The cost of labor shortages in US restaurants.

Worldwide, restaurants were among the hardest hit by the COVID-19 pandemic. As restrictions are lifted and vaccinations rise, restaurant owners were optimistic heading into the summer, particularly for the opportunity to make up for financial losses incurred in 2020.

As expected, diners came back in droves, many of them with a surplus of savings they were ready to spend. However, restaurant workers have not been as quick to return — which is causing major problems.

I previously wrote about the causes of the labor shortages in Europe. Today, I will examine the factors that are keeping chefs, washers, and wait staff from returning to work in the US.

An ongoing wage dispute.

According to a recent survey by One Fair Wage 53% of all restaurant workers are considering leaving their job, with 76% citing low wages and tips as the reason.

These low wages have been a long-standing pain point in the industry, and beyond. (For reference, the federal minimum wage for servers and other tipped employees is $2.13/hour and in 2019 the median server salary was $22,890.) However, the unemployment benefits offered during the pandemic gave workers new leverage.

While not all tipped workers were able to access unemployment insurance last year because of low earnings, many were able to qualify for the enhanced unemployment benefits. With the additional $300 a week from the Federal government, many restaurant employees were able to make a comparable amount to — if not more than — when they were working. The pay was also more predictable, and allowed them to avoid exposure to COVID-19.

With a smaller pool of available workers, restaurant owners have entered a bidding war for talent. They are offering higher wages, sometimes exponentially, and other incentives like signing bonuses. As a result, average pay for hourly workers at restaurants, hotels, and entertainment venues spiked 2.3% in June alone — an increase of this magnitude usually happens over the course of a year, rather than a month.

A breaking point.

Along with poor wages, the US restaurant industry has long been plagued by less than ideal working conditions. Employees have cited long hours, lack of benefits, erratic schedules, harassment from management and customers, among other issues. When COVID-19 hit, there was also widespread fear about the health and safety of workers.

For many, the pandemic was the last straw. They used their time off, and the security granted by their unemployment benefits, to pursue jobs in other industries. Others took the opportunity to retire or leave the workforce altogether.

Looking up.

At times, the outlook for the restaurant industry has seemed bleak, but experts believe that the worst may be behind us. Many schools will resume in-person learning in the fall, which addresses issues of childcare. And the extra unemployment benefits are scheduled to end in September.

And the ship is already beginning to right. In July, American employers added 943,000 jobs — 327,000 of which were in hotels and restaurants.

While it may take time before the restaurant industry is staffed at pre-pandemic levels, especially as we navigate the delta variant, I am confident that we will come out on the other side — in some cases for the better.

Until then, we should all show extra appreciation for the staff who have come back to our favorite restaurants.

Danilo Diazgranados is an investor, collector, and lover of fine wines and a member of the prestigious Confrérie des Chevaliers du Tastevin, a fraternity of Burgundy wine enthusiasts.

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Investor in and lover of fine wine and restaurants.

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Danilo Diazgranados: On wine and food

Danilo Diazgranados: On wine and food

Investor in and lover of fine wine and restaurants.

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