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The leisure and hospitality sector, one of the hardest-hit industries during the COVID-19 pandemic, has rebounded in both employment and wages, according to a report by ADP. Despite losing 8.2 million jobs in March and April 2020, the industry has not only recovered its workforce but has also emerged as a leader in wage growth since the pandemic’s onset.
Wages for new hires in the leisure and hospitality industry have surged 38% since November 2018, second only to the trade, transportation, and utilities sector. The median hourly wage for new hires rose dramatically from $11 in February 2021 to $15 by late 2023, although growth has plateaued in recent months.
This upward trajectory reflects the sector’s efforts to attract talent as consumer demand rebounded after pandemic restrictions eased. Employers, particularly in restaurants and hotels, have prioritized competitive wages to fill positions.
Job-Stayer Wages Outpace Job-Changers
A notable trend within leisure and hospitality is the reversal of the conventional pay dynamic. Historically, job-changers enjoy larger wage increases than those who remain with their employers. However, since December 2022, job-stayers in leisure and hospitality have seen higher year-over-year wage growth compared to job-changers.
This anomaly stems from employers’ need to retain workers amid a tight labor market. The industry recorded double-digit annual pay gains for job-stayers between November 2021 and February 2023, an unprecedented feat compared to other sectors.
Impact of California’s Fast Food Minimum Wage Law
California’s April 2024 implementation of a $20 minimum hourly wage for workers at large fast-food chains has further highlighted the complexities of wage growth in the industry. The law, which applies to limited-service restaurants with at least 60 nationwide locations, immediately boosted the median wage for fast-food workers above that of other leisure and hospitality employees in the state.
While the wage increase provided a significant pay bump, its impact on employment has been mixed. Employment at limited-service restaurants has declined by 5.5% since the law was announced in September 2023. By contrast, employment in other leisure and hospitality businesses rose by 0.5% during the same period.
The employment gap between fast-food restaurants and other leisure and hospitality employers has continued to widen, underscoring the challenges of balancing wage hikes with workforce retention.
Economic Forces Shaping Wage Trends
The report highlights several factors influencing wage trends in leisure and hospitality, including labor shortages, increased employer demand for specific skills, and government-mandated wage increases. These factors have contributed to significant wage growth, but they also bring higher operational costs for employers.
ADP’s findings illustrate how the pandemic has reshaped labor dynamics in the leisure and hospitality industry. While workers have benefited from higher pay, employers are navigating the challenges of retaining talent, meeting wage mandates, and managing increased labor costs.
As the industry continues to adapt, the long-term impact of these shifts on employment and wage stability remains uncertain.
Image: Envato
