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A “tail” of productivity in pet care services: new technology enables rapid growth

By Michael Schultz and Brian Chansky

If Fluffy, Spot, or Fido is a beloved member of your household, you are not alone—approximately 62 percent of Americans own a pet.¹ And if your household is like the average pet owning household, you spent about $770 on your pet in 2021. So, what are these dollars paying for?

According to the 2021 Consumer Expenditure survey, vet services and pet food account for 35 and 33 percent of total spending on pets, respectively. Other spending on pets is allotted to pet purchase, supplies, and medicine (23 percent) and pet care services (9 percent).² Although pet care services accounts for the smallest share of pet spending, both output and employment in the industry have grown rapidly in recent years.³

Each time you pay someone to watch Fluffy while you are out-of-town, take Spot for a walk while you are at work, or trim Fido’s coat, you and your pets are enjoying the benefits of the pet care services industry. This Beyond the Numbers article uses new labor productivity and related data series from the U.S. Bureau of Labor Statistics productivity program to examine how pet ownership trends are changing. Labor productivity is a measure of efficiency that relates the goods and services produced by an industry (also known as output) with the number of hours worked that went into producing those goods and services. Productivity data for the pet care services industry show trends such as increased pet ownership; younger pet owners choosing to pay more for individualized, quality pet care; and “pet tech” bringing the gig economy to pet owners and integrating technology into how they care for their pets.⁴

Recent output growth in pet care services

Revenue in pet care services more than quadrupled from 2004 to 2021, reaching $10.7 billion in 2021. According to the latest Economic Census data from 2017, pet boarding services accounted for the largest share of total pet care revenue, followed by pet grooming services and pet sitting and dog walking services.⁵ (See table 1.)

Table 1. Revenue in pet care services, in dollars and percentage share

Service	Revenue (in dollars)	Percentage share of total revenue
Pet boarding services	$2.3 billion	44%
Pet grooming services	1.6 billion	30
Pet sitting and dog walking services	631 million	12
Training services	263 million	5
Sales of pet food and supplies	145 million	3
Other revenue	377 million	7
Total revenue	5.4 billion	100
Source: U.S. Census Bureau.

Output in pet care services is measured as constant dollar sales, derived by deflating industry revenue with BLS consumer price indexes to remove the effects of inflation.⁶ Output grew a cumulative 144.6 percent from 2004 to 2021, equivalent to 5.4 percent per year. The most rapid period of growth was from 2012 to 2019, when output accelerated by a cumulative 57.0 percent (6.7 percent per year). Despite this impressive growth, output in pet care services fell 15.6 percent from 2019 to 2020 as a result of the COVID-19 pandemic.

The rise in output from 2004 to 2021 has been driven by growth in pet ownership and pet spending. For generations, Americans have loved owning pets. And with each passing generation, a larger share of Americans have owned pets. In fact, from 1988 to 2022, pet ownership increased 6 percentage points to 62 percent of all Americans. To understand the growth in the pet care services industry, it is useful to examine the three generations that make up the largest shares of pet owners as of 2021: millennials (32 percent), baby boomers (27 percent), and Generation X (24 percent).⁷

Generational spending on pet care services

According to the latest consumer expenditure data, baby boomer spending on pet care services has been consistent from 2017 to 2021, increasing by 6.9 percent (about $4).⁸ (See chart 1.) More substantial shifts in spending came from Generation X and millennials.

From 2017 to 2021, Generation X’s spending on pet care services rose rapidly, by 67.6 percent. At $55, Generation X spending was below baby boomer spending in 2017 but rose above it to about $92 in 2021. One potential factor that may have driven this rise in spending is the growing share of “empty nesters” in Generation X.⁹ As more millennials moved out of their childhood homes, their Generation X parents may have purchased new pets and replaced spending on their children with spending on their pets.

Like Generation X, millennials rapidly increased their spending on pet care services. Millennial spending was only $38 in 2017, but rose 75.1 percent to $67 in 2021. This increase in spending may be driven in part by recent increases in millennial income. Millennials have achieved a higher median income than either of their generational predecessors. Census data shows that the median personal income of a 40-year-old millennial is $49,000 per year, 14 percent more than Generation X made at age 40 and 25 percent more than baby boomers made at age 40.¹⁰ As millennials increased their earnings, they may have used the extra money to spoil their beloved pets. In fact, a recent survey finds 76 percent of pet owning millennials say they are more likely to splurge on something for their pet than they are to splurge on something for themselves.¹¹

The recent trend of “pet humanization” seems to be changing American pet ownership as well.¹² For the modern pet owner, caring for a pet means much more than simply buying a bag of kibble and a bone. Now, there is an array of new pet care services an owner can purchase: a day at the spa including a “pawdicure,” training sessions with a pet behavioral therapist, or even a birthday “pawty” coordinated by a professional pet party planner. These emerging trends help explain the revenue and output growth in pet care services in recent years.

The rise of “pet tech” and small businesses in pet care services

The way pet care services are provided has changed as dramatically as the type of services offered. Pet technology, or “pet tech,” is a new development in the world of pet ownership, bringing the gig economy to pet owners and integrating technology into how they care for their pets.¹³ Pet tech ranges from mobile applications and devices that allow owners to monitor their pets while they are at work to platforms that connect owners with local dog walkers, groomers, and even on-demand veterinarians. The pet tech market reached $5.7 billion in 2020 and is expected to reach $20 billion by 2027.¹⁴

New and innovative pet care services require specialized labor from workers in the industry. As a result, from 2004 to 2021, the number of hours worked in pet care services more than tripled, rising at a rate of 7.8 percent annually. To put this in context, hours worked in veterinary services only grew at an average annual rate of 3.2 percent during the same period. Hours worked in pet care services increased at the sharpest rate between 2009 and 2019, growing at a rate of 10.2 percent per year.

Small establishments and self-employed workers are especially prominent in the pet care services industry. Demand for individualized pet care from quality-minded pet owners combined with the advancement of pet tech allowed small establishments to both compete and thrive with larger firms. In the past, self-employed groomers, dog walkers, and pet sitters would likely find it difficult to expand their business beyond their immediate neighborhood or circle of acquaintances. To succeed as a full-time job, it may have been necessary for these self-employed to invest in their own shops or kennels. However, smartphone technology and platform applications now make it possible for independent pet care service providers to reach a much larger pool of potential customers.

The BLS productivity program estimates an industry’s number of self-employed workers and their total hours worked using household responses from the BLS Current Population Survey (CPS).¹⁵ According to this data, there were about 5,000 self-employed workers who worked approximately 7.4 million hours in pet care services in 2004. (See chart 2.) By 2021, self-employed workers had more than tripled to 17,800 and worked about 24.1 million hours. 

The growth in employment and hours worked by payroll workers has been no less dramatic. From 2004 to 2021, both payroll employment and hours worked grew by an average annual rate of 7.7 percent.¹⁶

Taking a closer look at the payroll employment data, we find that small establishments compose a particularly robust portion of the pet care services industry. (See chart 3.) According to the latest Economic Census data from 2017, over three quarters of pet care services establishments operating for the entire year had fewer than 10 employees. Data from earlier Economic Censuses (2007 and 2012) show that small establishments greatly outnumbered larger ones in those years as well.

Small businesses, both employer and self-employed, are a core aspect of pet care services. In part, this is likely attributable to a low barrier to entry. Pet care services can be provided without large capital expenditures or the need to hire a significant number of workers. The pet tech application platforms allow almost anybody to “dip their paw” into the industry with minimal capital or risk.

However, it is worth considering that small businesses may have a market advantage in pet care services. As millennials and Generation X pet owners demand more elaborate and individualized pet care services, small businesses can provide those services with greater flexibility. In some sectors, economies of scale allow large firms to gain market share and force small businesses out of the industry. In other words, large firms can often leverage their cost advantages into lower prices that consumers prefer.¹⁷ When it comes to their pets, consumers are not as sensitive to prices, nor are they willing to cut corners on quality. Thus, it seems that large firms in pet care services are not able to price their smaller competitors out of the market.

Labor productivity trends in pet care services

With all the recent growth and change in the pet care services industry, one might be surprised to find that the pet care services productivity statistics do not reflect the same pattern. From 2004 to 2021, labor productivity in pet care services fell a cumulative 30.1 percent (2.1 percent per year). (See chart 4.) Productivity declined most rapidly from 2006 to 2011, falling at a rate of 7.4 percent annually. From 2011 to 2021, productivity stagnated, declining 1.8 percent per year. Productivity rose moderately by an annual 4.6 percent from 2019 to 2021 as output recovered more quickly from the effects of the COVID-19 pandemic than hours worked did. Despite this slight increase, the long-term productivity trend in pet care services has been one of decline.

So, why has labor productivity in pet care services lagged? Consider the example of dog sitting services. The output is defined as the inflation-adjusted revenue from caring for the dog, while the hours worked are defined as the number of hours of work necessary to care for the dog. Before the rise of pet tech, most dog sitting services were provided by a kennel. With enough cages and equipment, caring for many dogs at a kennel would only require a few hours of work from a small staff. Self-employed dog sitters would have been limited in the scope of their operation and would most likely work a limited number of hours within their local area.

Now, consider how dog sitting may be provided through the gig economy. Using a modern dog sitting platform, a pet owner can easily find an individual willing to watch their dog. However, without the capital to care for more than one or two dogs at a time, the sitter will be putting in more hours of work per dog than the kennel. The owner of the dog may even prefer an individual to a kennel because the individual will be providing more direct attention (hours worked) to their dog.

If this direct personalized care is in high demand, other dog sitters may start to compete on this basis, offering other complementary services to attract more customers. There is some evidence of this on popular pet care services platforms. Pet owners are given the option to filter for sitters that only host one pet at a time, offer bathing and grooming, or even provide drop-off and pick-up services.¹⁸ Some hosts even advertise that they will take your pet out to dinner with them or allow them on the couch for snuggles. Competition based on personalized care simply requires more time, causing hours worked to outpace output and ultimately lower productivity.

Annual revenue for payroll establishments is reported in the Census Bureau’s Service Annual Survey. Payroll establishment revenue climbed from about $1.7 billion in 2004 to over $8 billion in 2021, equivalent to an increase of 9.6 percent per year. (See chart 5.) This rate of revenue growth far outperformed the revenue of the self-employed. Self-employed revenue comes from the Census Bureau’s Nonemployer Statistics and increased from $941 million in 2004 to $2.5 billion in 2021, a growth rate of 6.0 percent per year.

Combining the output results with the hours data shows us productivity growth in pet care services. From 2004 to 2021, payroll worker hours grew slightly faster than self-employed hours. Over the same period, payroll establishment revenue grew by a cumulative 378 percent and self-employed revenue grew by 171 percent. Thus, the productivity trends differ between payroll establishments and the self-employed. Payroll establishment revenue grew quicker than hours, implying positive productivity growth. Self-employed revenue grew much slower than hours, implying a decline in productivity. 

Productivity in pet care services increased for both the self-employed and payroll workers in 2020 as a direct result of business closures and government-mandated restrictions tied to the COVID-19 pandemic. From 2019 to 2020, self-employed hours fell 42.0 percent and payroll worker hours fell 17.8 percent. Over this same period, revenue fell 21.2 percent for the self-employed and 10.6 percent for payroll establishments. The rapid decline in hours combined with the moderate decline in revenue implies a rise in labor productivity. Despite this brief uptick in productivity, the overall trend for the pet care services industry over the last decade is still stagnant.

Pet owners have made pets part of their family, and expect their pet care service providers to show the same level of care and attention to detail that they do in caring for their pets. So, it makes intuitive sense that labor hours would outpace output for both the self-employed and payroll establishments. It is also logical that the self-employed would generate particularly low productivity growth in comparison to larger establishments. Pet tech may have given individual gig workers the ability to provide specialized pet care, but those workers lack the capital that allows larger establishments the ability to provide pet care services with fewer labor hours. 

Although output in the pet care services industry rose considerably over the last decade, the labor hours necessary to produce that output and please pet owners increased even faster, leaving pet care services productivity in the statistical doghouse of stagnant growth.

Conclusion

Pets have been a treasured part of American life for generations, consistent through periods of economic growth and turmoil, including a pandemic. However, pet ownership trends are changing as younger pet owners choose to pay more for the quality care they believe their pets deserve. In pursuit of more individualized service, owners integrated technology and the gig economy into pet care, shifting who competes and how they compete for pet owners’ loyalty. This need for individualized service has caused labor hours to continually outpace output. Growth in pet care services productivity has therefore been left somewhere between a “ruff” and “impawsible” place over the last decade.

This Beyond the Numbers article was prepared by Michael Schultz and Brian Chansky, economists in the Office of Productivity and Technology, U.S. Bureau of Labor Statistics. E-mail: productivity@bls.gov; telephone: (202) 691-5606.

If you are deaf, hard of hearing, or have a speech disability, please dial 7-1-1 to access telecommunications relay services or the information voice phone at: (202) 691-5200. This article is in the public domain and may be reproduced without permission.