3.0-4.3 percent. The findings also demonstrate that with quiet quitting, output, investment, hours and the capital stock become less volatile.