Scott Barnett & Associates Blog
The Fight for 15

August 23, 2021
The "Fight for 15" is over. The market won…

In 2012, a number of quick service restaurant (QSR) workers in New York City walked off the job in protest over the level of pay associated with the minimum wage (then set both federally and in New York at $7.25/hour). Though the number of workers was really quite small, the impact of the walkout was large. Thus was born the movement known as the "Fight for 15."

Since that time, the minimum wage in New York has risen almost every year to about $12.50 today. By law, it will continue to increase every year until it reaches $15.

It has always been a problem finding good people in our business but in 2018 the restaurant industry was beginning to experience significant difficulties in securing workers.
I remember in the spring of 2018 I tried to make a bet with an operator in the Florida panhandle that he would be paying cooks $18 that summer. He wisely didn't take the bet.
COVID Worsened the Already Challenging Labor Market
The lack of available people continued to worsen all the way up to March of 2020 when the pandemic began.

For the next 12 months, the problem was motivating people to work when the threat of illness was always there. Despite the layoffs and furloughs endured by the house employees and managers, it was often difficult to find the cooks and prep workers needed for the massive increase in off-premise food preparation and dining.

As the country began to re-open in 2021, the industry found itself in the worst (supply of) labor market that I have ever seen. A few factors contributed to this.

  1. COVID continues to terrify people, even the vaccinated. Many are still unwilling to work in a public setting. And the Delta variant is only adding to that fear.

  2. There is little doubt that the extended unemployment benefits and eviction moratorium caused people to delay returning to work.

  3. At-home learning made it impossible for one parent to return to the work force if they could not afford child care (and sometimes even if they could).

Many restaurant workers may have looked at their job and said, "You know, I've been thinking about doing something else for a while. I'm not making great money and I'm not getting younger and my boss doesn't give a damn about me. Maybe it's time…"
But the factor that nobody seems to want to confront is that many employees were prompted by the pandemic to reconsider their options.
And voilà, a labor shortage turns into a labor crisis. Everywhere!

And I mean everywhere.

My brother and his wife were spending this summer in Montana. A couple of weeks ago, he told me they had given up going out to eat.

"I am sick of everywhere I go reading a sign saying, 'Thanks for your patience. We are short of help and having trouble satisfying everyone,'" he complained as he surveyed half empty dining rooms with people lined up to get in.

Light at the End of the Labor Shortage Tunnel
There are, however, some mitigating factors that will help restaurant operators facing this labor shortage:

  1. At some point, the world will come to the realization that COVID is not going away. Therapeutics will get better and more people will likely go about their lives irrespective of the risk, which includes working in a restaurant.

  2. The government assistance will come to an end in September thereby forcing the last holdouts into the labor market.

  3. Vaccine mandates (either by businesses or government) will become ubiquitous.

And there is one factor many have not yet considered: more migrants entering the labor force.

Data suggests an increasing number of undocumented people are crossing the U.S.-Mexico border in recent months. The Pew Research Center noted that the U.S. Border Patrol had nearly 200,000 encounters with migrants in July 2021, a number not seen since March 2000.

Operating under the fair assumption that more undocumented migrants are entering the country, it also can be safely assumed that these people are going to need jobs. Since there is little reason to believe that the U.S. government will be enforcing I-9 requirements or encouraging the use of E-verify anytime soon, these migrants will probably be a significant portion of the industry's new labor force. (For the record, I am not encouraging illegal hiring practices.)

All of the efforts undertaken during the pandemic that reduce labor will continue, including:

  • Smaller and more flexible electronic menus
  • Buyout product
  • Use of tablets in sit-down restaurants
  • Ordering kiosks
The industry has always been both capital and labor intensive but the labor component cannot destroy profitability; the industry will find a way.
The coming months will demand an equal level of flexibility and creativity in order for restaurant operators to navigate the shifting labor landscape and the public's reaction to COVID. It seems that many operators, most of whom have been in survival mode for over 18 months, think that we just have to get past Covid. If only it were so.
Struggling to maximize profits during a pandemic that seems that it will never end? Reach out to me today to learn more about strategies that can take you from the red to the black.
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