The labor shortage that’s affecting nearly all industries is taking a major toll on the restaurant sector, forcing restaurant owners to raise pay and offer incentives to attract and keep workers.
“Our payroll is 25% to 30% higher because the waiters and cooks are commanding a higher price,” celebrity chef and restaurateur David Burke told Yahoo Finance. “There’s demand for them to go elsewhere. People are poaching.”
The June jobs report showed 194,000 workers were added to the restaurant and bar industry last month, but comparing that figure to leisure and hospitality’s pre-pandemic levels, employment in the sector is still more than 2 million jobs shy of February 2020 levels.
And in New York City, where restaurants and bars reopened for indoor dining at 100% capacity in May, the number of workers is currently about 40% below pre-pandemic levels.
Millions of workers who left the industry aren’t coming back for a number of reasons, including career changes and safety concerns. Republican lawmakers blame a slower-than-expected return in the labor market on enhanced unemployment benefits, which they say are keeping workers on the sideline and fueling a labor crunch.
A shortage of workers is a massive threat to the restaurant sector's recovery, warned Burke, who said he has had to reduce restaurant hours and scale back reopening plans, making the future uncertain.
“Now it’s a little more dog eat dog. We’ve got to pay workers more to keep them employed,” Burke said. “Luckily we have the PPP money to help us, but when that’s gone, and that will be gone before the end of the summer, it’s going to be very difficult to stay above the fray.”
“We’re seeing the slowest rebound in New York City. In New Jersey we’re doing great. We have outdoor seating at most of our properties and the minimum wage is much lower,” added Burke. “In New York City, the minimum wage was higher even before the pandemic and we were struggling to a certain degree with the new minimum wage and the benefit package that goes to all employees.”
The pay structure is something Burke and other restaurant owners are rethinking as the pandemic prompts industry leaders to reshape their businesses to stay competitive.
“There is a little bit of an imbalance in the pay scale. We have to figure out the tipping system against the non-tipping system, the benefit package and the amount of hours a restaurant worker works. It's hard to run a restaurant with eight-hour shifts so you've got to pay overtime,” Burke said. “Something has to get done with the labor when it comes to restaurants and the distribution of money.”
Seana Smith anchors Yahoo Finance Live’s 3-5 p.m. ET program. Follow her on Twitter @SeanaNSmith
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