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Pay hikes over the past four years have lifted the wages of people who work in hospitality — the nation’s lowest-paid industry — nearly 30 percent on average, reversing much of the wage inequality that has been growing for decades in the U.S.
In 40 states, even those that haven’t raised their minimum wage beyond the $7.25 federal floor, the recent pay jumps outpaced those of earners in each state’s highest-paying industry, usually energy, technology or the federal government.
The lowest-wage industry in every state is leisure and hospitality, a category that includes restaurants, bars and hotels. Those lowest-earning workers got bigger percentage raises than the highest earners, averaging a 29 percent boost between mid-2019 and mid-2023, a Stateline analysis of U.S. Bureau of Labor Statistics quarterly data shows.
“We’re experiencing a historic moment of worker power, where workers just aren’t willing to accept these wages anymore,” said Saru Jayaraman, who has advocated for higher wages for tipped hospitality workers in several states as president of One Fair Wage in Massachusetts.
The 29-percent average raise for hospitality workers compares with an average increase of 20 percent for the highest-earning category in each state. Inflation was 19 percent in the period between the second quarters of 2019 and 2023.
Nationally, wages for the bottom 10 percent of earners have grown more than for the top 10 percent since 2019, a change that has undone about 40 percent of the inequality that had built up since 1980, according to a working paper by the National Bureau of Economic Research updated in November. The shift is giving more power to young workers without college degrees, who have capitalized on the tight labor supply to find better-paying jobs.
The inequality turnaround was already happening before 2019 in states that raised their minimum wage, but starting in 2021, it spread to states that didn’t raise minimums, according to a social media post by one of the working paper’s authors, economist Arindrajit Dube at the University of Massachusetts Amherst.
“Regulation doing its thing” turned into “market tightness doing its thing,” Dube wrote in the post. “Tightness drives out low-wage jobs by creating better-paying ones,” he wrote, adding that policymakers can “make the market work better for workers or fix it with regulation. Or both.”
Income inequality improved
It’s still hard to tell whether the wage boost for lower-paid workers will translate into less economic inequality over the long term. It may depend partly on whether tax policy favors them or the wealthy. A U.S. Census Bureau report in September said income inequality improved for the bottom 10 percent of earners versus the top 10 percent between 2021 and 2022, for the first time since 2007.
But the advantage disappeared after taxes, the report found, partly because of the expiration of child tax credits expanded during the pandemic.
The highest wage increases for hospitality workers were in Maine (up 41 percent over four years), New Jersey (35 percent), Florida (34 percent) and Virginia (33 percent). All are states with a higher minimum wage than the federal floor.
But increases were nearly as high, about 33 percent, in states without minimum wage boosts, including Idaho, Kentucky, New Hampshire, North Carolina and South Carolina.
“Mostly what you’re seeing is the effect of a tighter labor market,” said Elise Gould, a senior economist at the Economic Policy Institute. “More competition, more scarcity of workers, means employers have to pay more regardless of what state you live in.”
Many states with slower wage growth for hospitality workers already had high wages compared with other states: Nevada (up 20 percent), California and Hawaii (both up 23 percent) were among the slowest growing. But they still were in the top five for hospitality wages, ranging from an average weekly $826 in Hawaii to $784 in Nevada and $720 in California.
Higher wages for hospitality workers such as resort housekeepers in Nevada are helping to boost more Hispanic families into the middle class, according to a previous Stateline analysis.
For some conservatives, the movement is a sign that a hands-off approach works to raise wages without government intervention when labor demand outstrips supply. Some red states such as Texas have resisted minimum wage legislation and forbid localities from setting them, while Florida set a minimum only after a successful ballot referendum in 2020.
“My position is very much that wages are ultimately set by economic conditions, not politicians,” said Paul Gessing, president of the Rio Grande Foundation in Albuquerque, New Mexico, which has opposed legislation to raise minimum wages in the state.
Gould, of the Economic Policy Institute, said minimum wage legislation and other worker protections need to continue because low-wage workers cannot count on positive market conditions to boost pay indefinitely.
“History has told us they will need it at some point,” Gould said.
Stateline, founded in 1998, provides daily reporting and analysis on trends in state policy.
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