What happens to pay during the holidays?

Key takeaways

• Hourly pay for flexible work in service-related industries may rise during the fall if the economy reverts to pre-pandemic trends
• Businesses with higher demand for work on the actual holidays are likely to see large spikes in pay in their labor markets
• Other businesses can expect stable pay throughout the fourth quarter unless another wave of the pandemic disrupts labor supply
  

The fall and winter holidays are coming soon, and businesses across our network are gearing up for rising demand. The labor market remains extremely tight, despite the efforts of central bankers to cool the economy. Businesses will be bringing in flexible workers to cope with upticks in demand, but these workers will want time to celebrate as well.  So what is likely to happen to pay?

It used to be fairly easy to answer this question, given historical trends and the context of the overall labor market. Nowadays the Covid-19 pandemic and the large number of people outside the workforce have made predictions more difficult. Still, let's start with the historical data.

The overall picture

Here is the month-by-month indexed trend for hourly pay on our platform for businesses in food and food service in 2019 and 2021, with September set to equal 100:

Back in 2019, hourly pay for flexible work in the sector rose by about 12% in December versus its level in September. But in the pandemic years that followed, hourly pay was fairly flat. A similar story comes from the hospitality sector:

In 2019, hourly pay in December rose by about 3%, but it was flat in 2021. (The hospitality sector was under huge restrictions in 2020 because of the pandemic, so that year is excluded.)

Instawork was less active in other industries in 2019, but we can track pay outside of hospitality and food in 2020 and 2021:

Once again, we see fairly flat trends in 2020 and 2021, with only a slight increase in 2021.

So why did 2020 and 2021 look so different from 2019? Much of the difference stems from how people have consumed services during the pandemic. Summers have always been peak times for service businesses like food and drinking places, but sales in December have still been about 5% higher than in September. That dynamic changed during the pandemic. In 2020, there was no spike at all in December. In 2021, the spike was less than 3%.

Will 2022 look more like the past two years, with flat hourly pay for flexible work, or more like 2019? This summer featured a huge boost in the demand for entertainment, leisure, and travel services, as many consumers felt the effects of the pandemic recede. It's not clear, however, that they will be able to maintain that momentum through the end of the year. Our indexed trends in hourly pay have been fairly stable after rising during the spring and summer. And if the economy really begins to slow, then businesses offering non-essential services may be the first to see falling demand.

Day-by-day in December

December is when the rubber really meets the road, especially for service businesses. Holiday parties, catering, restaurant meals, local celebrations – they all need workers, but often at the same times when workers would like to be with their own friends and families. Earlier this year our analysis measured the premiums in pay for flexible workers on weekends and holidays. But what happens at the very end of the year?

Let's start with the hospitality sector, again dropping 2020, with pay indexed to 100 on December 1:

In hospitality, there is not only less supply of labor on the actual holidays, but also more demand. And the spikes in hourly pay were enormous in 2019, with rates rising more than 40% on Christmas and New Year's Eve. There were also spikes in 2021, but only in the 20% to 30% range, likely because of the smaller increase in demand and expanding supply of labor for flexible work. Still, these were big changes.

The spikes were also present but not as high in food and food service (where we have insufficient data for a day-to-day trend in 2019): 

Notably, there was no noticeable spike around the actual holidays in 2020. And there was very little day-to-day change in either year across other industries, where businesses were often closed on the actual holidays: 

This year, we expect similar dynamics in all three sectors, with the potential for spikes in hospitality to moderate even more as our network of flexible workers grows. The wildcard, just as in in the past two years, will be Covid-19. A new variant and a wave of infections could shift spending away from services once more, while reducing the labor supply and causing urgent shortages of workers across the economy. So let's hope for the best, and just keep a plan for the worst in the backs of our minds.

Realtime metrics

These metrics, derived from data aggregated across the Instawork platform, compare the two weeks starting 9/8/2022 to the previous two weeks. To control for the overall growth of the Instawork marketplace, only shifts involving businesses that booked shifts in both periods are included:

• $0.21 rise in hourly pay
• 1.2% point rise in share of short-notice shifts
• 1.5 hours rise in hours per existing worker

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