Since the start of the pandemic, the economy has had a number of strange developments associated with lockdowns, reopenings, supply chains and rising inflation. All of these developments have created a number of perhaps unexpected outcomes.
The Dallas Federal Reserve recently released data documenting one of these outcomes: Since the spring of 2020, low-wage workers have been more likely than high-wage workers to see wage increases.
According to Joseph Tracy, former vice president of the Dallas Fed, a spike in demand is partly behind some of the wage growth.
“The service sector really rebounded very strongly,” Tracy said. “We heard countless examples around Texas of restaurants and retailers that were facing significant new demand, and they were trying to get their businesses back up and running, if not expanding.”
All that demand means employers are having to pay a little more just to get workers in the door.
“We were like, fine, we’ll just pay the graveyard $19 an hour when, prior to the pandemic, we were paying them like $11 or $12, plus tips,” said Stephanie Williams, co-owner of Bennu Coffee, a 24-hour Austin coffee chain.
Like many businesses in the service sector, Bennu has had a hard time finding and retaining workers. Before the pandemic, Bennu could find workers to show up for those early morning and late-night shifts. Now, not as much.
“Everything was fine before the pandemic, and then obviously we didn’t need people for a while,” Williams said. “But then, when it came time to build the staff back, that’s when the struggle started.”
According to Williams, the initial reopening of the service sector after the pandemic hit really changed the way her employees experienced the workplace. Baristas were essentially asked to police public health policy, which is a task Williams says should have never fallen to them.
“For instance, when we were requiring masks, it was getting cussed at or spit on because they were asking customers to wear masks,” Williams said.
It’s also worth noting that while wages have risen faster for low earners, those raises haven’t exactly transferred into more spending power, says Tracy.
“Now, again, keep in mind, even those groups were finding it harder to keep up with inflation,” Tracy said.
Right now, inflation is over 8%, and as long as it’s that high, it’s going to cause issues for business owners, their employees, and just about everybody else.
