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% on average, reversing much of the wage inequality that has been growing for decades in the United States.
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% 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% average raise for hospitality workers compares with an average increase of 20% for the highest-earning category in each state. Inflation was 19% in the period between the second quarters of 2019 and 2023.
Nationally, wages for the bottom 10% of earners have grown more than for the top 10% since 2019, a change that has undone about 40% 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.”
On Jan. 1, 22 states raised their minimum wage, while 38 cities and counties raised theirs beyond the state standard, according to the Economic Policy Institute, a think tank that examines how policies affect low- and middle-income workers.
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% of earners versus the top 10% 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% over four years), New Jersey (35%), Florida (34%) and Virginia (33%). All are states with a higher minimum wage than the federal floor.
But increases were nearly as high, about 33%, 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%), California and Hawaii (both up 23%) 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.
