Wage stagnation in leisure and hospitality during the cost-of-living crisis: the role of labor segmentation, cost burden, and structural constraints

The leisure and hospitality (L&H) industry, comprising the arts, entertainment, and recreation sector and the accommodation and food services sector, faces persistent workforce sustainability challenges, including poor working conditions, high turnover, and low wages. To advance L&H workforce sustainability, this study examines how the cost-of-living crisis affects wage vulnerability in this sector through the lens of the Labor Market Segmentation Theory (LMST). Using a panel dataset of U.S. industry-level statistics (2015–2024) using the Difference-in-Differences (DID) approach, we find that L&H wages fell significantly behind other sectors post-2022, widening the annual wage gap by $5,976. Results reveal a structural pass-through of operational cost burdens onto employees, compounded by constraints such as a younger workforce, a high proportion of nonsupervisory roles, and low certification rates, reinforcing the sector’s intensified vulnerability under macroeconomic shocks.