> Our industry is very much in need of a temporary visa program for the low-skilled, essential workers
I think this is interesting because I hear a lot about a shortage of tech workers and the consensus I hear is that there really isn't a shortage, employers need to pay more. Or they need to offer training.
But here is another industry facing labor shortages. Is it really a shortage? My impression of restaurant work is that the kitchen staff get paid less and work more than the wait staff and there is little room for advancement, other than starting your own restaurant.
> I think millennials are really focused on quality of life
Ha! As opposed to what? Working really hard for some reason?
> He has also tried to clean up the kitchen in other ways. “You can’t come to work and scream at people,” he said. “When I was a younger chef, that was how I interacted with my team.
My god, imagine the horror of not being able to come into work and just scream at your employees.
If you can't afford to pay enough to retain labor, you need to charge more for your products or give labor equity. If you can't make money doing this (ROI not good enough if equity is diluted or people won't pay more for what you're selling) then you should not be in business.
The issue I have with restaurants saying they cant pay more is that FOH staff often bring in close to 10x of BOH. So there's actually plenty of money to go around, it just comes in the form of a mandatory 20% tip to a single person. Eliminate tipping, raise your prices, pay all your employees on an equivalent scale, give them healthcare and vacation time, and watch the "shortage" go away.
The labor market is tight, near full employment. In very constrained locations (like SF) wages for kitchen staff have gone up significantly. Other places it's just hard to find people to do the job for what the market will bear.
We're reaching the point where we seriously need to think about assisting internal migration in the country, but before that can kick in we'll end up with a recession to fight off inflation.
The founder of BET is saying that this tight labor market has enabled people who previously were chronically unemployed to become employable in this economy.
It's not that we don't have able bodies available, we do, what we don't have is people already trained in a skill set available for cheap. We have people who could be trained, and we're seeing that, and we're seeing a reduction in undocumented labor undercutting legal labor. This is good for the American worker, even as the price of goods may rise marginally.
Also often the more marginal workers who do want to work have no cheap way to get to where the work is. In a world of Uber buses get eliminated, and the poor cannot get to work.
In general a lot of these cities in the US have a tacit agreement with these kinds of businesses that they are allowed to violate labor regulations, health regulations, immigration regulations, wage regulations, so that they are able to provide lots of labor intensive services in high cost regions.
If the municipal government wants to shut down any restaurant in the city, they can under a panoply of pretexts. If the Federal government is allowed to enforce the various Federal laws and regulations being ignored, it can also.
A vibrant restaurant culture is a nice-to-have, not a must-have.
These municipal leaders cannot talk out of one side of their mouths about the wonders of a well-regulated economy and then out of the other side demand the privilege to apply those regulations inconsistently in a corrupt fashion.
Considering that there are too many restaurants in many of these cities with failure rates in the stratosphere and profits questionable except at the most hyper-successful locations, this is not a bad thing for such an industry to contract to correct the oversupply.
Notice in the article itself that it talks about restaurants turning to 'unconventional' labor pools like ex-addicts, ex-cons, underemployed veterans, and people they have fired before because it is no longer so easy to violate labor and immigration regulations with impunity. Is that so bad? Does this not solve more general problems internal to our society rather than trying to paper over them by importing more people?
We had a restaurant near us that ran as a co-op. The food was good, the service was OK (it was very self-serve, which was fine, but it was communicated poorly...), but they repeatedly could not stay afloat or manage a budget over a long time period.
That's obviously just an anecdotal example, but I don't know of any co-ops aside from REI that seem to really stick around and do well longterm.
Seems like they should just raise prices on the food to control demand and provide additional capital for paying workers. Basic economics 101. What am I missing here?
Restaurant customers are quite sensitive to price increases. This is why restaurants sometimes reduce the size of meals instead of raising prices.
In any case, the real reason for the article and its complaints about a "tight" labor market is to lobby for low wage immigration:
"Our industry is very much in need of a temporary visa program for the low-skilled, essential workers,” said Shannon Meade, the National Restaurant Association’s director of labor and work force policy. "
Yep. Having worked in the restaurant industry, it also means they don't want to pay healthcare, give sick / vacation time, or even hire enough employees to cover all shifts. ("Oops, no one is scheduled for tonight, guess you have to work a double!") It's way easier to exploit temp visa workers who are a missed shift away from getting deported.
I actually really loved working in a kitchen but it's absurd how bad the labor conditions are.
Demand functions aren't generally straight like the illustrative graphs used in intro classes. What you end up with is easy replacement with similar goods. Being able to differentiate goods in food-service seems like a very difficult proposition without some sort of brand recognition. Because of that, if someone can purchase some food that is equal or close enough to equal at a significant (significance as defined by the consumer utility) then they will go with the cheaper option.
While raising prices seems like the simple solution to this issue, the reality is likely that they would quickly - if not immediately - price themselves out of the market.
It feels like a straw man argument. Food is a basic necessity, and there is a threshold where you grumble but still open your wallet to pay up, rather than walk away. Overtime you get de-sensitized to the higher price and the fact that the everything on the dollar menu actually cost $1.29 doesn't phase you.
I think the restaurant industry should look more holistically at options for dynamic pricing ala Uber. These could increase their margins enough to actually address the labor costs more effectively.
Well, food is a basic necessity but restaurants aren't. Prices going up at a restaurant doesn't necessarily mean that the local Safeway needs to raise their prices as well.
Supply and demand curve apply to labor too though, right? At some point (in the near future if the premise of the article holds), the labor won't be available at the current price. Restaurants that won't raise wages won't be able to offer good service to their customers, and ones that do raise wages will be able to offer good service. The competing classes of restaurants are no longer substitute goods.
(Not an economist, for the benefit of anybody who doesn't find that patently obvious ;-)
ETA: I don't see the reason for the downvotes on the parent. It seems like a pretty reasonable explanation as to why there would be a brutal race to the bottom in restaurant industry. But again, my economics background is limited. Maybe somebody could explain the flaw in the argument?
This may be a local phenomenon caused by bad ownership or management, but the fast food restaurants near me have really been struggling to stay well staffed, resulting in them no longer being "fast". It seems like some of them are propped up by the brand and cheap prices instead of acceptable service. I wonder if there is a reduction in the number of teens and college students seeking out these kinds of jobs. Maybe teens just don't get jobs anymore, and college students don't have time to work for a wage that'll barely cover their living expenses
So I’m just saying, over here in the other Washington, Seattle has raised the minimum wage. And after a bunch of whining about how it was going to ruin their margins, restaurants have raised their prices, and everything continues the same as before. Maybe DC restaurants could, I dunno, raise their prices a little and pay their staff enough to get by? Nah. It’ll never work.
How do you think the folks for whom dining represents a significant expense feel about these raised prices?
Everyone talks about the minimum wage’s effects (or not) on employment, but I’d be way more concerned with its (potentially very regressive) effects on prices.
I live in Seattle. Prices for food have indeed gone up a lot. There are clearly still a lot of people here who can afford it, based on how very busy the (good) restaurants still are.
I mean eating out is a luxury, right? Better to be paid a decent wage and have the option to avoid the luxury than not to have the money in the first place.
Most people who make minimum wage are members of multi-income households (like teenagers or spouses working part-time), and don't have any problem with costs of living.
And for those who are not members of multi-income households? Cause from what I can see, only about half of the people making minimum wage (according to BLS statistics) are teenagers. That still leaves a lot of people who do rely on the minimum wage, and are thus not able to afford the rising costs of living.
I think they can learn how to cook. 2 people can eat pretty darn well for $100 spent on groceries in a week most anywhere in the US. That covers, what, 2 or 3 dinners out at a sit down place? Maybe 5 at a fast casual place? And the people eating out still need breakfast and lunch.
Dining out is not a necessity. Unless you're one of the rare people without a kitchen that somebody will inevitably protest about. In which case you'd better be paying a lot less than market rate for housing with a kitchen to cover the totally foreseeable expense of eating out all the time.
And all the people that used to eat out learn how to cook and stop eating out. The restaurants go out of business and the workers with higher minimum wage are fired.
> And all the people that used to eat out learn how to cook and stop eating out. The restaurants go out of business and the workers with higher minimum wage are fired.
You're arguing that people should not bother learning how to prepare food for themselves in order to sustain the restaurant industry.
Per the article, demand (i.e. restaurant customers) is on the verge of exceeding supply (food cooked by restaurant workers) now because there aren't enough restaurant workers.
At the risk of stating the obvious, not all customers are equally price-sensitive. The goal would be to hit a happy equilibrium by removing enough of the most price-sensitive customers that supply and demand end up at a happy equilibrium.
By the way, this is one of the arguments for Universal Basic Income. If everyone starts with a base of having enough money to live a simple but dignified life then you can do things like eliminate the minimum wage. You eliminate that race to the bottom because you put the power back in the hands of the workers and remove the distortion of "people need basic food & shelter" from the labor market. Now you've got to pay someone enough to make them want to work at McDonald's (or improve working conditions or whatever).
I would expect that the price of cheap fast food would go up a lot because now you're going to have to pay someone enough to want to do that job (versus now where you can take advantage of the fact that for many people it's a either a McJob or living on the streets). I would expect the prices of more luxury goods, where workers are already paid a good wage and have good working conditions, to be less affected, as those jobs are already subject to fewer distortions in the labor market.
We talk a lot on HN about how easy it is to fool yourself into thinking that you have a real business. You might have the coolest product ever but if people aren't willing to pay your cost to produce then it doesn't matter - you don't have a business.
Restaurants are exactly the same. You might make the best food in the world but if no one is willing to pay the price it costs then it doesn't matter - you don't have a real business.
Minimum wage is an attempt to force the externalities of a business underpaying its employees back on to the business. The whole point is to push prices up so that the business is responsible for itself - otherwise it's easy to pay people a very low wage and let society make up the gap so that you don't have people living in abject poverty (this is what Walmart is accused of for example).
Minimum wage is an attempt to force the externalities of a business underpaying its employees back on to the business.
I hear this argument a lot but it doesn't make any sense to me. Costco and Walmart both move into town. Walmart hires 100 formerly unemployed residents at $10/hour. Costco runs a less labor-intensive operation and hires 20 at $20/hour. For the sake of argument, they both sell the same amount of goods. Why is Walmart being "subsidized" but Costco is not? Walmart's paying 2.5X the wages to folks who were previously relying 100% on the taxpayer.
It's not the case that people employed by Walmart were previously relying 100% on the taxpayer. Many of them may have been working for smaller retail outfits which treated their workers decently and went out of business because they couldn't compete on price with Walmart.
The point of my example (which has some mapping to the real world) is that Costco does successfully compete with Walmart and pays “decent” wages, but to a lot fewer people. Costco has put smaller retail outlets out of business, too.
Costco doesn't compete with Walmart. It is much more selective about where it places stores (each store needs to serve many more people) and it stocks a smaller number of mostly higher revenue items.
The claim is that employees working for the wages Walmart pays still collect government benefits.
Whether to impute those benefits to the store is a fair question, but the idea is that Walmart employees are literally collecting more government payments than the Costco employees.
Here is a mix of things likely to when there is a shift in the economic equilibrium for labor. This is true for all industries and not just the restaurant industry.
- Increase wages/benefits of workers (increased prices for customers)
- Substitute capital for labor (buy more machinery)
- Increase the supply of workers by training new people
Having worked in the restaurant industry (Bus boy, expo, and server) for 5 yrs from HS to College to shortly after there has always been these problems. People think the grass is always greener at another place an will switch jobs after 2 months, maybe even only a couple weeks, well before they have built up enough institutional knowledge (menu details in order to effectively sell, ways to ring up common and edge case special preps, where supplies are in store, build rapport with frequent guests, etc.) to make them truly effective at their job and make consistent money. Restaurateurs complaining about their servers bad service is a failure of management to adequately train (seen this is action), albeit I've seen long time servers who had plenty of the institutional knowledge to do their jobs but refuse to do simple things like pre-bus a table.
Edit:
Forgot to mention. This is maybe the 2nd or 3rd article where I've read that towns/industries have looked to recruit out of prison/jail. This imo is a good thing.
For jobs that don't require years of training, you really don't have "worker shortages". If you pay more, you will find people willing to work. I have come to see "worker shortage" as shorthand for businesses saying "we would like to pay people less" and advocating some sort of (typically government) intervention to drive up the supply of labor and thereby decrease wages (in this case allow more temporary immigrant workers who can more easily be taken advantage of and paid less).
"The more experienced workers, she said, are attracted to the increasing number of Washington restaurants with high-profile chefs, leaving midlevel establishments like hers struggling with inexperienced and often fickle help."
That's because chefs and restaurants like me actually: pay over minimum, train staff and actually treat them like humans. Not like cattle or worse.
One of my (admitably) many pet peeves in this industry is "restaurants" complaining that they can't get top talent for peanuts, and wondering why, for example, my place is full while theirs struggles to meet basic cost.
Yeah having a 200 seat, cater to everyone with super low prices('it attracts customers!') seems like a great idea, until they actually try it.
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[ 2.5 ms ] story [ 118 ms ] threadI think this is interesting because I hear a lot about a shortage of tech workers and the consensus I hear is that there really isn't a shortage, employers need to pay more. Or they need to offer training.
But here is another industry facing labor shortages. Is it really a shortage? My impression of restaurant work is that the kitchen staff get paid less and work more than the wait staff and there is little room for advancement, other than starting your own restaurant.
> I think millennials are really focused on quality of life
Ha! As opposed to what? Working really hard for some reason?
> He has also tried to clean up the kitchen in other ways. “You can’t come to work and scream at people,” he said. “When I was a younger chef, that was how I interacted with my team.
My god, imagine the horror of not being able to come into work and just scream at your employees.
My understanding is that most restaurants aren't in a position to pay much more; are the urban demographics different enough to support such a thing?
We're reaching the point where we seriously need to think about assisting internal migration in the country, but before that can kick in we'll end up with a recession to fight off inflation.
It's not that we don't have able bodies available, we do, what we don't have is people already trained in a skill set available for cheap. We have people who could be trained, and we're seeing that, and we're seeing a reduction in undocumented labor undercutting legal labor. This is good for the American worker, even as the price of goods may rise marginally.
If the municipal government wants to shut down any restaurant in the city, they can under a panoply of pretexts. If the Federal government is allowed to enforce the various Federal laws and regulations being ignored, it can also.
A vibrant restaurant culture is a nice-to-have, not a must-have.
These municipal leaders cannot talk out of one side of their mouths about the wonders of a well-regulated economy and then out of the other side demand the privilege to apply those regulations inconsistently in a corrupt fashion.
Considering that there are too many restaurants in many of these cities with failure rates in the stratosphere and profits questionable except at the most hyper-successful locations, this is not a bad thing for such an industry to contract to correct the oversupply.
Notice in the article itself that it talks about restaurants turning to 'unconventional' labor pools like ex-addicts, ex-cons, underemployed veterans, and people they have fired before because it is no longer so easy to violate labor and immigration regulations with impunity. Is that so bad? Does this not solve more general problems internal to our society rather than trying to paper over them by importing more people?
That's obviously just an anecdotal example, but I don't know of any co-ops aside from REI that seem to really stick around and do well longterm.
In any case, the real reason for the article and its complaints about a "tight" labor market is to lobby for low wage immigration:
"Our industry is very much in need of a temporary visa program for the low-skilled, essential workers,” said Shannon Meade, the National Restaurant Association’s director of labor and work force policy. "
Translation : pretty please send cheap labor our way; our profit margins aren't high enough.
Switzerland seems to have achieved some balance in this regard. Japan too, although their wages are artificially depressed via other means.
I actually really loved working in a kitchen but it's absurd how bad the labor conditions are.
Demand functions aren't generally straight like the illustrative graphs used in intro classes. What you end up with is easy replacement with similar goods. Being able to differentiate goods in food-service seems like a very difficult proposition without some sort of brand recognition. Because of that, if someone can purchase some food that is equal or close enough to equal at a significant (significance as defined by the consumer utility) then they will go with the cheaper option.
While raising prices seems like the simple solution to this issue, the reality is likely that they would quickly - if not immediately - price themselves out of the market.
I think the restaurant industry should look more holistically at options for dynamic pricing ala Uber. These could increase their margins enough to actually address the labor costs more effectively.
(Not an economist, for the benefit of anybody who doesn't find that patently obvious ;-)
ETA: I don't see the reason for the downvotes on the parent. It seems like a pretty reasonable explanation as to why there would be a brutal race to the bottom in restaurant industry. But again, my economics background is limited. Maybe somebody could explain the flaw in the argument?
Everyone talks about the minimum wage’s effects (or not) on employment, but I’d be way more concerned with its (potentially very regressive) effects on prices.
Dining out is not a necessity. Unless you're one of the rare people without a kitchen that somebody will inevitably protest about. In which case you'd better be paying a lot less than market rate for housing with a kitchen to cover the totally foreseeable expense of eating out all the time.
And all the people that used to eat out learn how to cook and stop eating out. The restaurants go out of business and the workers with higher minimum wage are fired.
Good thinking
You're arguing that people should not bother learning how to prepare food for themselves in order to sustain the restaurant industry.
At the risk of stating the obvious, not all customers are equally price-sensitive. The goal would be to hit a happy equilibrium by removing enough of the most price-sensitive customers that supply and demand end up at a happy equilibrium.
And without a $15 minimum wage, restaurants cheaper than $10 sandwich “fast casual” places are much more viable.
Finally, I’d expect the poor disproportionately depend on services provided by minimum wage workers across a range of sectors.
I would expect that the price of cheap fast food would go up a lot because now you're going to have to pay someone enough to want to do that job (versus now where you can take advantage of the fact that for many people it's a either a McJob or living on the streets). I would expect the prices of more luxury goods, where workers are already paid a good wage and have good working conditions, to be less affected, as those jobs are already subject to fewer distortions in the labor market.
Restaurants are exactly the same. You might make the best food in the world but if no one is willing to pay the price it costs then it doesn't matter - you don't have a real business.
Minimum wage is an attempt to force the externalities of a business underpaying its employees back on to the business. The whole point is to push prices up so that the business is responsible for itself - otherwise it's easy to pay people a very low wage and let society make up the gap so that you don't have people living in abject poverty (this is what Walmart is accused of for example).
I hear this argument a lot but it doesn't make any sense to me. Costco and Walmart both move into town. Walmart hires 100 formerly unemployed residents at $10/hour. Costco runs a less labor-intensive operation and hires 20 at $20/hour. For the sake of argument, they both sell the same amount of goods. Why is Walmart being "subsidized" but Costco is not? Walmart's paying 2.5X the wages to folks who were previously relying 100% on the taxpayer.
Whether to impute those benefits to the store is a fair question, but the idea is that Walmart employees are literally collecting more government payments than the Costco employees.
https://www.washingtonpost.com/blogs/govbeat/wp/2013/12/12/t... https://wtop.com/loudoun-county/2017/07/loudoun-dubbed-riche...
I'm sure they are suffering horribly. Maybe you can start a Kickstarter or gofundme for them.
[1] https://www.lni.wa.gov/WorkplaceRights/Wages/Minimum/
- Increase wages/benefits of workers (increased prices for customers)
- Substitute capital for labor (buy more machinery)
- Increase the supply of workers by training new people
- Close unprofitable businesses
Edit: Forgot to mention. This is maybe the 2nd or 3rd article where I've read that towns/industries have looked to recruit out of prison/jail. This imo is a good thing.
20 years ago.. eating out was not a daily thing.
That's because chefs and restaurants like me actually: pay over minimum, train staff and actually treat them like humans. Not like cattle or worse.
One of my (admitably) many pet peeves in this industry is "restaurants" complaining that they can't get top talent for peanuts, and wondering why, for example, my place is full while theirs struggles to meet basic cost.
Yeah having a 200 seat, cater to everyone with super low prices('it attracts customers!') seems like a great idea, until they actually try it.