Open for Business But No One to Work: Restaurant Industry Faces Employment Crisis

The hospitality industry is continuing to feel the effects of the pandemic as doors are beginning to open again and

restaurant industry unemployment crisis

The hospitality industry is continuing to feel the effects of the pandemic as doors are beginning to open again and capacity restrictions are easing in many places. Even as the vaccination rate in the U.S. continues to accelerate, the restaurant industry and other businesses are facing a difficult problem: they can’t find anyone to hire. Speculation has been rampant in Washington D.C. and across the country as to why people aren’t looking for jobs right now, but no one seems to have a concrete answer as to why they can’t find anyone to work jobs that once were popular. So what’s going on, and how can businesses get workers back through their doors so they can survive another year?

The Restaurants Lucky Enough to Survive 2020 Face New Challenges

restaurant industry unemployment crisis

Once restaurants began to get to the go-ahead to start indoor services and it seemed as though there was light at the end of the tunnel, they were not prepared for what they’d find on the flip side of the pandemic. Many restaurants were forced to close their doors in 2020 as restrictions or lockdowns prohibited them from being profitable enough to stay open. Per Fortune, according to data from the National Restaurant Association, 2020 saw over 110,000 restaurants close their doors permanently. This resulting in a horrifying 2.5 million jobs erased from the map. Now that other restaurants are hiring more workers, it was expected that those who lost their jobs forever in the hospitality industry in 2020 would be competing for them. However, some employers report that no one is even showing up to apply. So what happened? Where are the workers?

In Roseville, Michigan, restaurant owner Darren Lee says he’s never seen anything like what’s happening right now with the employment crisis. Fox 2 in Detroit reports, “‘For the last two months I’ve been looking for and trying to find people,’ Lee said. ‘But they’re content with their unemployment they’re content with the money they’re being paid to stay home and not work.

And they’re content with an easier life and I can’t say I blame them, but I’m not built that way.’”

Lee added, “I put out a basic signing bonus and there are many businesses that do it. And it was not an awful lot, it was $400, but I didn’t even get a phone call, crickets.”

So is Lee right, are people staying home because unemployment is sufficient and they’re happy relaxing at home? While no one has been able to pinpoint a single reason behind the employment crisis, the answer seems a lot more complicated than that.

Are People Just Lazy?

On the surface, it seems to make sense: pay people enough on unemployment and they have no reason to seek a job. But if you talk to the unemployed, there are a lot of reasons why people would choose not to return to work. The first and most obvious reason that restauranteurs can’t find employees is because so many people were forced to leave the industry. For many small business owners, as month after month of the pandemic stretched on and they were forced to lay off or furlough employees, people sitting at home became desperate. The job market changed almost overnight. At the beginning of 2020, approximately 3.5% of the US population of workers was already working remotely from home.

A market prediction from December of the same year suggests that as many as 1 in 4 Americans will be working from home through this year. That’s a staggering increase, suggesting that a lot of work either went remote – or workers took more remote jobs that already existed. This is likely a part of why the hospitality industry has seen such a massive drop in applicants. Working with customers as closely as you do in hospitality jobs puts many people uncomfortably close to a COVID risk, it can require long and demanding hours, and the pay isn’t always that competitive – small town restaurant employees especially often make pennies compared to their big city counterparts. Workers face the reality that if they do contract COVID and can’t work, there isn’t a buffer system at their job to insure they get paid to stay home and recover.

If part of the workforce shifted online, what happened to the rest? Anecdotally, there may be something to the suggestion that people are staying on unemployment because they’re more financially secure that way. In many states, an “at will” employment system creates insecurity and instability for people who worry they can be fired at any time for any reason – or for no reason at all. So to walk away from the steady and predictable unemployment checks, whether they pay more than pre-pandemic salary or not, has to be a daunting proposition.

And for many, it’s true; unemployment insurance may pay more than they were making working 40-60 hour weeks, a sobering reality that has employees reevaluating their career choices. And on the other hand, employees are considering if they can continue to work for three people while getting paid poorly. As employees are being asked to work longer hours for few or no benefits at poverty wage rates, unemployment appears not to just be an attractive option, it’s the shrewd one. Of course, unemployment won’t last forever.

And many people try to re-enter the workforce are finding themselves vastly overqualified. Used to making $25 an hour pre-pandemic and adjusting to a $13 an hour entry level job may not just be unappealing, it may be impossible. Many jobs won’t hire overqualified workers, so they’re out of luck. 

The Debate in Washington About Unemployment Insurance

restaurant industry unemployment crisis

And in Washington, the debate is raging about how long unemployment insurance recipients should continue to get the $300 a week pandemic boost from the federal government on top of state unemployment. From Florida, former Governor and Senator Rick Scott penned a worried note to the Federal Department of Labor imploring them to investigate what he deems a concerningly high rate of unemployment fraud, which surely is at fault for causing small businesses across the state to shutter their doors, according to Scott.

Scott, who helmed an overhaul of Florida’s unemployment system which many have called disastrous, recalled his infamous, “Let’s get to work!” slogan while imploring the DoL to take action. CL Tampa reports Scott’s concerned words; “‘State and federal unemployment benefits have provided a necessary source of assistance for many workers who lost their job and livelihoods due to the COVID-19 pandemic. However, abuse of these benefits hurts America’s economic recovery and can be devastating for small businesses who are attempting to safely reopen,’ Scott wrote.

He continued to cast aspersions at the unemployed, a reiteration of concerns about unfilled service jobs expressed in recent days.

‘I understand that current law prohibits workers who refuse suitable work from receiving unemployment benefits. Current law also prohibits workers from remaining on unemployment simply because benefits pay them more than what they would earn after returning to work. Despite this, I am hearing from many Florida businesses and employers that finding workers due to enhanced unemployment benefits continues to be a significant barrier to adequately staffing and reopening their operations.’”

Republicans, fighting the federal supplement to unemployment all along, do not feel that it is necessary to keep providing extra money on top of state unemployment. Democrats to not believe the economy is sufficiently reopened or recovered to remove that safety net yet.

So What is a Business to Do?

It’s undeniable that businesses, especially small local businesses, are between a rock and a hard place. While the easy answer would be for them to provide better pay and more benefits to workers, most barely survived 2020 and now are scraping together what’s left of their business to try to stay afloat in 2021. They can either work understaffed and risk burning out current employees, or they can offer better pay and see their margins evaporate – margins which are already usually thin for small restaurant owners.

Right now, there’s a game of chicken happening between workers on unemployment and employers desperate for workers. The employers will have to get more competitive and lure people in – some are doing so by offering higher hourly starting wages, some are offering sign on bonuses or even money to just show up for an interview – and health benefits are a huge plus. People on unemployment insurance nervously eyeing the stuttering reopening of the hospitality industry and in full awareness that some of these businesses may have survived but may not recover fully will have to decide if they’re ready to dive back in.

Pandemic unemployment insurance from the federal government is currently set to expire in September, barring another stimulus plan with an extension from President Joe Biden and Congressional Democrats. But who will blink first – employers desperate to stay afloat, or employees desperate to stay safe and stable? It’s a heartbreaking scenario, one which won’t resolve easily.