What Happened to North Carolina’s Restaurant Workers After the COVID-19 Recession?

We all know how difficult it is to find restaurant workers these days. We see it in the “Help Wanted” signs hanging on the front door of every restaurant on Main Street. We hear it from employers: according to our recent Employer Needs Survey, 87% of hospitality employers in North Carolina say hiring has gotten harder since the start of the COVID-19 pandemic. And we see it in the labor market data: in 2021, the number of job openings for food service workers reached an all-time high in North Carolina, but restaurant employment remained below pre-pandemic levels as employers struggled to fill open positions. 

In this article, we use data from the North Carolina Common Follow-up System (CFS) to determine what happened to all those people who were working in North Carolina’s bars and restaurants prior to the COVID-19 pandemic and explain why it has been so hard to hire restaurant workers in recent years.

The number of North Carolina workers primarily employed in the Food Services and Drinking Places sector (“restaurant workers”) increased by around 18,000 between 2017 and 2019 [Figure 1].¹ Restaurant employment declined sharply during the COVID-19 recession in spring 2020, but then rebounded in late 2020. Despite this partial recovery, as of 2021, the number of restaurant workers in North Carolina was still below its pre-pandemic level. Our state had 504,000 restaurant workers in 2021—around 39,000 fewer than the number we’d expect if restaurant employment had continued to grow at its pre-pandemic pace.

Figure 1

What happened to North Carolina’s 39,000 “missing restaurant workers”? When comparing the 2019-2021 decrease in restaurant workers to the 2017-2019 increase [Figure 2]:

• Nearly half (47%) the 2021 shortfall in restaurant workers is accounted for by an increase in individuals leaving the restaurant sector to work in a different industry.
• Around one-third (32%) is explained by an increase in individuals leaving the workforce entirely.
• The remainder is due to workers staying on the sidelines: fewer employed workers transferring to the restaurant sector (19%) and fewer individuals entering the workforce (3%).

Figure 2

Workers who left the restaurant sector following the COVID-19 recession tended to shift into the same industries where former restaurant workers found employment prior to the recession, such as Administrative and Support Services; General Merchandise Stores; Professional, Scientific, and Technical Services; and Food and Beverage Retailers [Figure 3]. While the industries former restaurant workers shifted to remained unchanged after the COVID-19 recession, workers left the restaurant sector at a higher rate than in previous years. For example, 14,000 workers switched from the restaurant industry to General Merchandise Stores between 2019 and 2021, compared to only 10,000 between 2017 and 2019.

Figure 3

These industry sectors have one thing in common: they all tend to pay higher wages than restaurants. The typical job in the restaurant sector paid only $22,000 per year in 2021 [Figure 4]. Jobs in Professional, Scientific, and Technical Services—one of the top sectors of employment for former restaurant workers—range from relatively low-paid administrative staff to well-compensated professionals, but overall, the median wage for this sector is almost three times higher than that of restaurants.² The other sectors where former restaurant workers are most likely to find employment are relatively low-paying, but they still offer higher wages than restaurants, ranging from $24,000 per year at Food and Beverage Retailers to $31,000 in Administrative and Support Services establishments.

Figure 4

Recent hiring challenges in the restaurant sector have been driven by a number of factors including demographics, the COVID-19 pandemic, and a tightening labor market:

• Labor force participation in North Carolina has fallen over the past two decades, due primarily to demographic factors (e.g., increased retirements), leading to fewer workers available to fill open positions.
• The COVID-19 pandemic accelerated the longstanding trend of declining labor force participation, particularly for in-person service positions, like restaurant jobs, that are exposed to the risk of viral transmission. In December 2021, the Census Bureau reported 133,000 North Carolinians were out of work because they were sick with COVID-19, caring for someone with coronavirus symptoms, or concerned about getting or spreading the coronavirus.
• These declines in labor supply have combined with a surge in job openings to fuel the tightest labor market on record, with a record low number of jobseekers per job opening. A tight labor market has given workers more opportunities to switch to higher-paying jobs in higher-paying sectors, leaving lower-paying businesses like restaurants at a disadvantage.

While restaurants had a hard time filling open positions during the first two years of the COVID-19 pandemic, more recent evidence suggests hiring conditions have improved since then. Employment in North Carolina’s Accommodation and Food Services sector plummeted 44% during the COVID-19 recession, but has been climbing upwards ever since and, by August 2022, had nearly recovered to its pre-pandemic level [Figure 5].³ Meanwhile, the number of unfilled job openings for Food Preparation and Serving-Related Occupations has fallen substantially after reaching an all-time high in October 2021.⁴ Restaurants are likely to see continued improvements in hiring conditions as our economy slows down from the rapid pace of growth seen in 2021 and the number of job openings in North Carolina declines to more a sustainable level.

Figure 5

¹This article defines workers’ “primary” sector of employment as the 3-digit NAICS industry sector where they earned the most wages in each year. This includes workers who were employed at any time during the year. Throughout this article, employment levels are reported rounded to the nearest thousand.

²Source: LEAD / US Bureau of Labor Statistics (Occupational Employment and Wage Statistics) https://d4.nccommerce.com/OESSelection.aspx

³Source: LEAD / US Bureau of Labor Statistics (Current Employment Statistics) https://d4.nccommerce.com/CesSelection.aspx

⁴Source: analysis of data from the US Bureau of Labor Statistics and the Conference Board https://analytics.nccommerce.com/NC-Labor-Supply-Demand/