Even as the U.S. economy slowly improves, labor remains problem #1 for the restaurant industry. Economic indicators look great on paper, and the consumer wallet might even feel a little heavier than it did just a few years ago. Some of the conditions driving improvement for workers, however, is having an inverse effect on management needs within the restaurant industry.
To wit, as things keep getting better in the overall job market, it’s restaurant jobs that start to get particularly difficult to fill with quality workers that meet your budget expectations. We know restaurant industry turnover is on the rise again, with August 2017 statistics as follows:
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But why? There are six overriding factors that are driving labor problems for restaurants headed into 2018, having a national and local impact on your hiring success.
1. Low Unemployment
The national unemployment rate is at its lowest rate, 4.1 percent as of October 2017, in over a decade. While unemployment rates are varying from 2.3 to 5.2 percent in metropolitan areas sporting one million or more residents, even non-urban environments are seeing employment rates rise proportionately. And it’s driving a lot more competition for the available trained staff among restaurateurs.
“There are so many new jobs in the restaurant industry that there aren’t as many workers out there to hire,” said Victor Fernandez, executive director of insights and knowledge at TDn2K, a Dallas-based restaurant research firm.
Restaurateurs like Chef Ed Hollingsworth of the Chuck Wagon restaurant in Apopka, FL, have been struggling with keeping good workers, in some cases having to raise wages just to compete. And while a tight labor market may be driving wages up organically, the restaurant industry is still not immune from the risk of mandatory higher labor costs — via regional minimum wage increases.
2. Minimum Wage
The national minimum wage — dubbed the Fight for $15 — may be viewed as a sleeping giant in a largely Republican-controlled national government, but predictably, many local municipalities are picking up where the national fight left off.
27 states and 40 localities have set minimum wage above the national requirement of $2.13 for tipped employees and $7.25 for back of house workers, with the expectation of more to come unless a larger federal law is put into place. The cost of mandated and competition-driven wage increases is often getting passed on to consumers in the form of higher menu prices, but that is a risk for restaurant owners as well.
As the economy improves slowly, there is a double-edged sword in terms of results for the restaurant industry. Increased entrepreneurship is encouraged with low interest rates and rent prices in some localities dropping, but more businesses in an economy that is only growing modestly in terms of consumer spending means one thing: you need to compete for your customers — and that means a balancing act for restaurants between menu prices and cost control.
3. Local Law Changes
Minimum wage is not the only local law taking over employment concerns in the coming year, and it may make managing rules about hourly employment more confusing for the restaurant industry, as well as costlier.
It is true that the U.S. Department of Labor has moved to roll back last year’s expansion of overtime rules by the Obama administration, but individual states could easily implement worker protectors via state-level legislation, ballot initiatives, and even executive action. And this is amid word that the DOJ is working on its own revisions.
Depending on the sensitivity to worker rights expressed by your state legislature or governor, your restaurant could be seeing the very same raise permanently prevented from taking effect by the courts on a national level. And overtime is not the only pay-related matter hitting local and municipal ballots and in-chamber voting. Paid sick leave laws are expanding in many areas of the country. For example, Washington state guarantees one hour of paid sick leave for every 40 worked as of January 1, 2018. Austin, TX is considering a similar measure, despite Texas law not mandating it.
Meanwhile, New York City Mayor Bill de Blasio signed the “Earned Safe and Sick Time Act” into law, effective May 5, 2018. While the law doesn’t change the amount of already-mandated sick leave provided employees, it expands the use of such time to circumstances surrounding safety and recovery from abuse, including meetings with lawyers or police, court appearances, relocation time, and any other time required to maintain personal and psychological safety in the event of domestic abuse.
Any worker without permanent citizenship of the U.S. may be facing shaking ground in the coming months with Immigration and Customs Enforcement (ICE) raids on the rise, including “non-targets,” immigrants who were present at the time an ICE raid occurred, but were not the initial targets.
But the risk to restaurant industry employees and your restaurant’s turnover doesn’t stop at the employee’s own immigration status. Restaurant staff who are citizens themselves may have to face the possibility of their close family members being deported, perhaps even parents for those temporarily protected by the Deferred Action for Childhood Arrivals (DACA) program. If their family is at risk for deportation, does your employee stay or do they go?
With several municipalities establishing themselves successfully as sanctuary cities, and holding up against multiple federal court challenges, it can be difficult for those in the restaurant industry to know which laws need to be followed and which supersede others. Most recently, 11 cities also have united in a pledge to provide legal assistance to all immigrants facing deportation. This makes for a very complex legal atmosphere for restaurant owners managing staff at risk of deportation.
5. Competition in and across Segments
While it is true that most new hires — especially the most desirable, i.e. those with experience — are coming from within the restaurant industry, it’s become clearer that employees may not see the same distinctions managers or owners do in terms of restaurant style and segment.
“Restaurants are competing with each other for talent, and it goes beyond restaurants that look like your restaurant,” said Victor Fernandez. “People don’t get up in the morning and say, ‘I’m going to look for job in a QSR restaurant.’ Around 56% of restaurants say their primary competition for hourly employees comes from within the segment, and 37% say it’s restaurants across all segments.”
The common threads driving employee moves are no longer like work situations, but a better wage offer, a promotion, or richer benefits. Perks matter more than ever, no matter whether you are a quick serve or full-service restaurant.
6. Generational Divide
Expectations on just who could be your ideal employee are also a barrier for much of the restaurant industry, with current trends going against historical assumptions.
“Participation [among younger people] continues to decline,” observed Fernandez. “About 35% of people 16 to 21 years old have a job or want a job. That’s down about 10% in the last decade. So, we’re seeing less and less of that critical demographic.”
What the restaurant industry is seeing instead is an influx of Baby Boomers returning to the workforce post-retirement.
According to the National Restaurant Association, persons 55 and older are the fastest-growing sector of the restaurant industry work force. As Baby Boomers begin to exit the mainstream workforce, a traditional work ethic coupled with the possibility of living well into their 80s and 90s has encouraged many retirees to take up part- or full-time restaurant employment. In fact, the U.S. Department of Labor predicts that people 65 and older will continue to enlarge this workforce at least until 2024.
No matter who your applicants are or where they’re coming from, what is absolutely certain is that 2018 will not see labor concerns vanish — or even diminish — for the restaurant industry. How your business faces those concerns could mean the difference between surviving and thriving in the current economy.
Want more insight on practical ways to combat turnover and hire the best employees? Download our free eBook “How to Hire the Perfect Restaurant Employees” today!