Then came the pandemic, which was initially a disaster for restaurants, forcing most to close temporarily and thousands to shut their doors for good. The sector’s rebirth involved lots of innovation and experimentation, from high-end restaurants turning to takeout to legalization of to-go alcoholic drinks to delivery-only ghost kitchens preparing huge quantities of chicken wings to, when in-person dining resumed, lots more outdoor tables, online menus and other tweaks. The experimentation continued as the tight labor market of 2021 made it impossible to go back to pre-pandemic staffing levels even as demand returned. For diners, this hasn’t always been great — restaurant guest satisfaction as measured by Merchant Centric fell in 2021. But it did wonders for the sector’s long-lagging productivity numbers.
It hasn’t been bad for the workers, either. Inflation-adjusted food-service wages are up almost 6% over the course of the pandemic, while overall private-sector wages are down slightly.
The big real-wage gains were all in 2021 and have stalled since, and there’s no chance of anything close to a repeat this year of 2021’s productivity gains, which are only reported annually. A recession, or just more normal labor market conditions, could even send these trends into reverse. But things won’t go back to the way they were before the pandemic. Restaurants experienced a huge shock, found ways to cope with it, and in many cases fundamentally changed how they do business. Meanwhile, many former employees have found better work at other restaurants and in other sectors. Employers in food services and accommodation, which combined accounted for 13.6 million jobs in the US in October, had 15.6 million employees quit during 2021 and the first three quarters of 2022. These have always been high-churn sectors, but their recent quits rate is nearly double what it was a decade ago.
Elevated quits rates, which generated talk of a “Great Resignation” last year, have accompanied a significant reallocation of labor in the US. In October, there were 804,000 more nonfarm payroll jobs than in February 2020, a gain of just half a percent, but that masks a lot of sectoral upheaval.
Leisure and hospitality is by far the biggest loser, still down more than a million jobs. Break things down into narrower categories and the largest losses are in, big surprise, food services.
The closely related accommodation sector has experienced a much bigger percentage drop in jobs than food services, and accommodation spending is also up even after adjusting for inflation. But in accommodation, spending and employment growth disconnected a while ago, with employment not only down 17% during the pandemic but now pretty much the same as it was in January 2010.
Part of the explanation is the rise of Airbnb Inc., which is included in the accommodation spending numbers but not, for the most part, in the payroll employment numbers. That is, its employees, of which there are about 6,000 worldwide, are included if they’re in the US, but its self-employed hosts, of which there are 4 million worldwide, are not. Airbnb reported North American gross bookings of $25.3 billion for 2021, which is 19% of reported consumer spending on accommodation, and it is of course not the only short-term rental service.
The divergence between spending and employment in accommodation is thus bigger in the statistics than in economic reality, but clearly Airbnb has brought change and innovation to the industry. Meanwhile, anyone who has stayed at an actual hotel lately can attest that the business has become less labor-intensive, with daily room cleaning increasingly a thing of the past. The lodging industry was transforming before 2020, and the pandemic seems to have accelerated those changes. Not all these changes are for the better, and the same goes for the new directions restaurants have been taking. But if they’re part of a broader shift away from low-pay, low-productivity work, the net effects could be very positive.
More From Bloomberg Opinion:
• Why Can’t Workers Get the Skills They Need?: Romesh Ratnesar
• What Great Resignation? Workers Are Staying Put: Justin Fox
• Labor Market Strength Is Also a Sign of Dysfunction: Conor Sen
(1) In the USDA and US Bureau of Economic Analysis numbers, meals prepared at restaurants but consumed at home are still counted as food away from home or food services spending, although the fees charged by delivery services aren’t.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Justin Fox is a Bloomberg Opinion columnist covering business. A former editorial director of Harvard Business Review, he has written for Time, Fortune and American Banker. He is author of “The Myth of the Rational Market.”
More stories like this are available on bloomberg.com/opinion
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