Restaurants can’t find workers because they’ve found better jobs

After losing her longtime restaurant job at the beginning of the pandemic, Emilia McGrath scrambled to find a backup plan.

She traded in her apartment in Boston for her childhood bedroom in Bowdoin, Maine, moving in with parents to briefly work at a private school. Eventually, the 28-year-old found a job working on exhibits at a children’s museum a couple of hours away.

That short-term plan has become a permanent one. McGrath makes less than she did in restaurants but has far better benefits, including paid time off, health insurance and a predictable schedule. For now, at least, she’s done with restaurants.

“It feels like a healthy change,” she said.

Nearly three years since the coronavirus pandemic upended the labor market, restaurants, bars, hotels and casinos remain short-staffed, with nearly 2 million unfilled openings. The leisure and hospitality industry, which before the pandemic accounted for much of the country’s job growth, is still short roughly 500,000 employees from 2020 levels, even as many other sectors have recovered.

But these workers didn’t disappear. A lot of them, like McGrath, who were laid off early in the pandemic, moved to behind-the-scenes office work where they are more likely to have increased flexibility, stability and often better pay.

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Employment in professional and business services - a catchall category that includes office jobs in accounting, law and other white-collar firms - has soared by 1.4 million during the pandemic. And tens of thousands of additional people are working in finance, construction, and transportation and warehousing.

“There’s this reshuffling going on that is explaining why lots of industries can’t find workers,” said Betsey Stevenson, an economics professor at the University of Michigan and former Labor Department chief economist. “Their workers have left to go somewhere else.”

These migrations have been possible in part because so many workers have left the labor force entirely. An estimated 2.5 million people have died, retired or otherwise dropped out since 2020. Americans older than 55, in particular, stopped working at heightened rates during the pandemic because of covid-related health risks. Plus, rapid run-ups in home values and stock prices made it financially viable for scores of older Americans to retire. Those extra vacancies in the job market, researchers have found, created room for people in the service industry to move into new lines of work.

As a result, workers are “missing” from certain service jobs - often the ones most visible to the public - slinging drinks, steaming lattes, waiting tables, cleaning hotel rooms or caring for babies.

“There’s been a shift away from the sectors where we have the most person-to-person contact,” said Nick Bunker, economic research director at the jobs site Indeed. “It feels like no one’s working, even though we can tell from government statistics that they are.”

It isn’t clear, exactly, how many workers made the switch from service work to other industries. The Bureau of Labor Statistics tracks employment by sector but offers little visibility into workers’ movements or motivations. But labor economists say there has been a discernible shift away from service-sector work, which has altered the U.S. job market and possibly reshaped it for the long term.

In interviews, many workers said they made the switch thinking it would be temporary, but found the new stability tough to give up.

Ashton Rodriquez, who lives in Cleveland, switched careers in March 2020 after nearly 15 years working in restaurants and bars. She had been considering starting her own jewelry business for years but said the jolt of the pandemic sped things up.

“Like a lot of people, I had time to sit with myself and figure out what I really wanted,” the 34-year-old said. “It was a forced decision in a way, but not an unhappy one.”

She makes twice the money she made as a bartender at LongHorn Steakhouse and says she likes having control over her own hours. Instead of working well into the morning, she’s often in bed by 8:30 p.m. “Working for yourself is super scary,” she said. “But I would never go back.”

The movement of workers away from hospitality jobs is playing a role in the economy’s broader inflationary problems. Pressure to attract workers has driven up wages in the industry - by 23 percent in the past three years, more than in any other sector - complicating the Federal Reserve’s task of containing inflation. Fed Chair Jerome H. Powell this week flagged service-sector inflation, as a result of higher wages, which are compounded by costlier food and gas, as a particular concern for the central bank.

“Clearly labor is important for restaurants, but so are food prices,” Powell said in a Wednesday news conference following the Fed’s latest interest rate increase. “There are lots of things in that mix that will drive inflation. I would say overall, though . . . you’re not going to have a sustainable return to 2 percent inflation in [the service] sector without a better balance in the labor market.”

The job sector shift has been most pronounced in the United States, where 20 million Americans suddenly lost their jobs in early 2020. Unlike many European countries, which helped workers stay on the job by subsidizing their wages, the United States took a different approach, offering additional unemployment benefits once people were out of work. Employers cut 14 percent of the U.S. workforce in the first month of the pandemic, with many of those losses concentrated in restaurants, hotels, child-care centers and other service employers.

William Spriggs, a labor economist who was originally critical of the mass layoffs in the United States, now says the shake-up may have ultimately encouraged service workers to look beyond low-wage jobs.

“This has been a good evolution - it has raised wages and changed the structure of the labor market in a deep, profound way,” said Spriggs, chief economist for the AFL-CIO. “Workers who were trapped in low-wage jobs were able to escape by switching to higher-paying industries.”

Indeed, federal data shows that any worker who switches jobs generally gets higher pay increases - an annual increase of about 7.7 percent, as of December - compared to 5.5 percent for employees who stay put.

At the same time, a burst of retirements during the pandemic helped set the stage for low-wage workers to move into “professional occupations” that often came with better pay, more flexibility and lower exposure to health risks, according to a recent paper published by the National Bureau of Economic Research.

“When older workers - who were in relatively high-paying jobs at the top of the ladder - retired, everyone else was able to climb up a step, from a worse job to a better one,” said David Wiczer, an economics professor at Stony Brook University and one of the paper’s co-authors.

The jobs that remained empty, the researchers found, were the less desirable ones: low-skilled, low-wage, customer-facing jobs.

Business is booming at the Westgate Las Vegas Resort & Casino. Barry Manilow is back onstage, and the hotel - where Elvis Presley famously performed hundreds of shows - is fully booked for weeks at a time.

But workers are tough to come by. The property is operating with just 1,400 full-time employees, down from more than 2,000 before the pandemic.

“Las Vegas is back but the workers are not,” said Gordon Prouty, the hotel’s vice president of public relations. “Many people moved on. We had a very tenured staff here. Some people decided to retire rather than the come back. Others moved. And others were slow to come back because they had health concerns or wanted to work remotely - it’s a very front-facing industry.”

The positions that have been hardest to fill, he said, are the workers who interact most frequently with guests, such as casino dealers, security guards, waitstaff and bartenders, and housekeepers. The resort has raised pay and is hosting additional job fairs.

“Staffing has been a constant challenge after covid,” Prouty said. “We’ve had to get creative.”

Economists say the dynamic could soon change, as a cooling economy prompts tech giants, insurance firms, banks and real estate companies to lay off more office workers. It’s possible some of those employees, particularly those in administrative and secretarial jobs, could go back to service work. In January, the hospitality and leisure industry added 128,000 new jobs - the most of any sector.

For now, demand continues to outpace supply. Fresh data this week showed that hospitality and leisure openings account for nearly 2 million of the country’s 11 million job openings.

In Cambridge, Mass., Atwood’s Tavern has struggled to refill its ranks after laying off its entire workforce early in the pandemic.

Many long-timers - including McGrath, who works at the children’s museum - left for new pursuits. One employee now works at a science lab; a few others took remote customer service positions.

“The people who used to work in restaurants have gotten new jobs,” said General Manager Alex Sirigu. “They’ve all moved on.”

The restaurant, which used to recruit exclusively by networking and word of mouth, has begun posting openings at “every single online platform,” from local classifieds to national job boards, he said. Sirigu has also taken steps to make the jobs more attractive: Raising wages by as much as 20 percent and closing earlier, at 11 p.m. instead of 1 a.m. on weeknights.

“The pool of workers has gotten much smaller,” Sirigu said, adding that almost all candidates are new to the industry. “It’s mostly younger people, entry-level applicants who are fresh graduates or high school students. We are having to start from scratch.”