Only 4% of laid-off service workers will get their old jobs back, study finds

waitress
  • Workers in leisure, hospitality, and retail have been particularly hard hit during the pandemic.
  • A New York Fed analysis finds only 4% of workers will be rehired by currently closed small businesses.
  • And just 3% of the service businesses currently closed are likely to reopen.
  • See more stories on Insider’s business page.

Throughout the pandemic, service workers have had it tough. The ones that didn’t have to contend with massive layoffs have had to safely navigate customer-facing roles, while their industry has been radically disrupted.

And evidence is showing that the service workers who were laid off stand a slim chance of getting their old jobs back.

A new analysis from the New York Federal Reserve’s Liberty Street Economics looks at data from about 100,000 leisure, retail, and hospitality businesses – mostly small ones – and delves into the ones that have remained closed.

Of businesses active before the pandemic, 35% remain closed. The longer a business stays shuttered, the more likely it is it will never reopen, according to the analysis: For every extra week a business stays closed, the probability of reopening drops by 2%. Most of those businesses have been closed since the pandemic first hit.

Bad news for workers

For people working at those currently shuttered businesses, continued closures may bring bad employment news. The analysis found that just about 4% of workers laid off from those businesses will be rehired by them.

The longer the closure, the lower the chance of rehiring: For every extra week they remain shuttered, the number of workers rehired for reopening drops by 5%. Of course, that all hinges on if their employers do end up reopening. The New York Fed anticipates that just 3% of the closed businesses will reopen, and those that do will hire back 35% of their workers over the course of four weeks.

Service workers have been hard hit throughout the pandemic

To be sure, employment in leisure, hospitality, and retail has seen a major rebound as the economy has reopened.

In March, nonfarm payrolls added 916,000 jobs, and service jobs accounted for a third of those gains. Small businesses are also increasingly reopening, especially as vaccinations around the country ramp up and restrictions are lifted.

One hindrance is the so-called labor shortage, where employers are having trouble filling jobs. That could be for a few reasons, according to Insider’s Ayelet Sheffey, including COVID-19 health concerns and inability to access affordable childcare. A study from advocacy group One Fair Wage found that of the workers who never left service jobs, female workers experienced more harassment and lower tips during the pandemic.

A February McKinsey report separately found that food service jobs are in general decline over the long term, and over half of workers in low-wage jobs will have to find higher-paying positions post-pandemic.

“Last year, we started a relief fund for service workers; 240,000 workers applied for relief,” Saru Jayaraman, the president of One Fair Wage, previously told Insider. “And I can’t tell you the number of women waitresses who wrote to us and said, ‘I can no longer feed my children. The lines are too long at the food banks. I am now resorting to stealing food because I have no choice.'”

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Millennials splurging on steaks and wine are fueling NYC’s indoor dining scene

millennial inndoor dining nyc
Indoor dining in New York City reopened on February 12.

Millennials are driving New York City’s indoor dining scene.

Restaurant owners in the city told Bloomberg’s Kate Krader that although many diners still prefer outdoor dining, young adults are more likely to eat inside – and they’re splurging while doing so.

Nearly a year of restaurant deprivation and a decline in restaurant hopping amid restrictions is causing the cohort to shell out for high-priced items like steak, wine, and tasting menus, sending check averages and tips on the climb, restaurateurs told Krader. Tip averages increased from from 19% to 21% at Il Buco and Alimentari, she reported.

It’s all a sign of life for restaurants since February. Daily revenue across dine-in, takeout, and delivery declined in February, as did number of seated guests, per a UBS research note. Americans have continued to eat more at home amid cold weather, according to a recent Bank of America note. But both banks signaled the chances of a rebound.

March has already seen an improvement in dine-in demand, per UBS, while BofA predicts more people will flock to restaurants when restrictions get lifted and upon vaccine rollout and better weather. “There is a significant amount of pent-up demand to eat out again as consumers are tired and bored of cooking at home,” states Bank of America.

Indoor dining in NYC resumed on February 12 (it’s currently at 35% capacity), and millennials are fulfilling both banks’ forecasts. But their spending may not be enough to save the restaurant industry, Krader reported, or those who work in it.

A struggling service industry

Service workers have been hit hard during the pandemic. While food services saw some notable increases in employment in February 2021, bar and restaurant jobs are still down by around 2 million since the start of the pandemic, according to the Bureau of Labor Statistics.

A McKinsey report also found that, post-pandemic, workers in “declining” sectors such as food service may have to make some substantial career changes to stay afloat. In fact, according to McKinsey, more than half of them will have to find higher-paying jobs – requiring different skills – on the other side of the pandemic.

Throughout the pandemic, service workers have also found themselves unable to work from home, but instead in environments sometimes requiring indoor interaction with unmasked customers. A study from UCLA and UC Berkeley researchers found that fast-food workers in LA County were “especially vulnerable” to COVID-19, Insider’s Grace Dean reported.

Demographically, those workers have disproportionately been women and people of color – a continued trend of some of the most vulnerable workers being the hardest hit. In December, Eater reported that indoor dining was the “fastest growing” source for the spreading of coronavirus, according to the state.

While New York City restaurant workers are now eligible for vaccines, The City reported that many were struggling to secure a coveted slot before restaurants reopened for indoor dining.

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