One of the biggest challenges that the restaurant industry faced, and continues to face in 2021 are labor shortage challenges.
Although many numbers from sales are on the rise, analysis of the latest economic data on the restaurant industry reveals that, despite steadily increasing sales, the industry is grappling with recruitment and retention challenges, as well as increased food, labor, and fuel costs.
So what was the impact on labor in the restaurant industry in 2021? In this article we will explore what restaurant owners appear to be facing across North America when it comes to navigating labor.
In March 2020, the COVID-19 pandemic spread to the U.S., triggering lockdowns that brought the U.S. economy to a standstill. The food service industry was heavily impacted, losing over 3 million jobs during the pandemic. More than 110,000 restaurants have permanently closed (or are projected to do so) due to the economic fallout caused by the pandemic.
In Canada, restaurants were directed to close indoor dining or operate under capacity restrictions in mid-March 2020. By April 2020, more than 800,000 food service workers had lost their jobs or had work hours reduced to zero. The industry is making a slow recovery, but current employment levels remain 17% below pre-pandemic levels, with about 207,000 fewer jobs according to the Statistics Canada October 2021 Labor Force Survey.
Restaurateurs will have to deal with the unique labor challenges of the post-pandemic era with new hiring strategies and technological adaptations.
Despite the reality that unemployment levels across the continent are still high, restaurateurs are facing more difficulty restoring employee numbers at eateries to pre-pandemic levels.
Workers are citing issues like low pay, poor working conditions, disrespect from customers, and COVID-19 safety concerns as reasons they are hesitant to return to work. Others, having been furloughed at the start of the pandemic, have simply moved on to other industries.
Employers blame the difficulty in staffing on unemployment benefits, but over half of the states in the U.S. ended federal extended unemployment benefits in the middle of the year, with little to no effect on job recovery.
According to the National Restaurant Association, 75% of restaurant businesses in the U.S. reported that retaining employees was the top challenge facing their business.
Data from Restaurants Canada, presents a similar picture in Canada, with restaurant workers leaving their jobs more quickly in the post-pandemic era.
The reasons for lower staff retention rates are similar to those causing hiring challenges. Workers feel underappreciated and are underpaid in many places, causing them to seek out higher paying jobs.
With the pandemic causing most restaurants to switch to off-premise dining, digital engagement is no longer optional. Consumers have also been swept along with the trend, honing their tech skills to master the different facets of restaurant digitization like online ordering, delivery apps, order pickup, and electronic payment.
Restaurants will also have to find ways to expand their reach to consumers. Social media, in particular, has become a reliable means of reaching new consumers during the pandemic, with businesses collaborating with content creators on platforms like TikTok to bring awareness of their brand to a new customer base.
As millennials approach midlife, they are leaving the restaurant industry in larger numbers to pursue other career paths. Research by Prudential and The Motley Fool found that Americans who had changed careers during the pandemic were more likely to be millennials and, in the food service industry, 6% of workers were transitioning out of the industry compared to only 3% transitioning in.
On the other hand, Gen Z are entering the restaurant industry in high numbers. According to the National Restaurant Association Educational Foundation (NRAEF) and the Center for Generational Kinetics, 82% of Gen Z say that a restaurant job was their first paid job, and 73% think the restaurant industry is a good place to get a first job.
On average, Gen Z enter the industry two years earlier than millennials, and they are also more likely to leave if working conditions and pay are unfavorable.
The restaurant industry is Canada’s 4th largest private sector employer, employing 1.2 million people before the pandemic, and providing the number one source of first jobs in Canada. Unfortunately, the industry is now facing serious labor shortages, with a jobs deficit of over 200,000.
In a survey by Restaurants Canada, 80% of respondents reported finding it difficult to hire back-of-house staff, and 67% were having trouble filling front-of-house positions. Another 42% said they expected the number of unfilled positions to increase over the next year.
However, with steady increases in numbers of jobs across different industries, the unemployment rate in Canada is forecast to steadily improve in the coming years, set to average 7.6% by the end of 2021, and 6.3% in 2022.
Customers are returning to the restaurant industry but this rebound is being threatened by labor shortages. By April 2020, employment levels in the American foodservice industry had dropped to record lows of 6.3 million, an almost 50% drop from pre-pandemic numbers of 12.3 million jobs.
In 2021, the industry has seen a steady increase in the number of jobs due to increasing vaccination numbers, but data from the Bureau of Labor Statistics suggests that full-service restaurant employment remains about 10% below pre-pandemic levels.
In the quick service restaurant industry, staffing levels are still 4% below pre-pandemic levels. Additionally, employers are struggling with hiring and retention issues, with 75% of operators saying retention was their number one challenge in 2021, according to data from the National Restaurant Association.
Although employment in the industry is projected to increase steadily, with an estimated 17% growth by 2030, the industry is yet to make a full recovery.
While many of the drastic changes the restaurant industry has seen in 2021 have been reactionary, in response to the pandemic, most of them are here to stay. The industry is only going to see a rise in the use of technology, online ordering, contactless payment, and off-premise dining over the next several years.
Technology, in particular, will play a central role in the transformation of the industry, with innovations like delivery robots and kitchen automation filling the human resource gaps left by labor shortages.
As the restaurant industry makes a recovery from the effects of the pandemic, restaurateurs should expect to see an increase in revenues, alongside widespread changes in the traditional understanding of foodservice.
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“In the labor numbers, we were reporting about a $300 to $400 difference than what we were getting through Push!”
-Tara Hardie, ZZA Hospitality Group, 16 locations