Low-wage positions in restaurant and hospitality industries drive NC job growth

CorrespondentsAugust 31, 2013 

— Kristen Harris’ resume is packed with everything from training coordination to recruitment, but she’s not looking to add to it right now. Instead, the recent master’s degree recipient is perfectly happy working 40 hours a week as a bartender and cocktail waitress at World of Beer in North Hills.

Though the 29-year-old Harris isn’t banking anything close to what she made at her 9-5 jobs, that’s fine for now.

“I think … every graduate’s fear is ‘Hey, it’s real, what are you going to do with (your degree)?” she said. “I think that’s why I’m so comfortable here.”

She is one of about 438,900 North Carolinians employed in leisure and hospitality services. Despite slight recession-era job losses, this sector has bounced back faster than any other in the state, adding 21,500 jobs over the last year and about 44,900 since the end of the recession. It currently accounts for about 11 percent of total nonfarm employment.

Economists say the sector’s growth can be credited mostly to the fact that its employees don’t cost very much to hire. Jobs in leisure and hospitality services generally offer low wages, shallow benefits and part-time work. According to the Bureau of Labor Statistics, the average American in the sector earned $13.48 an hour working 25.9 hours a week in July.

North Carolina’s next two rapidly growing sectors – professional and business services and trade, transportation and utilities – pay substantially more. On average, jobs in professional and business services pay $28.47 an hour at about 36 hours a week nationally. The trade, transportation and utilities sector, which leads the state in total employment, pays about $20.95 an hour at 35 hours a week. In North Carolina, those sectors have added 14,600 and 9,600 jobs over the last year, respectively.

Despite growth in those two sectors, the fact that leisure and hospitality services leads the state in overall job growth over the past year is a sign of bigger economic problems on the state level, said John Quinterno, principal economist at Chapel Hill forecasting firm South by North Strategies.

“The issue is largely that wages in the sector generally are not very good,” Quinterno said. “That’s something we definitely have a need to be concerned about in terms of the recovery.”

Many jobs in leisure and hospitality services come from North Carolina’s restaurant industry, which the National Restaurant Association predicts will register $15.4 billion in sales this year alone.

In May 2012, food preparation and serving-related occupations made up for about 9 percent of employment in North Carolina, making it the eighth largest state restaurant industry in the U.S., according to the Bureau of Labor Statistics. The National Restaurant Association predicts that over the next 10 years, employment in North Carolina’s restaurants will grow by 13.5 percent.

Some of the growth is due to higher levels of tourism and to more consumers eating out, economists say. But they also say the growth is largely because food service is a sector where jobs are almost always available, something that is not the case in other industries.

In general, jobs in the restaurant sector do not pay very well. The average North Carolinian working in food preparation and serving-related occupations made $20,130 in annual wages in May 2012, according to the BLS.

Low pay but room to move up

World of Beer, where Harris works, opened in late 2011. It is one of 44 locations and the first outside of Florida, said manager Alex Ortiz.

The bar’s growth was not hindered by the recession, Ortiz said, and in its first year of operation, the North Hills location’s sales were about $1.5 million. This particular location does not serve food.

“Overall, the business has been healthy,” Ortiz said. “It’s been successful. It’s been well-received by our market.”

His 20 employees come from “every walk of life,” he said.

Ortiz started as a bartender’s assistant at the Fort Myers World of Beer. He relocated to Raleigh and became the general manager of the North Hills location after just four months.

“I know the World of Beer has growth opportunities not only for me as a person and professionally, but economically as well,” he said. “I stand to gain.”

In restaurant jobs, there’s usually room to move up, said Lynn Minges, president and CEO of the N.C. Restaurant and Lodging Association.

“Our business owners are hungry to find good employees,” she said. “And even if they come in as entry-level, rarely do I see a business owner who didn’t start as a manager, or a waiter or a host.”

This is because jobs that were once available in higher-paying industries such as construction and manufacturing aren’t available anymore, leading more people to settle for part-time work, Quinterno said.

“Because conditions overall remain weak, workers who would not have considered the jobs (in leisure and hospitality) are now taking them,” he said.

Tourism still strong

The leisure sector stayed afloat during the recession partly because of the resiliency of the state’s tourism industry. In 2012, tourism was responsible for $4.4 billion toward the state’s payrolls, and supported 193,610 new jobs for North Carolina residents, according to the Commerce Department’s Division of Tourism.

It also fuels growth in other industries. Last year, tourism pumped $6.4 billion into the restaurant industry, $3.4 billion into lodging and $1.9 billion toward recreation.

“Even though (the coast was) hit by the recession, tourists kept coming. So there was still activity going on,” said James Kleckley, an East Carolina University economist.

Those in the business agree. Ariadna Vucinovic, general manager of the Ramada Plaza in Nags Head on the Outer Banks, said that hiring has been steady over the past three or four years and that business has, if anything, increased.

Although business is seasonal – only about three months a year – not much has changed for the Ramada, Vucinovic said.

“They talk about the recession and everything – we haven’t seen it here,” she said.

Gunther Jochl, the general manager of the Sugar Mountain Ski Resort in Banner Elk, said although he has the same number of positions available at the beginning of the ski season – between 300 and 350 – it’s getting harder to find employees. Many jobs at the ski resort are seasonal, and Jochl said he starts hiring the bulk of his staff in mid-November each year.

One of the reasons finding employees is becoming more difficult, he said, is that as the economy improves, more jobs become available. During the recession, people lost their construction jobs and needed work. Now, he must compete with other employers, complicated by the fact that many of the jobs the resort offers are seasonal.

“It’s harder and harder to find good people. People have jobs and they’re out there working,” he said.

Kim Jochl, the resort’s marketing and merchandising director, said the resort is more affected by the weather than by the economy. However, she did observe from talking to skiers that at the peak of the recession, people seemed to be traveling closer to home.

“They were coming to Sugar Mountain instead of flying out west, flying up north, flying to Europe,” she said. “People tended to stay more local because it was more affordable.”

Vacations stay close to home

Charlie Peek, a spokesperson for the N.C. Division of Parks and Recreation, said that in recessionary times, people take vacations closer to home to save money.

“You can still get a family vacation in that everybody enjoys that’s inexpensive,” he said.

State park attendance levels have plateaued at record levels for about four years. In 2011, state parks and state recreation areas saw 14.25 million visits, matching the all-time record set in 2009, according to a Parks and Recreation annual report. Increased park attendance brings an economic boost to the areas – mostly rural – the parks border.

“Indirectly, with the state parks doing well, campgrounds will do well. Restaurants will do well. Those local businesses will do well,” Peek said. “The feeling is that recreation is doing pretty well.

Nationally, jobs in recreation generally yield $14.82 per hour at about 25 hours a week, according to the BLS.

North Carolina’s overall hiring was the slowest in the first half of 2013 it has been since the onset of recovery, Quinterno said. If that pace keeps up, it’s possible that the state won’t achieve pre-recession employment levels until late 2016.

In order to see an economic resurgence, higher-paying jobs would have to bounce back, Kleckley said.

“Not a lot of other parts of the economy are growing. It’s the fastest growing industry in a slow growing state,” Kleckley said. “And while it’s good that we’re seeing more jobs and more people going to work, we would really like to see the activity in manufacturing and construction come back – those are relatively high-paying jobs.”

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