LABOR CRISIS STRETCHES OUT! – CAN’T ANYBODY HERE PLAY THIS GAME?

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LABOR CRISIS STRETCHES OUT! – CAN’T ANYBODY HERE PLAY THIS GAME? (Casey Stengel, while managing the NY Mets.)

Supplemental unemployment benefits of $300 per week,  tax-free, ended as of September 6th. While it can be argued that this was only one of the ingredients that created a severe labor shortage for restaurants and retail establishments, it was clearly a major factor. Hospitality oriented, consumer facing, businesses all over the country have been looking forward to the first week in September when these benefits will expire.

A cynic might say that you can count on bureaucrat to snatch defeat from the jaws of victory. Within less than one week after supplemental  unemployment benefits ended President Biden has announced a mandated plan whereby all workers within a business that employs 100 people or more must be vaccinated before they enter the facility.  While there are many operators that will not be affected because they are under the 100 employee starting point, there are obviously a great number of multi-unit operators that are affected by the vaccination mandate.

Our conversations with operators indicate that the labor crisis has abated to a noticeable degree before and since September 6th, but the situation is still substantially tougher than before the Covid crisis.  Both management candidates and crew have apparently socked away a financial cushion and, as we have described earlier, lots of ex-employees don’t want to return to this very demanding industry.

The new vaccine mandate has complicated the situation further. Some operators, have told us that the lack of available crew, in just the last week, is worse than ever. Young people either are not vaccinated or don’t want to get vaccinated and it’s not very pleasant to wear a mask for  hours while working in a kitchen heated by fryers and grills. Walking around Manhattan yesterday, we found Chipotle, McDonald’s and Shake Shack with dining rooms closed, only offering off-premise alternatives. The explanation provided was that this limitation was due to an absence of staff.

We suspect that the vaccination mandate will be adjusted at some point soon because just yesterday the President and his staff were getting “feedback” from major retail companies. Changes could be implemented and this “episode” in the midst of an ongoing pandemic can be considered a “teaching moment“ and/or a lesson in unintended consequences. At best, however, current and potential employees will no doubt be confused by the rapidly changing requirements and therefore delay their return to work.

THE BOTTOM LINE: The labor crisis is far from over, and future required wages will be materially higher than pre-Covid. There will continue to be adjustments to service between dine-in and off-premise. Companies have found that they don’t need their dining rooms as much as they thought. With staff  hard to come by, there is  no rush to open dining rooms fully, if at all. Offshoots of Covid-19 are still in play, which will be seriously affect consumer spending. At best, predictability of operating results will be challenged, and will not normalize until well into 2022.

Roger Lipton