What Higher Wages Mean for Foodservice

Across the nation, minimum wages are going up. Los Angeles will raise wages to $15 per hour by 2020. Chicago will boost hourly pay to $13 by 2019. New York state will likely approve a hike to $15 per hour by late 2018, but oddly, only for workers in fast-food chains. Some companies have even raised wages voluntarily; McDonald’s pledged to start employees of U.S. corporate stores at an hourly rate that’s $1 above whatever is mandated locally.

The push for higher wages has widespread public backing: in a Hart Research poll, 63% supported increasing the national minimum to $15 per hour by 2020. Many Americans are distressed by rising inequality, and some see employers of low-paid workers as freeloading on society, since their employees’ paltry incomes are supplemented by taxpayers with benefits like food stamps or Medicaid.

Employers tend to view things differently. Of 1,000 New York state QSR operators polled by the Employment Policies Institute, 22% said the proposed $15 wage could force them to close their doors, not quite half said they’d be obliged to cut back employee hours, and 70% said they’d likely raise menu prices. Some economists assert that higher wages reduce staffing levels, kill businesses, raise unemployment and spike consumer prices, hurting the poor the most. Others argue that wage hikes don’t have negative effects overall, partly because workers are also consumers: with more money in their pockets, they’re likely to spend more at local businesses, even if prices have risen a bit.

Time will tell. But foodservice has larger problems than the minimum wage: worker shortages resulting from an aging population, a reduced flow of immigrant labor and an improving economy that offers job hunters more options. Good entry-level workers aren’t as easy to find, keep or afford as they were during the recession.

The need to optimize staffing will accelerate changes already underway. Front-of-house tech, including kiosk and tablet ordering, as well as mobile-phone ordering and payment; back-of-house tech from foolproof fryers and grills to timers and schedulers linked to the POS system; more speed-scratch and offsite prep; more commissary-sourced grab-and-go foods; more small-footprint express and kiosk units that require little staffing. Labor shortages (particularly shortages of drivers resulting from the aging of the over-the-road workforce) will also accelerate disruptive shifts in the foodservice supply chain.

AS I SEE IT, higher minimum wages and other labor constraints will make workers more important to employers. The higher value placed on each worker will mean more investment in training and in making work rewarding. Companies that hope to thrive in the new labor environment had better have a plan.

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Darren Tristano

Darren Tristano is President of Technomic Inc. Since 1993, he has led the development of Technomic’s Information Services division and directed multiple aspects of the firm’s operations.

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