June 30, 2021 at 02:11AMEmily Barone
For 14 months, Mark Domitrovich dreamed of a time when his Chicago bar and restaurants would again be filled with the buzz and chatter of happy customers. On June 11, the day he had been waiting for finally came: the state of Illinois allowed all businesses that had been affected by COVID-19 restrictions to fully reopen.
But in the weeks since, things haven’t gone the way he had envisioned at his three establishments. At Lottie’s Pub, for instance, the indoor and sidewalk areas are open, but an area that functions as a beer garden is still closed to customers. At Frontier, a whole-animal restaurant where meats are cut tableside, doors are open only four days a week and it’s operating at about 60% capacity on those days. Of Domitrovich’s locations, only Ina Mae Tavern, a casual dining space with New Orleans-inspired cuisine, is operating six days a week, but still only at 80% capacity.
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Domitrovich’s business challenges no longer stem from wary diners or capacity limits that sent sales volume into a tailspin last year. Instead, he’s struggling to find and retain enough employees to handle a full house. “We’re not even close to being able to fully reopen,” he says. “Overall I had about 150 employees before the pandemic. I’m down 30%, and they are key positions.”
The labor crunch is widespread, affecting many industries that dimmed their lights during the pandemic and are now scrambling to turn them back on. From warehousing to trucking to hospitality, the shortage is rippling through the economy, causing supply-chain bottlenecks and driving up costs that are preventing many sectors from fully recovering. But it’s particularly pronounced at restaurants, which are short on chefs, washers and wait staff. In May, employment at eating and drinking establishments was still 1.5 million jobs below pre-pandemic levels, or down about 12%, according to the National Restaurant Association’s summary of data from the U.S. Bureau of Labor statistics.
Restaurants were battered by COVID-19—one in 10 permanently closed during the pandemic, according to estimates from food industry research firm Datassential. But as restrictions eased amid mass vaccination and plummeting COVID-19 case rates, those that had survived rushed to reopen in April, according to data from review site Yelp.
Customers, eager for a sit-down meal prepared by someone else and craving a return to socialization norms, started flooding in. Reservation data from OpenTable shows that, across the U.S., seating has largely returned to 2019 levels. By early June, 70% of Americans said they felt safe dining at a restaurant, according to a Morning Consult poll. That’s a major improvement over 2020, when no more than 42% said the same at any point that year.
Domitrovich says seating demand is back to where it was before the pandemic, and on some nights is even higher. But he lacks enough workers to serve all those customers, and diners are not as sympathetic to his business troubles as they were during shutdowns. “They can’t understand why the service isn’t great, or they’ll say, ‘I can see you have open tables, so why aren’t you seating me?'” he says. “We explain we don’t have enough people and they’re like, ‘well, you guys must be idiots and lousy at what you do.'”
Numerous independent restaurateurs and small franchise owners interviewed by TIME, from South Carolina to Hawaii, painted a similar picture. Large chains are feeling the crunch, too. In a late May earnings call, the CEO of Cracker Barrel noted that staffing was at concerning levels at one in four stores, and at critical levels at one in 10 stores. In a survey from the National Restaurant Association, which represents the spectrum of restaurants from white-tablecloths to fast food, 72% of operators rated recruitment and retention of workforce as their top challenge, up from 8% in January.
But while there may be industry-wide agreement over the extent of the problem, there’s less consensus about why the labor shortage is happening in the first place and what to do about it.
Pointing Fingers
In the U.S., the pandemic may seem to be ending. But the current hiring crunch is very much rooted in the pandemic, stemming from economic shutdowns, industry-specific restrictions and major shifts in consumer spending patterns last year. So as states declare a return to normal, employers find themselves facing a labor pool that is anything but.
Some workers in the most blighted industries have shifted to industries that were growing last year, like home-delivery services, or have even started their own companies. Parents and other unpaid caretakers, particularly women, have dropped out of the workforce entirely. And others have become wary of going to work, out of health concerns, burnout, or frustration with the ever-changing regulations. At the same time, hospitality employers are in fierce competition with one another to staff up in order to accommodate a tsunami of consumers who are determined to travel, be entertained and eat out. As a result, those looking for a job have plenty of options.
“Everyone decided at once to come back, so there’s a huge mismatch between supply and demand,” says Sridhar Tayur, professor of operations management at Carnegie Mellon University’s Tepper School of Business. “Because the pandemic lasted for so long, now there’s a lag.”
In normal times, such fierce competition for labor should drive down the unemployment rate, as people looking for work are enticed by higher wages and other perks. But the national employment rate remains relatively high, at 5.8% as of May. Why? Most likely because an enhanced federal unemployment program gives an extra $300 a week to those receiving jobless assistance. The program initially ran from late March through July 2020 with a $600 supplement, and was reauthorized at half that amount in late December. While the program has been a vital economic lifeline for many who lost their job during the pandemic, critics say it’s dissuading some recipients, especially those in low-wage industries, from looking for work.
Both labor and employer groups say the supplemental benefits are playing a role in the hiring crunch, but each side argues that the program demonstrates the ills of the other.
ROC United, a restaurant employee advocacy group, says flawed labor policies have kept wages artificially low and that reforms to ensure workers can earn a decent living were badly needed well before the pandemic. “The industry is based on a business model of minimum and subminimum wage in a lot of states around the country,” says Teofilo Reyes, chief program officer at ROC United. “And it’s a model that’s not sustainable for people. Workers were being paid poverty wages and they don’t want to go back to that.”
John Trammell, 26, was a host and assistant server at a Detroit restaurant for about two years prior to the pandemic. He liked caring for customers and working hours that allowed him to pursue his dancing career. But he left the industry in late 2019, disenchanted by the promise that he would eventually move into a server position, while enduring low and unreliable tip wages. He often worked morning shifts, he says, when tips were smaller, and he had to bank on generous customers to make ends meet. He got a new job at a Family Dollar store in March 2020, and has since been promoted to assistant manager. The pay only covers his basic expenses, but it’s reliable. And although he got more personal satisfaction out of serving diners than shoppers, he doesn’t miss the feeling of being undervalued.
“Why would I go and tend to people and maybe not get paid?” Trammell asks. “If a restaurant doesn’t add on gratuity, then I have to hope for a 10% or 15% tip on the bill, and that’s if they order an appetizer, entree, liquor and dessert.”
A recent survey by One Fair Wage, which advocates to end subminimum wages for tipped workers, found that 53% of all restaurant workers are considering leaving their job, with 76% citing low wages and tips as the reason. What’s more, the survey found that harassment increased and tips decreased during the pandemic—and that the decline was exacerbated when workers enforced COVID-19 safety protocols on customers. The group reported last year that millions of tipped workers were unable to access unemployment insurance because their earnings were too low for them to qualify. But workers who secured the enhanced unemployment benefits have a greater opportunity to figure out their next career move and negotiate better employment terms without risking financial cover.
Meanwhile, employer groups argue that enhanced unemployment pits employers against the government, forcing them to inflate salaries to compete with a taxpayer-funded safety net program—a challenge for restaurants and other businesses that operate on thin margins. The U.S. Chamber of Commerce, for example, has called for an immediate end to enhanced unemployment and, by its own estimates, says that one in four recipients is earning more in unemployment than they earned working.
Domitrovich has invited his former employees to return to work. But some are still collecting unemployment benefits, based on the notices he receives from the Illinois Department of Employment Security (employees lose benefits if they refuse to return to work, unless they can present a valid cause for refusing, as determined by that department). In Chicago, starting July 1, the minimum wage is $15 an hour, while the tipped minimum wage is $9. Domitrovich says his servers typically make upwards of $30 an hour including tips, but that might not seem enticing if they can get an unemployment equivalent of $23 an hour while not working at all. He’s also desperate for back-of-house staff like bussers, cooks and dishwashers, but the salaries prospective hires want are beyond what he can pay.
“We’re a smaller operation. I can’t pay dishwashers $24 an hour, full benefits and all that stuff,” he says. “It’s just not realistic, and I don’t think I can put myself in a position where I pay that to get through right now, and then when it’s all over with, you’re just bankrupting yourself.”
The enhanced unemployment program is scheduled to run through September. But half the states, run predominantly by Republican governors, are ending the benefits early in an effort to stimulate the job market. It could take months to know if that strategy pays off. But one early analysis from job site Indeed found that, among states that are not terminating the program early, job searches have been consistently below an April baseline. Among states that are ending it early, job searches spiked, but only temporarily. States that ended the program in mid-June had increases in mid-May but are back below the April baseline, and those that are ending the program in late June and July had noticeable increases earlier this month but are dropping back toward the baseline.
Carrie Schweitzer, 48, of Northeast Philadelphia, has been a server for more than three decades. During the pandemic, she worked at a diner-like establishment that paid about $3 an hour and didn’t compensate her for the tips she was losing while packing to-go orders—a task that often added up to two hours of her workday. She endured harassment from customers as well. She recalls one customer asking her to pull down her mask—and she did, for fear of losing the tip. “I needed that $3,” she recalls. “It turned into a toxic workplace.” She recently took a new job at another restaurant. Her salary is about the same as before, but she hasn’t been asked to do unpaid labor.
Still, Schweitzer has found more recently that she’s working harder to compensate for the influx of customers. Because waits are long, both for a table and for food when the kitchen crew is understaffed, customers get angry and frustrated. Those circumstances are out of her control, but she suffers when the customer writes “slow service, no tip” on the check.
“The meat of our pay should come from the employer,” she says. “Tips should be for a beer after work.”
One thing is for certain: the hiring dynamic has switched to favoring employees, allowing many workers to reassess their worth, ambitions and personal priorities. “After a long time of declining labor power, and now because of the additional payments and rapid rise in hiring, the labor force actually has more options,” says Tayur. “People are getting more careful about how they treat their labor. It’s now a precious commodity.”
Higher salaries, menu adjustments and robots
Employers, including restaurant owners, are now having to react to this paradigm shift. Their strategies are varied, in part because it’s unclear whether this new reality is a summer blip that will disappear when the expanded unemployment benefits expire in September or is here to stay, and thus may spur federal labor reforms.
Rene Denis, owner of Chao Pescao, a Latin-Caribbean restaurant in San Francisco, says that before the pandemic he’d typically receive 100 responses per help-wanted ad. Now, he gets only five solid candidates out of 10 viable resumes. “I can’t pick and choose,” he says. In response, he’s offering $20 an hour starting salary to try and set himself apart from those offering the city’s minimum wage of about $16 an hour. Other owners across the country are taking a similar approach; several told TIME that they’ve been paying staff 20% to 25% more, and yet are still having trouble filling shifts.
In many cases, owners are raising prices in order to afford costlier employees. According to the National Restaurant Association, menu prices in May were up more than 4% from a year ago at full-service restaurants, and up more than 6% at limited-service restaurants. Craig Dunaway, president of Penn Station East Coast Subs, a Cincinnati-based sandwich chain with 312 locations across 15 states, says that he normally sets suggested menu prices at the end of each year for his franchisees. But in May, he adjusted prices for a second time in six months, bumping them about 5% higher than the prices set in November.
“I will tell you, it’s not absorbing all the wage inflation,” he says. “If you have a sign in the window offering $9 an hour and you can’t get anybody, then you offer $10 and hour and $11. If you offer $11 an hour to start, and you have an experienced crew that’s been there one month or three months, then they’re making less, so you have to bump them up, too.”
Allison Yoa is testing a more unusual strategy: she’s leasing a robot at her Ocean City, N.J. restaurant, Island Grill Seafood & Steakhouse, which she runs with her husband Andrew Yoa. The robot, made by Richtech Robotics, looks a bit like a step ladder on wheels and can navigate around the dining area using sensors. It’s helped the staff to run food to tables and bus dirty dishes back to the kitchen, but it hasn’t fully filled the void: the restaurant had about 75 employees before the pandemic, and it’s now operating with about 45.
When a local news outlet published a story about the robot, some people called for a boycott of the Yoas’ business, arguing that they were depriving unemployed people of a job opportunity. Yoa says her critics don’t understand the struggle she’s had in finding employees, particularly because, during the peak summer season, she typically depends on foreign workers who come to the U.S. as part of a cultural exchange program, but that worker supply has been hampered by travel bans and visa backlogs.
“I can’t take a job away if people aren’t applying for it,” she says. “If you want to come in for a job, I’m here. We still don’t have enough staff. I need prep people during the day and I could still use washers, among others.”
Back in Chicago, Domitrovich is considering a move he never imagined he’d have to make: closing one or two days, or limiting hours by opening later and closing earlier. It’s the exact opposite of what he thought would happen after a long, difficult wait for COVID-19 regulations to lift. But he’s concerned that his executive chef, Brian Jupiter, who co-owns the restaurants with him, along with the other staff members, have burned out. He worries about their mental health and morale—and the possibility that they may not stick it out.
“We could easily backslide [if] a couple positions go missing,” he says. “We’re hanging on by a thread.”
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