Service sector

COVID-19 service sector job cuts expected to hit younger workers harder

A Boston restaurateur inspects his empty establishment. (Craig F. Walker/The Boston Globe via Getty Images)

COVID-19 and the coronavirus that causes it are not only a public health crisis but also a economic. With calls for social distancing, service sector jobs that depend on customer-supplier interactions or involve the gathering of large numbers of people are likely to be hit hard. Workers in industries such as restaurants, hotels, child care, retail and transportation services are at a higher risk of losing their jobs.

Nearly one in four American workers — 38.1 million out of 157.5 million — are employed in the industries most likely to feel an immediate impact from the COVID-19 outbreak, according to an analysis of government data from Pew Research. Center. From the most vulnerable are workers in retail trade (10% of all workers) and food services and drinking places (6%). In total, these two industries employ nearly 26 million Americans.

The COVID-19 pandemic is likely to have a widespread negative impact on business activity for some time to come. This analysis focuses on key demographics of workers in those industries that provide in-person services, such as restaurants and child care, whose finances are under the most immediate strain.

The high-risk industries included in this analysis and the number of workers employed in these industries are: food services and drinking places (9.7 million); accommodation (1.5 million); arts, entertainment and recreation (3.4 million); child care services (1.5 million); personal and laundry services (2.7 million); retail (16.2 million); and some transportation industries (3.1 million). Selected transportation industries include air, rail and marine transportation, bus service and urban transit, taxi and limousine services, scenic and sightseeing transportation, and incidental transportation services. Transportation industries excluded from this analysis, such as truck transportation, employed 4.6 million workers in 2019.

Estimates are taken from labor force statistics published by the United States Bureau of Labor Statistics, based either on its household survey or on the Current population survey (CPS), or its survey of commercial establishments, the Current employment statistics (THOSE). The CPS is the government’s official source for monthly unemployment estimates and the CES is the official source for monthly wage employment estimates.

The United States is in a historical moment, and there is a great uncertainty on the short and long-term economic effects of this pandemic. But it is safe to say that the short-term impact on employment will be significant. the latest report from the Ministry of Labor on unemployment insurance claims shows an increase of 3 million initial claims in the week ending March 21 compared to the previous week. A 15% reduction in the workforce from high-risk industries alone would add 5.7 million workers to unemployment rolls. This would result in an almost immediate doubling of the US unemployment rate from 3.5% to 7%. In contrast, it took almost two years for the unemployment rate to double during the Great Recession, from 5% in December 2007 to 10% in October 2009.

Young adults are disproportionately at risk of losing their jobs due to COVID-19Based on the demographics of workers in high-risk industries, young people in particular are expected to be disproportionately affected by virus-related layoffs. Of the 19.3 million workers aged 16 to 24 in the economy as a whole, 9.2 million, or almost half, are employed in establishments in the service sector. Young workers account for 24% of employment in high-risk industries overall, and many establishments in these industries face a high probability of closure in areas with more severe COVID-19 outbreaks.

High-risk industries also employ slightly more women than men: 19.4 million workers in these industries are women compared to 18.7 million men.

There are slightly fewer white workers in high-risk industries relative to their share of the overall workforce, while black and Hispanic workers are slightly more present in these industries. But the differences are not great. For example, Hispanics account for 18% of employment in the entire economy and 21% of employment in high-risk industries.

Most of the workers most at risk of losing their jobs due to COVID-19 are low-wage workers Workers in these industries have below-average earnings. Across all industries, the average weekly wage in January 2020 was $975. In contrast, workers in food services and drinking places earned just $394 per week on average. Workers in other high-risk industries had earnings ranging from about $500 to $600 per week, with the exception of transportation workers, who earned $956 per week. Many of these workers do not have access to benefits such as paid time off and telecommuting, which some workers in other types of industries use to comply with social distancing guidelines.

As businesses in some of the high-risk industries try to adapt to the new economic reality to survive – for example, restaurants moving take-out orders and “contactless delivery” – many others, including entertainment-related businesses such as sports arenas and cinemas, are currently closed, either voluntarily or due to government mandates. In other cases, such as air transport, operations are greatly reduced by travel restrictions.

Employment outcomes in retail trade, which employs 16.2 million workers, are more uncertain. While brick-and-mortar operations are at higher risk because some are closed by government mandate and shoppers are otherwise encouraged to stay home, e-commerce providers can benefit.

Amanda Barroso is a former social trends writer/editor at the Pew Research Center.