Wage Penalty in Hospitality Sector

Abstract Book of the 7th International Conference on Tourism Management and Hospitality

Year: 2026

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Wage Penalty in Hospitality Sector

Albian Krasniqi, Rory O'Farrell

ABSTRACT:

Workers in the tourism and hospitality sector have been systematically and persistently underpaid compared to those in other industries (Muñoz, 2009; Santos, 2007; Doğru, 2019). This persistent wage disparity is often attributed to the sector’s seasonal employment patterns and the prevalence of low-skilled labour, both of which contribute to a structurally low-wage equilibrium. Over time, this has fostered what Riley (2003) describes as a “tolerance for low pay,” suggesting that low wages have become institutionally embedded within the industry.
This study provides the first systematic evidence of such a pay penalty across most of Western Europe’s hospitality sectors, with the gap being particularly pronounced among top quantile earners.
The analysis draws on microdata from the Structure of Earnings Survey (SES), covering seven Western European countries. We apply recent unconditional quantile decomposition techniques (Firpo, Fortin, and Lemieux, 2009; Firpo, Fortin, and Lemieux, 2018) to decompose the wage gap between hospitality and non-hospitality sectors into two components: (i) the explained part, capturing differences in wages due to observable characteristics such as tenure, age, gender, and occupation, and (ii) the unexplained part, reflecting wage differences not accounted for by these characteristics and interpreted as a hospitality sector wage penalty.
Findings indicate a persistent wage penalty for hospitality workers in Western Europe, ranging from 4% to 16% per hour, on average. Among top earners, the penalty is significantly larger, reaching up to 35% per hour in the United Kingdom. The penalty persists across education levels, suggesting that low pay in hospitality is not solely a result of lower educational attainment. Moreover, the penalty remains evident when hospitality workers are compared with those in the retail sector or other industries individually, confirming its robustness across alternative reference groups.

Keywords: Hospitality, Wage Penalty, Wage Differentials, Tourism