Post-Pandemic, Leisure and Hospitality Workers are Winning

Ready for a good-news story? One of the hardest-hit sectors of the economy during the pandemic was leisure and hospitality. We were social distancing at best and quarantined at worst. All of this spelled tragedy for an industry built on in-person interactions. While some companies were lucky enough to be able to shift their business model and accommodate the “new normal,” still others had to shutter their doors—sometimes permanently. In just 2 months (March-April 2020), 8.2 million jobs were lost.

Now that we’ve opened up old wounds, let’s talk about that good news we mentioned. Reporting from ADP notes that four years later, the numbers have changed (for the better). Not only is employment in these industries back to pre-Covid levels, wages are up in a big way. Let’s break it down.

Since the end of 2018, new-hire wages for those in the leisure and hospitality industry have increased by 38 percent, with the median hourly rate for these folks going from $11 in 2021 to $15 by the end of 2023. What these numbers tell us is that after pandemic restrictions let up, employers in these areas fought to get the talent needed to meet increasing demand from consumers ready to leave the house. With workers in demand, competitive wages were able to finally take center stage.

Typically, people who change jobs will see a far higher increase in wages than those who stay with their employer, and there’s research to back that up. But when it comes to leisure and hospitality, the rules have changed of late. What is commonly called “job-stayer” wage growth has outpaced “job-changer” wage growth in this sector for several reasons. First, these employers are having to put forth a lot more effort to both acquire talent and retain it—so as new-hire wages have increased to meet the demands of a tight labor market, so have the wages for current workers. According to ADP, “Leisure and hospitality was the only sector that claimed double-digit annual pay gains for job-stayers between November 2021 and February 2023.” Secondly, remember California’s April 2024 implementation of a $20/hour minimum wage for employees at large fast-food restaurants? The result was that in that month, the median wage of California’s limited-service restaurant employees catapulted higher than the median wage for any other leisure and hospitality worker in the state of California. Interestingly, employment at these limited-service restaurants has decreased by 5.5 percent since the law was announced in 2023; employment in other areas of these industries increased by 0.5 percent. Could higher wages have forced business owners to cut back on staff? This gap in employment highlights just how tough it can be to balance wage increases with workforce retention.

Factors such as labor shortages, an increased need for a specific skillset, and government-mandated wage increases play a key role in wage growth, which is a net positive for workers. However, they also translate to higher operational costs for employers, which obviously cuts into profits. The pandemic truly reshaped the world of labor in the leisure and hospitality sectors, putting employees in the driver’s seat for a change. Is it sustainable? One thing is for sure: as the industry adapts to these shifts, the long-term outlook on employment and wages remains cloudy.

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