However, the foodservice industry is struggling to come to terms with the realities of the current labor market, due to the upswing in the global economy and the perceived disadvantages of the industry to prospective employees.
Finding, hiring, training and retaining employees is nearly as big of challenge as paying the increased minimum wages that are being mandated across the U.S. and Canada. These challenges span all segments of the industry and require new methods to solve them.
MACRO U.S. LABOR TRENDS
The U.S. economy slowed in the second half of 2016, as growth in the world’s largest economy weakened unexpectedly. Growth expectations for the year fell from 2.5% at the end of 2015 to 1.6% at the end of 2016. Although consumer spending held up well during the year, business investment was weak overall and exports were held back by the strength of the dollar and lackluster growth elsewhere in the world.
Unemployment rates in the U.S. continue to trend downward and the economy is near levels traditionally designated as “full employment.” However, long-term unemployment (defined as persons jobless for 27 weeks or more) remains high at 24% (compared to 31% in 2011). As do the number of workers employed part-time for economic reasons (sometimes referred to as involuntary part-time workers). Even so, through 2040, employment is forecast to grow at a pace faster than population expansion, leading to tighter labor markets (and, potentially, higher wages) in the future. Furthermore, lower labor force participation (the proportion of the civilian labor force either employed or unemployed, but looking) is a persistent problem, and over time, the situation could affect standards of living.
The lowering of the inflation-adjusted value of the federal minimum wage (which is currently 25% below its peak in 1968) has further contributed to wage stagnation and helps explain the increased divide between low-and mid-wage workers. Further inhibitors of wage growth include the introduction of federal tax incentives that encourage non-wage compensation (e.g. profit-sharing, flexible vacation) and increased healthcare costs to employers and employees.
However, with a rise in consumer confidence, people are eating out more frequently. That has coincided with an influx of new establishments and employment opportunities in the foodservice industry. Rising employment in the restaurant industry at a time of dwindling unemployment has made the labor market competitive, driving up wage rates, while increases in the minimum wage have put pressure on labor as well. The result for operators is a labor market with fewer minimum wage workers to choose from and workers that are willing to change employers frequently for minor increases in compensation. With this myriad of labor complications, the foodservice industry needs to adopt new ways to minimize labor costs to remain profitable.
Entegra Procurement Services regularly publishes blog posts on food trends and innovations in food services. Entegra is more than a group purchasing organization (GPO): Our team of procurement specialists implement strategic sourcing to bring the most value to your business. We help our clients, in many segments ranging from the healthcare supply chain to restaurant supply, to cut costs and consolidate their portfolios.