If good food is what thriving restaurants are built on, good service is where their hearts beat. Restaurants need a functional brigade of staff to survive in such a competitive sector. However, with a brewing labor crisis in the industry, dining establishments face difficulty recruiting and retaining employees.
Even before the pandemic, restaurants had trouble hiring enough workers. The situation worsened as rolling shutdowns led many laid-off restaurant employees to take permanent jobs in other industries. When the pandemic eased, restaurants had to cut back their hours because they couldn't find enough workers. Several people who used to work in restaurants found new jobs that they could do from home, often for higher salaries. This led to more open jobs at restaurants than there were people to fill them.
The big difference between open jobs and qualified workers highlights the severity of the current labor shortage in the restaurant industry. Today, restaurants are hiring across the board. As per the National Restaurant Association:
That said, Nation's Restaurant News noted that the second quarter of 2024 proved challenging for the restaurant job market. Only 900 jobs were added during the second quarter of the year. That's the smallest gain since 2020.
Even before the pandemic, jobs that are entirely in-person and have lower wages have struggled more with retaining workers. For instance, the leisure and hospitality industry has had the highest quit rates, the percentage of voluntary resignations per month, with the accommodation and food services sector consistently seeing quit rates around or above 4% since July 2022. The average annual restaurant turnover rate, which includes all departures (both voluntary and involuntary), is 79.7% over the past 10 years.
While most parts of the U.S. feel this insufficiency, the states that are experiencing the most labor shortages are Maine, Montana, South Dakota, Texas, and California.
Restaurants Canada reported that Canada's restaurant and accommodation industry lost 26,600 jobs in March, the biggest job loss among major industries. After a sharp drop in January, employment partially rebounded in February but fell again the following month. Adjusted for seasonal changes, employment in this industry has now been at its lowest level since December 2022.
Most diners report a worse guest experience due to labor shortages at restaurants. Modern Restaurant Management noted that a consumer survey from Hunger Rush found:
Bars are also feeling the impact of the labor shortage. In addition to health risks, low pay, and lack of benefits, some hospitality professionals are reluctant to return to their old jobs due to a lack of empathy.
Fast-food restaurants are also facing labor shortages, making it hard to maintain cleanliness, customer service, and food quality. This has led to service delays as staff struggle with high demand.
As of 2024, the restaurant industry faces a high open position rate, with many establishments reporting staff shortages. This scarcity of available labor has resulted in:
Although the restaurant industry is highly labor-intensive, technology helps improve service and customer satisfaction. Alongside restaurant technology, creativity and adaptability are crucial in addressing labor shortages.
Restaurant labor costs have risen sharply, with wages increasing 30% faster than pre-pandemic rates. Managers face difficult decisions: raising prices, reducing hours, or accepting lower profits. Additionally, many U.S. cities and states have raised minimum wages to address the stagnant federal rate.
These are just ten of the U.S. states that have raised their minimum wage this year. In total, 25 states and Washington, D.C. will see wage increases in 2024.
California's minimum wage for fast food workers is now $20 per hour. This wage applies to chains with at least 60 locations nationwide but excludes places like Panera Bread, which makes their own bread. Along with this increase, a new council of industry and worker representatives can raise wages annually by up to 3.5% based on inflation. They also oversee health and safety and address issues like wage theft.
The wage hike highlights the strong role of labor unions in improving conditions for fast food workers. Since the wage increase, California has added 11,000 new fast food jobs, reaching a record 750,500 jobs by July.
In response to higher labor costs, many fast food chains are raising menu prices by 8% to 10%, more than the usual 2% to 3%. They are also investing in AI and automation to cut costs.
Every province and territory, except Alberta, has or will increase their minimum wage in 2024. Nunavut will see the highest increase, at $3 and almost 19%. The average minimum wage increase for Canada is between 3% and 4%.
An increase in minimum wage typically leads to a proportional rise in labor costs. Smaller establishments with tight margins may struggle to absorb these costs, potentially resulting in reduced hours, limited staff, or even the closure of certain locations.
To manage increased labor costs, many restaurants are:
Prime Minister Justin Trudeau is bringing new regulations to the Temporary Foreign Worker (TFW) program. While the new rule addresses unemployment rates, it can make the labor shortages worse.
Here is a summary of the changes to Canada’s immigration policy:
Many Canadians see these changes as positive because they prioritize Canadian workers and will hopefully help to reduce the rising housing crisis. With many dwellings across Canada housing multiple families and being converted to rooming houses, a decrease in population is unfortunately much needed. However, businesses, especially in the hospitality industry, might face labor shortages and need to adjust their hiring strategies.
Restaurant labor shortages have been a major issue this year, and it looks like the problem might continue in 2025. Expert Market and Toast surveys found that 82% of restaurant businesses are hiring, highlighting the severity of the issue. The survey also revealed that labor shortages are a top challenge for 23% of companies, only trailing behind rising operating. This indicates that labor shortages are heavily impacting restaurant operations.
Restaurants are already taking significant steps to combat labor shortages. They recognize the urgency of the situation and are proactively implementing various strategies to attract and retain employees. These efforts include:
Many restaurants are boosting wages to address labor shortages and enhancing their approach by incorporating additional benefits. Lifestyle Spending Accounts (LSAs) are now being used to further improve employee satisfaction and retention.
These accounts allow staff to allocate funds toward various taxable items or activities. LSAs support wellness activities, encourage longer tenure, and reward the completion of training modules.
Restaurants are adopting technology to streamline operations and alleviate staff burdens. Tools like Push handle scheduling, ensure HR compliance, and oversee payroll, hiring, and onboarding. The use of such technology boosts efficiency and reduces labor demands.
Restaurants are focusing on optimizing their menus to streamline operations. By emphasizing dishes that are easier to prepare and cook and utilizing efficient methods like grilling or roasting, they are reducing preparation time and staffing needs. Menus are being rotated to feature seasonal specialties and in-season options while minimizing preparation time.
Tackling labor shortage in the restaurant industry can be tricky and challenging. As a restauranteur, it is imperative to prioritize staff retention and labor optimiztion. By using premier HR software like Push, you can streamline workforce management and reduce labor costs. To experience the full power of Push and better combat the labor shortage, book a free demo today!
“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
