Restaurant Industry’s Labor Shortages Made Worse By Demographic Trends

For an industry full of leaders long ago accustomed to handling staffing shortages, the past few years have but restauranteurs to the test. The next few will be no different. Long-running demographic trends colliding with the lingering effects of the pandemic have many feeling we are in the middle of one of the most difficult decades the industry has ever faced.

Restaurants were among the hardest hit by the pandemic, and among the slowest to recover. Health and safety protocols ensuring restaurants could open safely meant the industry faced a sloping recovery from a precipitously sharp drop. Customers were slow to return as well, as concerns about the pandemic kept many at home. As the industry began to get its feet back it immediately faced another unfortunate curve, the confluence of demographic trends. Beginning last year through 2027 4.1 million workers will retire annually, and there are not enough younger workers to replace them. If every unemployed worker found a job tomorrow, we would still be short by at least 1.2 million. 

There are not enough workers, and for an industry with a long history of high turnover rates and seasonal fluctuations such a long running labor shortage could quickly cause things to spiral out of control. Rather than just another hiring season, or a lull, labor-intensive industries such as restaurants face a permanent labor shortage. However, by spearheading innovative programs to retain some of the experienced workers retiring from the labor pool they can improve the training, recruitment, and retention of young workers. At the same time leaders must understand the realities of the continuing demographic trends, and work to understand and implement immigrant visa programs so they can attract workers from abroad. Demographic shifts are reshaping the workforce, of the present and of the future, and the restaurant industry is on the front lines.

More Workers Needed

As of early last year the restaurant industry still had not recovered to its pre-pandemic levels, short some 450,000 roles. At the same time,more than 60 percent of restaurant operators say they do not have enough staff to meet demand. These struggles cannot be written off as the fault of the pandemic. While that certainly exacerbated these trends the underlying causes, such as America’s declining birth rate, have been around for decades. This means that at the same time thousands of workers are retiring every day fewer young people are entering the workforce. Furthermore many older workers who left during the pandemic are not returning, having retired or moved on to different careers. With a shrinking pool of available workers, such a heavily service-driven industry as restaurants has been hit hard.

From the smallest mom and pop shop to the largest chains in the nation, everyone is seeing the same thing. Jobs go unfilled for longer than usual. Fewer people show up for interviews, and of those that do get hired many leave after just a few shifts. Even for an industry used to high turnover rates the confluence of these events with the shrinking labor pool will quickly, indeed for many already has, become untenable. An astonishing 82 percent of restaurants are actively hiring, and nearly half of managers report recruiting, retention, and training as their biggest problem. This should come as no surprise given the high turnover rates, with front and back of house positions alike at times cycling out faster than they can be replaced.

Beyond the obvious frustration of constantly dealing with the labor shortages, it costs businesses money as well. Understaffed shifts, overworked employees, stressed managers, in a competitive industry struggling to attract workers these are costs restaurants cannot afford. Additionally, such high turnover and the more stressful work environment risks pushing even more workers out the door, as experienced and reliable workers working in such conditions face higher levels of stress and burnout. When teams are stretched so thin the service takes a hit alongside morale, potentially leading to longer-term problems with ability to deliver that service or deal with reputational damage.

Think Nationally, Think Locally

While labor shortages exist all around the country, some states have been hit harder by others. States as varied as Utah and Georgia have twice as many job openings as job seekers, rendering it virtually impossible for anyone to reach and retain full staffing levels. Restaurants in major cities may have more candidates than statewide averages, but also have greater competition as many other industries are also contending with the labor shortage. In rural areas restaurants are similarly buffeted by the impact labor shortages have on the wider economy, with fewer people combining with a housing shortage to make it difficult to attract and retain talent.

All Is Not Lost

The picture painted above may be bleak, but some of the same effects of the pandemic making it harder to attract and retain talent have lessons for employers. Some restaurants have done just that, combining flexible scheduling with greater mental health support for their workers. Flexible scheduling can also be strengthened by making lemons with lemonade. While millions of workers are retiring every year, not all of them want to. Some workers may want to keep a few shifts a week, and this can aid in training and retention while also improving morale. On-the-job training pairing newer workers with some of these experienced part-timers can ensure the talent pool remains strong, while also alleviating some stress from full time workers. Businesses have also continued offering pay raises, and including bonuses tied to retention for certain amounts of time.

Automation cannot offer the same benefit to such a customer-service reliant industry as it can to other industries, it can help support workers. Improved scheduling software will improve employee morale while reducing the headache-inducing hours managers must spend when doling out shifts. Technology can also be used in improved training methods, even further reducing the stress on the existing workforce of the recruitment and training process.

Immigration and All Of The Above

While restaurant leaders ought to be making efforts on all of these fronts, they also must not overlook the obvious solution. If there are not enough workers available, get more workers. This can be done by expanding recruitment and outreach efforts to frequently overlooked groups of workers, from returning veterans to the formerly incarcerated. But as outlined above, there simply are not enough domestic workers to meet demand. To meaningfully meet the demands of the demographic shifts, restaurant leaders need to look abroad.

The restaurant industry has long relied on immigrant labor, and with a shrinking domestic labor pool more leaders are turning to foreign workers. Programs like the EB-3 visa allow restaurants to sponsor full-time workers from overseas if they cannot find workers domestically. The EB-3 and other programs provide for longer-term stability, as employees commit to staying at least twelve months. Combining greater outreach through work visa programs with the improved benefits and compensation outlined above, employers can attract motivated and reliable workers from abroad as well. 

Get Strategic or Get Left Behind

Unfortunately for anyone hoping things will “go back to normal,” the labor shortage will not resolve itself anytime soon. Baby Boomers will keep retiring by the millions, and even were the birth rate to pick up overnight it would be almost two decades before that even started to impact the labor shortage. Some restauranteurs have already begun putting in place many of the solutions outlined above. Researching and emulating best practices, and integrating as many of them together as possible, will enable leaders to attract and keep quality workers. By learning fluency in work visa programs, leaders can ensure that those benefits of attracting employees can attract workers here in the US and from abroad.