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Why Restaurants Are Experiencing a Labor Shortage

Thanks to takeout and delivery, grocery store restaurants, parking lot dining rooms, and other ingenious acts of fortitude, many in the restaurant industry made it to the other side of a brutal year.

As spring slowly morphs into summer, these operators face another crisis—an increasingly disruptive labor shortage.

Hudson Riehle, Senior Vice President of the Research & Knowledge Group at the National Restaurant Association (NRA), noted the continuing growth in restaurant sales as consumer confidence grows. He also addressed the labor shortage, “…It is important to note that 90% of operators say recruiting and retaining employees will likely be more difficult after the pandemic is over than it was before it began.”

According to the NRA’s latest survey, 42% of limited-service operators and more than half of full-service operators cannot reopen at maximum capacity due to labor shortages and the inability to hire enough staff.

The nearest estimates claim that there are still 1.7 million unemployed people that worked in the restaurant industry before the COVID-19 layoffs began. Where are they? Experts suggest that there are several reasons why these workers are not returning to the workforce.

Why Are Workers Not Returning to Restaurants?

Enhanced Unemployment Benefits

The U.S. Chamber of Commerce has blamed the $300-a-week federal jobless benefit for the current and expanding labor shortage. According to the Chamber’s analysis, this supplemental benefit provides more money in unemployment for recipients than they would earn if they were working. Currently, the federal unemployment payments are set to expire on Labor Day.

States looking at a strong tourist season and increasing diners due to pent-up consumer demand have opted out of the federal aid early in hopes of bringing more workers back. So far, 23 states are canceling the extended federal unemployment benefits as soon as June. Arizona, Indiana, and Tennessee have set the expiration date in July.

Some states are also offering financial incentives for employees to return to work. Arizona is offering a $2,000 bonus for people who return to work full-time, with some restrictions. Montana, Oklahoma, and Connecticut workers could see a $1,200 bonus, and the unemployed in New Hampshire that return to the workforce may get $1,000.

Amazon’s Hiring Spree

Amazon has been blamed for numerous changes in America’s landscape, including diminishing malls and retail chains. Now, its growing workforce is, like a moth to a flame, drawing in disgruntled restaurant workers.

Daniel Zhao, a senior economist at Glassdoor, told Bloomberg Businessweek that workers leave food service for higher-paying jobs at Amazon’s fulfillment centers. At the mega-online retailer, wages start at about $17 an hour. The New York Times reported that Amazon hired 1,400 new workers every day in 2020.

Todd Graves, CEO of the 530-unit Raising Cane’s Chicken Fingers, told Bloomberg that this is the toughest hiring market he’s seen in the 25 years he’s been in business. The instability brought on by the pandemic, as well as the hard work and long hours associated with the industry, has left many one-time restaurant employees thinking about change—permanent change.

Considering the thin profit margins restaurants operate under, many independent operators simply can’t compete with the likes of Amazon. Raising wages and remaining open are contradictory terms. The big chains, however, are turning to higher wages in an attempt to bring in workers. By the end of June, Chipotle Mexican Grill Inc. will raise its kitchen workers’ hourly wage from $13 to $15. The chain is hoping to hire an additional 20,000 employees.

Vivian Wang, CEO of Landed, a mobile app that connects hourly workers with employees, reports that the wages for BOH line cooks has increased by almost 20%. Atlas Restaurant Group told Restaurant Dive that their hourly employees make at least 10-15% more than they were in 2019.

On May 19, in 15 U.S. cities, McDonald’s franchise employees took to the streets in a one-day strike to obtain an increase in wages.

Looking for Stability

While the restaurant industry has been particularly hard hit by the labor shortage, other sectors also face a diminished workforce. Restaurant employees that returned to work only to be laid off again when indoor dining restrictions returned are heading for these industries in search of greater stability, better working hours, and better pay.

Fear of Contracting COVID-19

With the spread of vaccinations and most states in full swing, it’s hard to imagine that fear of getting COVID-19 still lingers. But for those who have seen their families affected by the virus, the apprehension is very real. Many are also concerned about the triple-mutant COVID variant that is currently devasting India, wondering if the nation is really as safe as people would like to believe. Potential workers with these fears are either in a wait-and-see mode or are waiting until they, themselves, are fully vaccinated.

Carlos Gazitua, CEO of Sergio’s Family Restaurants in Florida, told CNBC that they expect record-breaking numbers this summer, with hotels already booked up. Gazitua has increased wages and has three staffing agencies searching for employees for the 14-unit chain that has served Floridians since 1975.

Restaurant Dive reported on the many restaurants in the same labor-less boat. One restaurant posted a “Now Hiring” sign for six months– two applicants responded. Others report that candidates aren’t showing up for interviews.

Restaurants have turned to reduced hours in an attempt to limit overloading their current employees. Other operators are paying retention bonuses, hosting recruiting events, and hiring inexperienced staff in hopes of getting them trained and up-to-speed by yesterday.

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