Is It a Restaurant Labor Shortage, or a Broken Restaurant Industry? | Economy | Hudson Valley | Chronogram Magazine

As a financially independent college student, Rosalinda knew that getting a job or two when she moved to New Paltz wasn’t an option, but a necessity. (Her name has been changed to protect her anonymity.) In what seemed like immensely good fortune, when she began college in 2017, Governor Andrew Cuomo signed legislation guaranteeing workers statewide would soon benefit from a $15 minimum wage. But unbeknownst to her at the time, as a restaurant worker in upstate New York, Rosalinda would never come close to making $15 an hour.

In fact, when she worked at the recently closed Mediterranean restaurant Moonlight Cafe in New Paltz, she was paid $4 an hour, plus tips. At best, the tips would bring her average earnings to $10 per hour for a job that required her to wait tables, bus them, wash dishes, and close the shop alone at the end of the night. “For the work I was doing, it was not enough,” she says.

Ray, another restaurant worker who worked in food services at Mohonk Mountain House, says she left her job because she felt “overworked, underpaid, and underappreciated.” (Her name has also been changed to protect her anonymity.) She explains, “I definitely had to do more than I was responsible for. I felt like I was being taken advantage of.”

Both workers have since left the restaurant industry with no plan to return.

Amid a labor shortage in restaurants across the country, two narratives have emerged. One blames the shortage on workers being lazy; the other highlights low pay, poor treatment, and scant benefits as the primary causes. 

In fact, the pandemic exacerbated the economic insecurity of many restaurant workers. During lockdowns, about 60 percent of restaurant workers didn’t qualify for any unemployment assistance because their base pay was too low. As lockdown eased and restaurants reopened, tips were down between 50 and 70 percent in states across the nation. This could be one reason why one-third of hospitality workers don’t plan to return to the industry after the pandemic.

Restaurant owners are trying to come up with ways to bring workers back. “Right now you’re seeing more in terms of wages and benefits being offered than ever before,” says Melissa Fleischut, president and CEO of the New York State Restaurant Association. “Additional benefits are being offered in terms of health care or paid vacation or 401k. It’s just a way to try something new and attract employees in a way they’ve never had to before.”

But restaurant worker advocacy groups such as One Fair Wage and Restaurant Opportunities Center United say all restaurant workers must be paid a higher minimum wage, separate from tips, to ensure workers in the industry don’t continue to fall into poverty—one of many adverse outcomes of wage work that depends on tips. It’s also the solution, they say, to the purported labor shortage in the industry.

A May study from the National Restaurant Association reported that 72 percent of restaurant operators say recruiting and retaining workers is their biggest challenge in operating. A June report entitled “It’s A Wage Shortage, Not A Worker Shortage” from One Fair Wage suggests a possible solution: 90 percent of restaurant workers in New York say they would’ve stayed in the industry if they were given “full, stable living wages” (compared to 78 percent who reported the same nationwide).

A lower wage that forces workers to rely on tips has been linked to higher rates of sexual harassment—the restaurant industry is the single-largest source of sexual harassment claims in the US—and disproportionately low wages for people of color. On average, workers of color earn less in tips than their white counterparts. Eighty percent of women in the restaurant industry have reported being sexually harassed at work, according to a study by Restaurant Opportunities Center United. There are just seven states that require tipped workers to be paid a minimum wage; those states have half the rates of reported sexual harassment in the workplace.

Jocelyn, a worker in food services at Mohonk Mountain House whose name has been changed to protect her anonymity, says sexual harassment was common.

“There was a degree of not understanding workers’ boundaries. I’ve had multiple people ask me out while I was working so maybe it’s a part of a culture there,” she says, going on to describe instances of sexual harassment and a captain who routinely “broke physical boundaries.”

The captain has since been fired after working at the resort for years. “He had fat stacks of files against him and everyone knew,” Jocelyn says. “I don’t know the straw that broke the camel’s back.”

In a statement emailed to The River, Mohonk Mountain House vice president and general manager Barbara Stirewalt said: “Mohonk Mountain House does not tolerate sexual harassment and takes any and all incidents related to sexual harassment very seriously.”

But while the contraction of this particular workforce has been tied to the pandemic, people, especially women, were leaving the restaurant industry even before COVID-19. Instead of seeing the labor shortage as evidence of a flawed workforce, advocates say it’s evidence of a deeply flawed industry.

The Origin of a $2.13 Minimum Wage

Until early 2021, New York’s $12.50 minimum wage excluded one group of people: so-called “miscellaneous workers.” Hairdressers, nail salon workers, car wash employees, valet parking attendants, tour guides, dog groomers, tow truck drivers, aestheticians, restaurant workers, and others are all classified as miscellaneous, meaning they could legally get paid less than minimum wage.

But earlier this year, state lawmakers ended this rule for all miscellaneous workers, with one exception: restaurant workers, leaving them the only ones not making minimum wage by base pay.

“As part of the 2018 One Fair Wage campaign, we were initially fighting for restaurant, carwash, and nail salon workers and what ended up happening is that Cuomo passed a $15 minimum wage for just car wash and nail salon workers in 2019,” says Prarthana Gurung, director of campaigns and communications at Adhikaar, a Nepali immigrant-focused organization.

Restaurant Workers of America, an employee advocacy organization, says this was the right move, arguing that a minimum wage for restaurant workers would lead to fewer tips and decrease profits for workers overall. A study by Upserve found that 73 percent of waiters who began earning minimum wage at their job say their take home pay did not increase, likely because patrons assume there’s less of a need to tip.

The 1938 Fair Labor Standards Act established a minimum wage for most workers, but it excluded restaurant and hotel workers, who relied on tips. Womens’ and civil rights groups argued at the time that these workers were primarily women and Black people, and historians largely agree that these federal decisions were rooted in histories of racial exclusion. They allowed companies who hired Black people to avoid paying them for their labor. It was also a way to ensure it remained difficult for Black people to reach the same economic status as white people. In 1902, one journalist wrote that tips were a way to remind Black people they were inferior.

A 1966 Congressional amendment to the FLSA added a “tip credit” provision, which allowed for the minimum wage to be met with a combination of base pay plus tips. For 30 years, federal law required employers to pay a base wage that was a percentage of the federal minimum wage. But in 1996, another amendment changed the employer's minimum wage obligation to a dollar amount: $2.13. It hasn’t budged since, though the federal minimum wage for non-tipped workers has been raised four times, most recently in 2009. Today’s federal minimum wage for tipped workers, as a percentage of minimum wage for all other workers, is the lowest it’s ever been at just 29 percent.

Different states can proceed from the baseline $2.13 payment required by the federal government how they choose. Some states require restaurants to pay their workers at least the state’s minimum wage, while others have mandated tip credits: an amount of money an employer must pay a worker if they don’t make minimum wage from their base pay plus tips. In New York State, workers are guaranteed a $7.85 base rate with a $3.95 tip credit (although the original wage is higher in New York City and Nassau, Suffolk, and Westchester counties).

But these laws have not solved the issues they were meant to. In 2017, the federal Department of Labor investigated 9,000 restaurants and found that in 1,200 of them, employers were not paying workers the necessary tip credits, leaving them earning less than minimum wage. In 2020, the Bureau of Labor Statistics published a report showing that 60 percent of workers paid at or below the federal minimum wage were in leisure and hospitality, primarily bars, restaurants, and other food services. “As has historically been the case, the industry with the highest percentage of workers earning hourly wages at or below the federal minimum wage in 2020 was leisure and hospitality (about 8 percent),” the report’s authors write. 

Reimagining How Restaurants Work

Lagusta Yearwood, owner of Lagusta’s Luscious Commissary in New Paltz, is known for striving to run her businesses fairly. But in a recent Instagram post, she admitted the difficulties of “running an ethical business” in what she calls the “busted restaurant model,” and revealed that Commissary will revamp how it does business. 

“If a system is broken, can you be ethical within it?” she writes.

Commissary employees rely on tips to make a fair wage. “I wouldn’t say it’s a wonderful strategy, but right now it’s the only one I feel we have available to us,” Yearwood says. “If we got rid of tips and raised our prices by 20 percent, we would lose a lot of business.” On average, customers at the Commissary tip 13 percent, Yearwood says.

When it reopened after lockdowns, Mohonk Mountain House also reimagined its payment model. Pre-COVID, the resort paid back-of-house workers at the bar $5 an hour plus a certain percentage, depending on their position, of a pooled administrative fee, according to a former employee. Workers were told it would amount to at least minimum wage.

Upon reopening in July 2020, Mohonk shifted its payment model to a fixed hourly rate—an effort to make staff less reliant on tips, given that the resort would have fewer guests due to coronavirus health restrictions, according to an email sent by Mohonk to furloughed employees. Workers would begin receiving a base pay upwards of $16 per hour. But they no longer share the administrative fee, which now goes to Mohonk and helps make up the higher hourly rate, multiple sources claim.

That has meant patrons have been tipping less because they assume workers do not need it. Josiah, a food worker at the resort whose name has been changed to protect his anonymity, says some are concerned because earnings are down. One of his coworkers who once made $1,000 a week is now making about half. “It was pretty unanimous that everyone liked the old way of doing things better,” he says.

Ray, who was hired after the resort reopened but left after just a few months, says that the tipping system was one reason why she resigned. “Ninety percent of people don’t tip because they assume you’re already getting tipped,” she says. “It’s set up so most people won’t tip, but the [administrative fee] doesn’t benefit us.”

Mohonk’s tipping process is predicated on an honor system that usually leaves most tips, though small, in the hands of those who already have higher-paying positions. When someone helps a server or a bartender with their task, the server is supposed to share their tips with that person. But with minimal managerial oversight, bus boys, bar backs, and others in assisting roles can miss out on the shared tips, while those in higher positions can keep their cash to themselves without punishment.

“Tipping is very informal,” Ray says. “The first time I got it I was surprised, but my coworker said I should be getting it from people I help, and then she challenged me to see how often that happened. It didn’t happen much: 85 percent of the tips I got were from her.”

Tip sharing systems like these make it easy for those in high-paying positions to keep making more money and those with low-paying positions to end up not earning much—widening the pay gap within a restaurant.

“I was doing good work, being productive, I did a pretty good job being proactive and I got a lot of compliments,” Ray says. “So I was recognized, but a lot of the time it was only with words and not with tips. It was discouraging that the manager didn’t enforce or even encourage sharing tips, knowing the differential in our hourly pay.”

Ray received less than half of the pay of the people she worked with. Although it was previously illegal for employers to require tipped workers to share their tips with non-tipped workers, a years-long fight ended in 2018 with a Congressional ruling that employers could force tipped workers to share their tips with non-tipped workers. (The Trump administration proposed rules that would allow all employers who were paying workers minimum wage to then take their workers’ tips for themselves. The 2018 Appropriations Act, which allowed employers to force tipped workers to share tips with all employees, even non-tipped workers, and prevent establishments from taking tips, was meant to stop Trump’s proposed rules.)

Splitting the administrative fee has also created tension, according to Josiah. Dining hall staff received 3 percent of the administrative fee along with their paychecks, while those working at the bar received none, a decision Josiah says “created animosity which was definitely strange and a little hostile at times.”

A pay difference between front-of-house and back-of-house workers is common in the restaurant world. Yearwood is proud to say that at the Commissary, everyone is paid the same and tips are split evenly.

“This means whether you are doing prep or making drinks or washing dishes, you’re paid the same, because we believe that everyone’s work has value,” she says. But in regards to the best model to operate with and pay workers, she says she isn’t sure at all: “That’s the big question, isn’t it?

“Restaurants don’t exist in a vacuum, and we can’t fix restaurants in a vacuum,” she adds. “They need to be reimagined within a cultural and societal shift about how compensation and what work we truly value is completely transformed.”

The shortage of workers in the restaurant industry isn’t about laziness, as some would suggest. For many workers, it’s just about what’s most logical.

“I had to go above and beyond to make enough money to pay my expenses…I had to go above and beyond with my service to try and get tips, but a lot of people in this town don’t tip,” Rosalinda says, explaining why she left all of her jobs in the restaurant industry. “For a job where you’re supposed to work off tips, it demands more. You’re putting in work and you didn’t see the reward. That’s what it was.”

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