Dec 7, 2023 - Business

The golden age of restaurant worker wage growth is over

Data: Square; Note: Earnings include base wages, tips and overtime; Chart: Axios Visuals

Restaurant workers' wage growth has slipped considerably since the end of the COVID-19 pandemic, falling below even pre-pandemic rates.

  • That's per Square's new third quarter restaurant industry report, and includes base wages, tips and overtime.

Why it matters: It's a sign that restaurants are no longer quite as desperate for workers as they were during the late pandemic era, when many struggled to replace employees who had left for other industries during the pandemic slowdown.

  • It's also a reflection of inflation's impact on restaurants and consumers alike.

By the numbers: Restaurant workers' wages grew 4.9% year over year in October 2023.

  • That's slowed from peak growth of 10.5% in December 2021, when the average base wage was $12.60 and average hourly earnings totaled $15.85.

Driving the news: Restaurants' costs are up due in part to inflation, while consumers are often loath to pay higher prices because they're also getting hit with higher costs on basically everything in life.

  • Discretionary spending on dining out is often the first thing to go when times get a little tougher — and tips may be shrinking, especially amid a growing sense of "tipping fatigue."

Be smart: Wage growth is best considered alongside inflation — if your wage grows 3% but so does inflation, your wage didn't really grow at all.

Between the lines: Some of what's happening here is also being driven by the fact that most of America's downtowns still haven't fully recovered from the pandemic — meaning there are fewer people visiting bars and restaurants in many cities, and thus fewer bills and tips.

  • "Compared to January 2019, downtown neighborhoods in American cities appear to have flatlined at roughly 72% of their pre-pandemic activity as of the end of September 2023," per Square's report.

Yes, but: Restaurant workers in some cities are thriving, comparatively speaking.

  • Cincinnati, Las Vegas and Jacksonville all saw particularly notable wage growth in October, per Square.
  • Vegas also happens to have more foot traffic now than it did pre-pandemic, per separate research based on mobile device activity — so no doubt revived tourism is driving a relatively healthy restaurant business there as people flock to casinos, Golden Knights games and The Sphere.
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