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The Long Term Effects of the Restaurant Industry's Labor Shortage We Aren't Thinking About

The benefits restaurants are offering to attract more job candidates will have a ripple effect that will change the industry permanently.

The labor shortage in the restaurant industry is a familiar issue by now, but the long term implications of it may be more widespread than anticipated. According to the latest available job report from May, there are still 1.5 million job openings in the food and beverage sector, leaving restaurants scrambling to serve the record number of customers returning to dining out post-pandemic.

Why Restaurant Workers Aren’t Returning to Work

Many members of the public and employers assume that restaurant workers aren’t returning to work because they can make more money staying at home with unemployment benefits. While that is partially true, there are many other reasons as well that point to a larger shift in the industry’s culture and expectations.

Snagajob released the top reasons why hourly workers are not actively looking for work in its 2021 Summer Hiring Report:

  • Want to work but unable due to family obligations (like taking care of children) or schedule: 38%
  • Burn out from long-term unemployment: 33%
  • Want to work but waiting for more people to be vaccinated: 16%
  • No jobs that fill their skill set: 12%
  • Waiting for unemployment benefits to expire: 4%

In addition to these factors, many people are trying to find more flexible and satisfying work than they had previously, which means the labor shortage may not entirely go away once unemployment benefits expire. 

According to a survey from BTIG Analyst Peter Saleh of 300 unemployed people from the restaurant, manufacturing and transportation industries, 45%  were waiting to return to work to try and seek out something with more flexibility. 18% were interested in pursuing the gig economy now that remote and online work is so readily available. Only 3% of them said they were making enough on unemployment to stay out of the workforce.

What This Means for the Restaurant Industry Long Term

The pandemic undoubtedly served as a bit of a wake up call for the restaurant industry. It’s dawned on many workers and employers that the way these businesses are structured may not be sustainable, leading to calls for higher wages and better benefits. While some restaurants are implementing these changes, they aren’t without their consequences.

An increase in wages needs to be offset somewhere, likely with an increase in menu prices and supplies. This will obviously impact the customer, driving up the overall cost of dining out. According to the BTIG survey, experts are worried these increases will cause consumers to abandon dining out altogether because they simply can’t afford it, but it seems the industry is still far away from that reality.

Chipotle, for example, is raising its average hourly pay to $15 an hour, a 15% increase from its previous $13 an hour rate. It also announced it will increase its menu prices 3.5 - 4% to offset the wage hike. McDonald’s also announced an hourly wage increase of 10% for its corporate workers, and it’s assumed the brand’s menu prices will do the same.

As two of the largest brands in quick service restaurants take this path, many are expected to follow. Although the higher wages will likely attract more job candidates, the cost will need to be passed onto the customer, and it will likely never come back down again. It is still up for debate exactly how this will affect inflation rates and overall standard of living rates.

In order to keep the costs at a manageable level, there are several long term solutions that will be established in the coming years. Menu simplification would allow restaurants to avoid any unnecessary complexities in ingredients and staffing. Smaller square footage with enhanced take out options would allow restaurants to keep output high without spending more on space and wait staff. And offering lifestyle benefits such as flexibility, healthcare and professional development in addition to or instead of a higher wage can provide workers with a more positive work culture. 

It’s unclear exactly where the industry will go in the future, but the air certainly seems to be changing to reach an equilibrium between restaurants and the people who run them.