The Restaurant Staffing Crunch Is Real. Scapegoating Unemployment Insurance Won't Help.

The benefits shaming will continue until morale improves

May 03, 2021

If you follow industry news even casually, you probably know restaurants are in the middle of a staffing crunch.

Across the country, cities have loosened capacity restrictions and scrapped social distancing measures (that’s true in Kansas City as well). Customers have responded by pouring back into dining rooms. For the first time in months, the central challenge for restaurateurs isn’t “making it through the lean times.” It’s scaling up production to meet pent-up demand.

Just take a look at the the KC Restaurant Jobs Facebook group. You could scroll for an hour there and see the same three posts, repeated endlessly: 1) advertisements for job openings; 2) complaints from restaurateurs and managers about not getting applicants for those job openings; 3) spicy memes from restaurant workers mocking 1) and 2).

Generally, industry folks are either in this camp:

The guy who posted this later called industry workers “entitled little spoiled brats” for asking for a living wage and benefits.

Or this one:

On the jobs board, this post has 79 comments.

Both camps are partially right. Plenty of former industry workers aren’t ready to get back in the kitchen (though the reasons are more nuanced than a lack of “passion.”) And dozens of restaurants are still advertising jobs that pay less than workers could receive through unemployment insurance (thanks in part to the $300 weekly supplement extended through the American Rescue Plan).

But restaurants paying "good” wages (in relative terms) are struggling to find help, too. So this week, I thought I’d dig a little deeper into the most commonly cited explanations for the staff shortage and highlight a few things I think are missing from those discussions.

1. “The Pay Is Too Damn Low.”

The intuition here is pretty obvious: most restaurants paid trash wages before a global pandemic forced workers who disproportionately lack health insurance to recite the day’s specials to tables full of anti-maskers. In an ideal world, those workers would receive extra compensation for taking on that risk. But we don’t live in an ideal world, and most employers were cash-strapped due to shutdown orders and other pandemic-related operating restrictions.

Now that things are returning to “normal,” disillusioned workers are wondering where the money is.

I’m pretty sympathetic to this argument. Restaurateurs have shouted down calls to abolish the tipped minimum wage for years, arguing that they wouldn’t be able to operate if they had to pay full price for labor.

But when people say “my business wouldn’t survive under X constraint” what they mean is “my business wouldn’t survive as it is today.” And as workers have repeated ad nauseum over the past few months: if your business model depends on the exploitation of workers, maybe it’s time to get a new model.

All the same, I don’t see this changing any time soon. Employers are reluctant to let go of tipping for a lot of (understandable) reasons. Sure, tips subsidize payroll, but they also help align the servers’ incentives with the company’s: drive up your check totals, and you’ll get bigger tips.1 Functionally, serving and bartending are sales jobs without the benefits.

The low-wage explanation isn’t fully satisfying to me for one reason: a lot of restaurants have raised their starting wages recently. Before the pandemic, I would regularly see posts offering dishwashers and line cooks $10 to $12 an hour. Now, I’m more frequently seeing $15 and up.

What’s changed, I think, is that small wage increases are no longer sufficient to lure workers back to the industry. In economics jargon, the labor supply has become less elastic.

Why? Well, if you’re a conservative business owner, you might point to Explanation 2:

2. “People Would Rather Stay on Those Sweet Unemployment Bennies”

When economists talk about the labor supply, they sometimes talk about overcoming individuals’ “preference for leisure.” I love that. Who among us does not prefer leisure? If you inherited $5 million from an eccentric uncle tomorrow, would you keep working at Applebee’s for the sheer thrill of it?

Some business owners have suggested that expanded unemployment insurance benefits have allowed individuals with a, um, preference for leisure to express that preference.

If you just look at sector-specific employment numbers in KC, this seems like a reasonable explanation. In March 2021, employment in the metro’s leisure and hospitality sector was down a whopping 15 percentage points relative to March 2020.2

But low employment doesn’t necessarily mean more people are receiving government benefits. To answer that, you’re better off looking at the insured unemployment rate—the share of the labor force drawing on unemployment insurance.

Disclaimer: I only have weekly state-level data for this, and it’s not sector-specific. But I think the trends are still interesting.

In early 2020—before the pandemic shut things down locally—Missouri’s insured unemployment rate averaged around 1 percent. It rose to a peak of 9.53 percent the week of May 9, 2020, before falling steadily to 1.92 percent by the week of April 17, 2021 (the last week for which data are available).3

To be clear, that’s still elevated relative to pre-pandemic levels. But it’s nowhere near as high as I would expect given its prominence in the staffing debate.

Which leads us to another potential explanation:

3. Furloughed Restaurant Workers Shifted to Other Industries (and They Might Not Be Coming Back)

This explanation has received less attention than the first two, but I think it’s credible. When the first shut-down orders took effect over a year ago, restaurants were forced to close and furlough or lay off workers.

Many of those workers filed for unemployment insurance, but the system was a clogged nightmare in the early days. Plus, no one knew whether Congress would keep the tap running. So a lot of people picked up whatever jobs they could find quickly—as contact tracers, as Postmates drivers, as grocery baggers.

Those moves were ostensibly temporary—something to pay the bills until restaurants reopened and labor demand ramped back up.

But the pattern held up as cities reopened for indoor dining. One career server I spoke to in June left his job voluntarily when he felt like neither customers nor his employer were taking COVID-19 seriously. He found a job in a factory instead. He hasn’t come back.

I’ve heard similar stories from several other workers since. The common thread tends to be that the pandemic was a “wake-up call” for them—a slow realization that the hospitality industry operates in ways that are uniquely hostile to its workers regardless of the prevailing wage.

Sure, it’s notable that companies like J. Rieger Co. are offering to hire dishwashers at $15 an hour. But if those prospective dishwashers could make the same wage stocking shelves at Target or Amazon or Costco…why wouldn’t they?

Retail jobs have their own challenges, but they beat scalding yourself in the dish pit at 10 PM on a Saturday while a 24-year-old general manager with a diamond earring and a coke addiction screams at you about spoons.

The industry had been in the middle of a cultural crisis before the pandemic. High-profile chefs and restaurateurs had started to be held accountable for sexual harassment, for wage theft, for verbal and physical abuse. More workers started speaking out against the elements of the work culture they found harmful—in New York, in the Pacific Northwest, in Tempe, in Kansas City.

And yet the industry has marched on mostly as it always has, with little structural change even in the face of unprecedented stressors. Should we be surprised that industry workers are starting to jump ship?

Before the #notallrestaurants crowd chimes in here: of course there are still kind, supportive, well-meaning restaurant owners. That people aren’t lining up to work with even the “good ones” might suggest workers are tired of being asked to rely on the benevolence of an individual employer in lieu of a more robust system that can support them no matter who signs the checks.

Consumer Demand Could Help (but Probably Won’t)

Diners often ask me who the “good” restaurateurs are in town so they can support them. That’s a pretty subjective question and harder to answer than you might think. A bartender might tell me their current gig is the healthiest, most supportive they’ve ever worked; a server at the same restaurant will tell me the owner is “toxic” and refuse to go into detail.

Instead of asking who the good restaurant owners are—a question that frames “good” as a matter of personal character, not institutional policy—we could ask narrower questions:

Do you pay your servers and bartenders more than the tipped minimum wage?
When workers are sick, do you insist they find someone to cover their shifts before you allow them to stay home?
Do you offer health insurance? If so, what percentage of the premiums do you pay? Is the remainder credibly affordable for an employee working at your restaurant without spousal support or a second job?
Do you have an employee handbook? If so, does it spell out not only employee rules, but also employee rights?
When you say you have a “zero tolerance” policy for harassment, do you explain what that means in practice? Do you provide specific contacts and a reporting protocol? Do you preserve a paper trail of employee reports?

Those aren’t questions consumers are used to asking about any industry. And to be honest, I don’t expect many people to care about the answers. With the Willows Inn and Port Fonda exposés, readers seemed much more appalled by the ingredient fraud and trashcan food, respectively, than the worker abuse.

But plenty of consumers will shift their purchases to a less exploitative option if you market it to them. Think about all of the people who pay a premium for “fair-trade coffee” and “cage-free eggs” simply because they perceive them to be more ethical.

Restaurants have an opportunity here—not only to lure back staff through good-faith commitments, but also to communicate to the diners that they can vote with their dollars in favor of a healthier, more sustainable work culture.

I know that might seem like a fantasy. But hey—desperate times call for desperate measures.