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Published in Food/Agribusiness
The Garage Bar & Grill near downtown Grand Rapids has managed to stay fully staffed after increasing wages for its workers. The Garage Bar & Grill near downtown Grand Rapids has managed to stay fully staffed after increasing wages for its workers. PHOTO BY KATE CARLSON

Restaurant and bar owners navigate a labor pool in which workers now hold the bargaining power

BY Sunday, November 07, 2021 06:05pm

Kevin Farhat has a fully staffed Garage Bar & Grill near downtown Grand Rapids, and he’s hired about 30 more people to work at a new location opening soon in Ada.

The owner of both locations, Farhat pays his staff at least $15 an hour. Employees were getting paid $20 to $25 an hour last year thanks to a federal Paycheck Protection Program loan, he said.

Farhat’s operating in a service industry environment that’s been upended by the COVID-19 pandemic. Though many will tag the restaurant industry — and hospitality more broadly — with having a “labor shortage,” Farhat and labor experts say the characterization is misleading at best.

“It’s a changing environment right now, but if you treat people right, you should not have a problem,” he said. “I think this is a good thing, and it’s just the tip of the iceberg. The day of the $12 cook is over.”

Restaurants and bars across the country have had an increasingly hard time staying fully staffed this year, causing many businesses to cut hours or temporarily close. While many pointed to expanded unemployment benefits causing the staffing shortage, labor experts say the situation is much more complicated since those state and federal benefits have largely expired.

Christopher Burns, vice president, investment strategist and senior fixed income analyst with Greenleaf Trust, has compared workforce statistics among states that offered varying degrees of unemployment benefits. 

The states that ended expanded benefits earlier than others didn’t have people rushing back to the workforce like some believed they would, Burns said.

In April 2020, federal unemployment benefits were expanded to $600 a week, on top of state payments. By the summer of 2020, the additional benefits were cut down to $300 a week. Sept. 4 this year was the last payable week for four separate federal unemployment programs that were created under the CARES Act.

“Some people believed even the extra $300 a week was still causing people to stay out of the labor market, so states then were given the option to end that early,” Burns said. “There doesn’t appear to be this big group of people that were just staying home.”

Despite claims about people’s willingness to return to the service industry workforce, workers haven’t been clamoring for jobs since the expanded benefits stopped, he said.

Standoff

Brad Hershbein, senior economist and communications adviser at the Kalamazoo-based
W.E. Upjohn Institute for Employment Research, says the power balance has clearly shifted within the service industry. 

“Workers’ bargaining power has definitely increased over the past few months. But it’s unclear whether that will be sustained, and people are waiting to see which side will give in first,” Hershbein said.

Some employers are responding to the pressure by raising wages, but they often stop short of offering more incentives like stock benefits, health care or hiring people for more than 30 hours a week, Hershbein said.

Taking state-specific data from a national survey last month, the Michigan Restaurant and Lodging Association said 83 percent of operators reported total labor costs as a percentage of sales are higher than they were prior to the pandemic. 

In June, restaurant workers rallied at the state Capitol to call for higher wages as a report at the time showed 72 percent of Michigan restaurant workers left their jobs because of low wages and tips.

“It’s not that people don’t want to work, it’s that they don’t want to work in the conditions being offered,” Hershbein said. “Restaurant prices will have to rise quite a bit before we reach a new equilibrium so that restaurants can afford to pay their workers enough.”

Tami VandenBerg, owner of The Meanwhile and Pyramid Scheme, said it’s up to employers to rise to the challenge of attracting workers. VandenBerg had to go on a “big hiring spree” last year after only about 20 percent of workers came back to their positions when the Grand Rapids bars reopened after public safety-related closures.

“A lot of folks were not comfortable working, went back to school, and a couple got into the cannabis industry. There were a wide variety of things that happened causing folks to switch jobs,” VandenBerg said.

Like Farhat, VandenBerg used PPP funds to raise all employees’ starting wages to at least $15 an hour. Both bars are now fully staffed, she said.

“We decided to focus on paying staff as much as we could so we could attract people we wanted. Also, even with vaccines it is still risky to be working in that environment right now,” VandenBerg said. “As long as funds are available to give people hazard pay, we are and will continue to do that.”

‘Dangerous, slippery slope’

For Bill Weier, co-owner and general manager of Rustica restaurant in Kalamazoo, most of the turnover at the higher-end restaurant tends to be in the kitchen. 

“The available pool of employees is lower than I’ve ever seen,” Weier said. “The problem is exacerbated in the back of the house because cooks and dishwashers have always been harder to find.”

Throughout the pandemic, Rustica went from fully staffed at 15 employees down to three workers at two different periods of indoor dining shutdowns, Weier said. The restaurant is nearly fully staffed now, but Weier would like to hire one or two more people. 

“When we lose a dishwasher or a cook, it takes weeks to replace that person,” Weier said. “When we are short-staffed, the existing employees have to work even harder, which of course leads to more turnover and discontent. It’s a dangerous, slippery slope. As an industry, we need to address these issues.”

Weier said wages have been bumped “considerably,” and he is looking at more ways to reward back-of-the-house workers as well. 

“I haven’t had to close my doors yet because of staffing, but if one or two people quit, I would be in trouble. That’s all there is to it,” Weier said. “We’re all going to have to continue to do things to show our appreciation for our staff.”

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