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The last few years have reflected an unprecedented period of wage growth for restaurant workers. While past research has shown this trend in the U.S., we’re releasing new Square Payroll data to show that rising labor costs in the restaurant sector have been a global phenomenon. This increase coincided with broader inflationary pressures that affected businesses and workers across markets. In addition, the differential impact of inflation across markets has left the median worker in some markets better off than others.
This chart shows the growth in base wages for the median restaurant worker from January 2022 and December 2023.
So what’s going on?
The first thing we’re seeing is the long-term impact of a tight labor market and what that can do for workers and the broader economy. Coming out of the pandemic, restaurants across markets reported significant labor shortages for workers, which forced businesses to raise wages, leading to several solid years of wage growth for workers, particularly workers at the lower end of the wage spectrum. At the same time, we saw businesses dealing with supply chain issues that pushed up prices. So workers had more money in their paychecks, but things also cost more to buy. The good news for restaurant workers is that the wage growth over the last few years was enough to compensate for the inflation that occurred. Since January 2022, base wages in the United States for restaurant workers have grown by about 8.9%. Over the same period up to November 2023, consumer prices have grown at about the same rate. That’s generally good news in a healthy labor market.
The second thing we’re seeing is a sort of return to normalcy. We’ve heard from sellers that labor shortages are getting resolved, so wage growth is coming down. The labor market isn’t quite as hot as it was a year ago. It’s also likely that supply chain issues are also sorting themselves out, and inflation has come down a lot too. In fact, our latest data shows that base wages are growing faster than inflation now, which could lead to long-term pay gains for U.S. workers.
So wage growth has cooled, but it’s still growing, and now it’s growing faster than inflation. And this translates to more take-home pay for workers in the long term.
But in some cases, even strong wage growth hasn’t kept pace with inflation. Consider the United Kingdom, where data from Square timecards shows the median base wage for a restaurant worker grew 16.7% over the two years from January 2022 through December 2023. While that’s the highest growth we’ve observed in our markets, it’s below the inflation rate in the UK. Over the same period up to this past November, consumer prices grew 18.9%, according to the Office of National Statistics. Given this disparity, the median worker in the UK likely saw inflation slightly erode their take-home pay.
The Federal Reserve says it remains committed to bringing inflation down to a 2% annual rate, and the latest results have pointed to great progress. Elevated wage growth, if it holds, alongside declining inflation, will drive long-term pay gains for restaurant workers. Square will continue to monitor these trends. For more insights, check out the Square Payroll Index.