For decades, the story of the U.S. job market was one of widening inequality. Top earners consistently pulled ahead while low-wage workers were left behind. But in the years before and immediately after the COVID-19 pandemic, that story flipped. A historic surge in wage growth lifted dishwashers, waitresses, and hotel staff at a rate faster than executives and software engineers. Now, however, that window of opportunity appears to be closing.
The Post-Pandemic Pay Boost
From 2019 to 2024, the lowest-paid workers in America saw a remarkable turnaround. According to the Economic Policy Institute, the 10th percentile wage grew 15.3% in real terms, far higher than the 5.8% increase for median workers or the 6.9% increase for those at the 90th percentile. It was the fastest growth for low-wage workers in any business cycle since 1979.
The gains were widespread across low-paying industries. A dishwasher who made $12 an hour in 2019 could command closer to $15 an hour by 2024. Waitstaff in busy restaurants often saw their base pay rise sharply, sometimes alongside better tips as customers returned in force. Hotel housekeepers, who had been among the first to be laid off in 2020, found themselves in short supply when travel rebounded, allowing them to negotiate raises or move to higher-paying properties.
The Federal Reserve Bank of Atlanta reported that annual wage growth for workers in the bottom quarter by income hit 7.5% in November 2022, compared with 4.8% for those in the top quarter. “Businesses reopened and were desperate for workers—allowing many people in low-wage jobs to level up to better pay,” the analysis noted. One restaurant worker recalled switching to a competitor for “an extra dollar an hour, no questions asked.”
The Power of Policy and Minimum Wages
These raises were not only the product of market forces. Policymakers intervened aggressively during the pandemic, and their actions mattered. Expanded unemployment insurance, direct payments, and aid to states helped stabilize households and fueled a surge in hiring once the economy reopened.
Minimum wage increases also played a role. Between 2019 and 2024, twenty-nine states and the District of Columbia raised their minimum wage. In states with large increases, such as California, New York, and Florida, low-end wages grew even faster. For women, the effect was striking. In states with large minimum wage hikes, the 10th percentile wage for women rose 15.6%, compared to just 10.8% in states with no increase.
Black and Hispanic workers, long overrepresented in low-wage sectors, also saw meaningful improvements. Between 2019 and 2024, the wages of Black men grew at an annualized rate of 1.7%, compared with just 0.1% over the previous four decades. Young workers gained too. Teenagers and twenty-somethings, often employed in retail and fast food, experienced 2.6% annualized growth, compared with just 0.2% from 1979 to 2019.
The Slowdown Begins
Those rapid gains are fading. The July 2025 jobs report showed that average earnings in leisure and hospitality rose only 3.5% year over year, to $22.83 an hour. In contrast, information-sector jobs, which include software engineers and data analysts, saw wages rise 5.4% to $52.61 an hour.
The contrast with December 2021 could not be starker. Back then, leisure and hospitality wages were up 14% in a single year, while information-sector wages grew less than 2%. As one economist explained, “The best way that workers are able to get wage increases is to switch jobs, and you’re not seeing that as much.”
The Federal Reserve Bank of Atlanta now reports that wage growth for the bottom quarter of workers has slowed to 3.7%, the lowest since 2017. Meanwhile, those in the top quarter are still seeing 4.7% growth. A Bank of America Institute study confirms the trend: after-tax wages for households in the bottom third were up only 1.6% in June 2025, compared with 2.9% for those in the top third.
Why the Gains Are Fading
Part of the slowdown is due to a cooling labor market. The unemployment rate, which dipped to 3.4% in April 2023, has since risen to 4.2%. Employers are reluctant to fire but also hesitant to hire. That puts low-wage workers, who depend on job switching to boost their pay, at a disadvantage.
Historically, job switchers enjoyed significantly faster wage growth than workers who stayed put. But in July, for the first time since 2010, job switchers and job stayers both saw wage gains of just 4.3%. Without the option to jump to better-paying jobs, many low-wage workers have lost their biggest bargaining chip.
Spending patterns tell the same story. In June, households in the bottom third by income spent 0.2% less than a year earlier on credit and debit cards. In contrast, households in the top third increased spending by 1.2%. “That ties directly in with what we’re seeing with wage growth,” explained Liz Everett Krisberg, head of the Bank of America Institute.
What It Meant for Workers
For workers at the very bottom, the gains—though now stalling—were life changing. A hotel cleaner who made $11 an hour before the pandemic could, by 2024, expect closer to $15. That increase could mean paying rent on time, affording childcare, or cutting down on credit card debt. A retail cashier in Florida, where the minimum wage rose steadily under a voter-approved ballot measure, might have gone from $9 an hour in 2019 to nearly $13 an hour in 2024.
For younger workers, the period offered a rare chance to start careers with stronger pay. A teenager at a fast-food chain could begin at $15 an hour instead of the $10 or $11 that was common pre-pandemic. Many took advantage of the churn in the job market to demand higher pay or better schedules.
The Pessimists and the Optimists
Optimists say the recent wage compression proves that policy can shape outcomes. They argue that raising the minimum wage and maintaining a strong labor market could preserve gains for those who need it most. As one EPI report put it, “Wages grew for those who needed it most. Thoughtful policymaking going forward can help ensure that lower-wage workers continue to see improvements in their standard of living.”
Pessimists see storm clouds. They warn that slower hiring, rising unemployment, and new trade frictions will hit low-wage workers hardest. A Bank of America economist noted that poorer workers are often the first to lose jobs in downturns. If that happens, not only will wage growth stall, but the modest progress in narrowing income gaps may reverse.
The Bottom Line
The pandemic era created a rare moment when the balance of power shifted toward America’s lowest-paid workers. Dishwashers, retail clerks, and hotel housekeepers saw raises that allowed them to catch up, if only slightly, to professionals at the top. But as the labor market cools, the extraordinary gains of recent years are fading.
Whether the benefits prove lasting will depend on choices yet to be made. Without continued support from policy and a robust labor market, the era of big raises for low-wage workers may be remembered as a short-lived break in an otherwise long history of inequality.
