Restaurants have taken a major beating in the course of the pandemic. Not only were many forced to shutter to in-person diners early on, but for months they had to operate with strict capacity limits that hindered revenue.
Things improved earlier this year when COVID-19-related restrictions were lifted. But now, restaurants are grappling with another problem -- they don't have people to come work for them.
Restaurants are notorious for their low wages and grueling work conditions. They're also not the safest job at a time when a pandemic is still raging and mask mandates have been lifted. As such, it's easy to see why restaurant work is a hard sell these days.
Compounding the problem is the fact that workers on unemployment are still, in many states, collecting an extra $300 a week in benefits through early September. For some people, that's more than what they would actually make at a full-time restaurant job.
All told, restaurants have a real conundrum. And if they don't solve their labor issues soon, many will be forced to shutter not due to restrictions or a lack of consumer demand but due to the inability to operate. That could, in turn, be disastrous for real estate investors. Closed restaurants can negatively impact property values, not to mention hurt the landlords who rely on them to pay rent.
Thankfully, some restaurant chains are taking steps to address their labor shortages. And in doing so, they're also acknowledging workers' right to a more equitable wage.
Will more money do the trick?
Between the months of March and June, restaurants added more than half a million jobs, according to the U.S. Department of Labor. In spite of that, the unemployment rate across the industry sat at 10% in June, up from 9% the month before.
Some chains, however, are stepping up wages in an effort to lure restaurant workers back into the fold. Papa John's (NASDAQ: PZZA), for example, is offering existing employees the chance to score $400 in bonuses this year. An estimated 14,000 workers will be eligible for that program.
McDonald's (NYSE: MCD), meanwhile, will implement pay raises that average 10% over the next several months. Entry-level employees will be eligible to earn $11 to $17 per hour, well above the $7.25 federal minimum wage, while field managers will earn $15 to $20 per hour. By 2024, McDonald's intends to pay employees of company-owned restaurants $15 per hour at a minimum.
Chipotle (NYSE: CMG) has also rolled out a wage increase. Starting compensation for hourly crew members is now $11 to $18, with the average worker earning $15 an hour.
Of course, some restaurants that raise wages may seek to pass that cost increase onto diners, and that may not sit well. On the other hand, if given the choice between closures and higher costs, many restaurant patrons would quickly opt for the latter, so dining establishments may feel more than comfortable moving forward with plans to better compensate employees.
That said, for workers with health concerns, a modest pay boost may not be enough to get them to take a restaurant job. This especially holds true at a time when the new Delta variant is causing a surge in COVID-19 cases.
Still, raising wages for employees is a step in the right direction on the part of restaurants. And if more follow suit, they may avert a crisis and fuel their recovery from the events of the past year and a half.