Leisure and hospitality workers have emerged as pay winners since the pandemic.
Leisure and hospitality businesses were hit hard by the coronavirus pandemic. As social distancing took hold, restaurants and other high-contact services were forced to rethink their business models while concert halls and other group venues shuttered operations. Over March and April 2020, the sector shed 8.2 million jobs.
The pain was severe, but short-lived. By March 2024, leisure and hospitality employment had climbed back to its pre-pandemic level. In fact, industry workers today stand out as big winners when it comes to wage growth.
Big gains in new-hire wages
Base wages for leisure and hospitality workers typically fall at the bottom of the pay scale. To see how these people have fared since the pandemic, we tracked the base pay of new hires each month, indexing their pay to November 2018.1New-hire wages defined as wages for workers whose hiring date is from 60 days before to 30 days after the 1st of the current month and the first paycheck comes at the current month.
An unusual pay premium for job-stayers
It’s accepted wisdom that workers who change jobs enjoy a pay premium above what they could earn by staying in their current job, and ADP Research data bears that out. When we look at the year-over-year pay gains of job-changers and job-stayers, people who quit their old jobs for something new typically enjoy bigger wage increases than workers who stick with their employers.2To track pay changes, we calculate the annualized gross pay of individual workers each month for at least 12 months. Workers who are at the same employer at the beginning and end of the time period are classified as job-stayers. Workers who change employers during that time period are defined as job-changers.
An individual’s pay change is calculated as the percentage pay increase or decrease in pay compared to the same period 12 months earlier. The pay change for job-changers is the calculated by dividing the current job’s pay by the old job’s pay. A job-changer’s industry is defined as the industry they have joined in the past 12 months. Thus, job-changers include both workers who have found new jobs within the industry and workers who are new to the industry.
Leisure and hospitality, however, has challenged that rule.
Why does job-stayer wage growth outpace job-changers now? One big reason is that restaurants, hotels, and other employers have been forced to work harder to not only acquire talent, but retain it. As they’ve raised wages for new hires, they also have boosted pay for their current workers. Leisure and hospitality was the only sector that claimed double-digit annual pay gains for job-stayers between November 2021 and February 2023.
The case of California fast food
On April 1, 2024, the hourly minimum wage for workers at many California fast food restaurants (in a state where tip credits are not permitted) rose to $20 from $16. Specifically, the new rule applies to limited-service restaurants that are part of a restaurant chain of at least 60 establishments nationwide, and are primarily engaged in selling food and beverages for immediate consumption. Limited service refers to fast-food and fast-casual eateries where patrons order food at a counter.3We examined a controlled panel of 529 anonymized, limited-service restaurant employers (NAICS 722513) and 2,794 other leisure and hospitality employers in California, tracking median wages and employment since September 2022.
Overnight, the median wage for California’s limited-service restaurant employees jumped above the median wage for all other California leisure and hospitality workers.
While it’s too soon to draw broad conclusions about the impact of California’s new minimum wage law on employment, we know that leisure and hospitality workers, because they are more likely to earn minimum wage or close to it, tend to be most affected by changes in minimum wage.
Labor shortages, employer demand for certain skills, and government efforts to raise pay for low-wage workers have led to higher median pay. But that higher pay translates to higher costs for employers.
