Why Service Workers Are Earning More Than Ever But It's Still Not Enough

All those clever software packages that track hospitality and retail workers' hours, purposely limiting them to keep compensation down and benefits out of reach have ended up being a primary contributor to the current worker shortage. 

Making $17 an hour for 25 hours a week - the industry average - is insufficient to provide for basic necessities. As a result, workers who previously endured such treatment are now finding work at better pay with more and regular hours. Employers have only themselves to blame. JL

Rani Molla reports in Re/code:

While pay for non-managers in the leisure and hospitality sector rose 13% in September compared with a year earlier, the average wage is less than $17 an hour. That’s less than even the next lowest-paid sector, retail, $18.68 per hour. Weekly pay in the industry averages out to $416.08, (for) 25 hours a week. On average, for all private sector jobs, people work 34 hours a week. “Hospitality jobs are notoriously known for low-wage, low-skill kinds of work. So that’s already a stretch to attract people.”

If there’s one thing many workers have learned from the pandemic, it’s that while money is a lot, it’s hardly everything.

Employers in almost every industry say they’re struggling to find workers, but the situation is especially severe in the leisure and hospitality sector. While workers in these industries are getting paid more than ever, it still doesn’t seem like enough. Bars, restaurants, and hotels across the country are posting signs advertising open jobs — or asking customers to be patient since they don’t have enough staff. In August, the latest available month for openings and turnover data from the Bureau of Labor Statistics (BLS), there were a near-record 1.7 million open jobs in leisure and hospitality — 10 percent of all jobs in the sector — and a record of nearly a million people quitting.

While lots of breath has been spent suggesting people aren’t returning to these jobs because they’re lazy or on the government dole, the apparent shortfall in workers instead demonstrates longstanding problems with the industries themselves. Thanks to technology, the hospitality business has been undergoing a transformation over the past decade or so, as food delivery has become mainstream and automation has taken over many face-to-face interactions.

But human beings are still integral to keeping these industries running. As a result, restaurants and hotels are closing or unable to operate at full capacity, which is forcing companies to either change their working conditions or their business models to survive. The reasons it’s currently tough to hire in the sector are myriad and range from the romantic, like a push for worker empowerment and reevaluating the meaning of life, to the quotidian, like a lack of child care and opportunities for advancement.

“Hospitality jobs, especially front-line, are notoriously known for low-wage, low-skill kinds of work — it’s associated with working conditions that are not necessarily conducive to adequate life-work balance,” Bruce Tracey, a professor of human resource management at Cornell and editor of Cornell Hospitality Quarterly, told Recode. “So that’s already a stretch to attract people.”

“And then go to the last 18 months and the industry broadly has shown its vulnerability and its fragility,” Tracey said.

Many Americans have been able to hold out for jobs in other industries or better jobs within leisure and hospitality thanks, in part, to an increased level of savings and decreased spending during the early pandemic as well as other cost-cutting. Additionally, unemployment benefits provided a much needed cushion to those working in food service, hotels, and entertainment — industries that were hit hard early in the pandemic.

The assumption that workers would be forced to go back to work once pandemic benefits ran out didn’t prove true. However, when individual states rescinded their unemployment benefits this summer, it didn’t have a meaningful impact on the worker shortage in many industries, including leisure and hospitality. Data from September, when the benefits were cut on a federal level, show a similar story, suggesting there are reasons beyond financial keeping people from taking these jobs.

Why people are leaving leisure and hospitality

Before the pandemic, Maureen Neer was a chef de cuisine who typically put in 70 hour weeks, much of it unpaid. “It was sort of like a badge of honor for chefs to be ultra-hardworking, sleep-deprived, to work as much as you can,” Neer said.

When the pandemic hit, she decided it was time to reevaluate her work-life balance and change industries. She convinced a telecom company that her skills ordering supplies for restaurants made her a good candidate as purchasing and operations manager there. She’s been at her new job for a year and is enjoying how different it is from her prior profession.

“I’m still getting to work from home, which gives me a lot more free time to do life things. And I have health insurance, which is nice, and it just feels a little more stable and less likely for me to get burnt out,” Neer said. She sometimes fantasizes about cooking again but keeps reminding herself that “there were a lot of very legitimate and valid reasons why I quit the industry.”

For starters, while pay for non-managers in the leisure and hospitality sector rose a dramatic 13 percent in September compared with a year earlier, the average wage is less than $17 an hour, according to the latest BLS wage data. That’s less than even the next lowest-paid sector, retail, which brings in $18.68 per hour. (BLS wage data goes by industry, not occupation.) And a $2 an hour raise also doesn’t mean that much in an industry where many people work part time.

Indeed, weekly pay in the industry averages out to just $416.08, with workers putting in 25 hours a week. In other industries, people are typically able to get more hours and thus bigger paychecks. (On average, for all private sector jobs, people work 34 hours a week.)

Leisure and hospitality is far from the only sector undergoing a hiring crunch, so many people are able to find better, higher-paying work elsewhere. People are leaving for a variety of jobs, including those in factories and warehouses, customer service, and health care. These are often jobs that have better benefits and more predictable schedules. Unsurprisingly, interest in jobs on the hiring platform Indeed skew heavily toward positions with higher wages as well as ones that offer remote work — something that’s not really possible in the leisure and hospitality industries.

Jobs outside that sector also have a clearer path to advancement, according to Cornell’s Tracey. He gave the example of a luxury hotel where it took people 15 years to rise from an entry-level position to general manager. “How long does it take for people to train up to be a brain surgeon?” Tracey said.

But as the pandemic wears on, the lack of affordable child care is perhaps the biggest hurdle to getting people back to work. Many child care workers left their low-paid industry during the last eighteen months, leading to child care deserts where even those with the financial means can’t obtain adequate child care. For people in lower income brackets, including those working in leisure and hospitality, paying for child care can eat up most of their wages, so staying home to watch children is simply a smart financial decision.

As Louis Hyman, a labor relations professor at Cornell, put it, systematically undervaluing child care — considered to be women’s work — has led to this situation.

“Instead of workers suddenly realizing that there is more to life than their service economy job (did anybody not know that?),” Hyman told Recode in an email, “It’s just the patriarchy.”

Still, living through a pandemic gave many people the time and the distance to take stock of their life, and some landed on reprioritizing the importance of work within it. That’s especially true in industries like leisure and hospitality, which disproportionally employs women and people of color, who were disproportionately ravaged by Covid-19.

“Those are people in our industry,” D. Taylor, international president of Unite Here, a union that represents workers in the hotel and food services industries, said. “They reassessed: ‘What am I doing here? Why am I doing this? Am I getting ahead? Do I have a shot at the American dream?’”

“If [workers] held the power, they’d be making 30 bucks an hour” —D. Taylor, international president of Unite Here

Even those who are benefiting from rising wages in leisure in hospitality are questioning the work. For example, a teacher in New York state who works at a winery on weekends, told Recode that he’s been making more, due to a raise and increased tips. But since the pandemic, he’s had a change of heart and wants to spend more time with his own kids.

“It’s hard to say no to money,” the teacher, who asked that we not use his name, said. “Before [the pandemic] I almost looked to be stressed, but now I’m good. I don’t need any more.”

A lot has been said about power being in the hands of the worker. A flurry of news about higher wages, signing bonuses, and employee perks, like the ability to work from home, has made it seem as though employees completely dictate their terms of employment. But while employers are certainly having to work harder to hire and retain employees, worker power is likely overstated, especially among lower-wage workers.

“If they held the power, they’d be making 30 bucks an hour,” Taylor said. “They have some power now.”

Leveraging a little bit of power

Problems within the leisure and hospitality sector predate the pandemic. The rise of online ordering and home-sharing apps has sent shockwaves through the industries, and was already causing unrest among leisure and hospitality employees. The pandemic, as it’s wont to do, just made the trend more extreme. It caused working conditions to deteriorate more, but at the same time, it’s also given workers more power than before, thanks to the ongoing labor shortage.

To compete in the online space, restaurants have partnered with tech platforms like Grubhub and Uber Eats to market, sell, and deliver their goods. While expanding their customer base, these platforms also cut into restaurants’ already low margins. And workers at those restaurants bear that strain. Additionally, many restaurant workers either lost their jobs or unwittingly became front-line workers during the pandemic, which put them constantly at risk of getting sick. The situation is similar at hotels, which have faced an existential crisis from competitors like Airbnb and were largely empty last year. That has meant less money going to hotels and, by extension, to their employees.

A delivery worker pushes his bicycle in Manhattan borough on October 27. 

Eduardo Munoz/AFP via Getty Images

The nature of leisure and hospitality work is also changing. Some companies are using software and robots to complete more mundane tasks, and in turn making the jobs themselves better. By not having to take orders or schedule employees, some employees can focus on the more compelling components of their jobs.

So far it’s unclear whether using machines to flip burgers or bake pizzas will reduce the need for human labor overall or just redirect it to other tasks. Of course, some companies will simply get by with fewer people, say by reducing how often they clean hotel rooms or by opening fewer days per week or by offering fewer menu items or amenities.

Cornell’s Tracey, however, sees elevating tasks as a way to offer better jobs with better pay.

“The mindset is changing,” Tracey said. “I speak with operational managers and leaders all the time, and many of them are trying to express how much gratitude they can muster to anybody who’s willing to show up.”

That’s expressed itself in higher wages, better benefits, and more flexible hours. That is not just beneficial to employees.

“Some places have gone to try out what it means to actually be a high-road employer,” Heidi Shierholz, president of the Economic Policy Institute, said. “Reduced turnover, higher productivity, higher morale — through all that stuff you recoup the cost of the increased pay.”

But that’s by no means universal.

Yamir Contreras, a unionized housekeeper at a hotel in Rhode Island, hasn’t seen her pay grow since before the pandemic. Her workload, however, has.

Many of her former colleagues left to find better-paying work in other industries, she told Recode through a union interpreter. Where there were once 25 housekeepers, there are now 11 doing the same amount of work. Her pay has not been raised, but she doesn’t want to leave since the job is near her home and her kids. It’s also just what she’s used to.

“What’s really sad is that there are people here who have worked for 10 years and they’re still not even making $18 an hour,” Contreras said. “And hotel jobs are hard. When you work your whole life in a hotel, you go home, and you retire with a walking stick.”

To wit: An aging population that’s retiring earlier than usual is one of the many reasons there aren’t enough workers to go around.

In response to poor conditions, there’s been unprecedented interest in unions — though union membership is still only at 11 percent, thanks in part to the difficult governmental hurdles to forming unions. Taylor, the union president, said worker discontent is higher than he’s seen in his 35 years of organizing.

“There’s never been a better time, frankly, to unionize because workers know that corporate America is not going to take care of them, governments aren’t going to take care of them,” he said.

The union hosted numerous actions among hospitality workers last month including marches and strikes. They’re asking for fair workloads, living wages, and an end to job cuts. Already, thanks to the labor shortage, leisure and hospitality jobs have been forced to become better than they used to be.

Dewayne Jamison, a stadium worker in Seattle who helps keep the many concession stands stocked with food and beer, recently got a promotion and a big raise to $24 an hour after a union agreement.

A high minimum wage in Seattle, as well as hazard pay, made it so that even entry-level jobs were making nearly $21 an hour there. That meant the stadium food and beverage company had to increase its wages and benefits to compete.

“I never thought we’d get a $6 raise just like that, you know? That’s a game changer for a stadium worker,” Jamison said. “That’s a life changer.”