Restaurant operators say they ‘can’t win for losing’

When the Centers for Disease Control opened the floodgates May 13 to vaccinated Americans getting out and congregating, many who had ordered out or cooked at home for 14 long, lonely months heaved a sigh of relief. Then they dialed up their favorite restaurant to make a celebratory reservation. Restaurant owners are more than anxious to welcome them back. The catch is, they can’t – at least not easily. After suffering through a year marked by closures, layoffs, and a shift to mostly take-out and delivery, operators are now facing a historic shortage of workers that has forced them to limit hours, reduce seating capacity, eliminate lunch and breakfast service, and load up existing staff up with more hours and additional duties. “With the CDC guidelines changing, the weather getting nicer, and more people vaccinated, I think people are ready to come back out and enjoy restaurants like ours,” said Tim Carty, a co-owner of North Liberty’s Table restaurant, which has seen its fair share of challenges since opening in the thick of the pandemic in July 2020. After only being open five months, the eatery specializing in modern American classics and craft cocktails closed just before Thanksgiving as the weather cooled and COVID-19 cases spiked. Table reopened March 23 but has wrestled with finding enough staff ever since. For the moment, the restaurant is only open for dinner and has put off plans to open for lunch or relaunch a revamped brunch service it had been excited about premiering. “We’re really struggling,” Mr. Carty said. “I mean, you can’t drive past a restaurant in town without seeing ‘now hiring’ or ‘help wanted’ signs or something in their window. And we’re definitely part of that group … The smaller staff that we have is wonderful, but they’re working every hour we’re open, which isn’t good for anybody. We’re just running them ragged and that’s not fair.” Things are tough all over, as a glance at Indeed.com confirms. The job-hunting site listed 7,777 job availabilities in the Cedar Rapids metro and 4,521 in the Iowa City area as of mid-last week. Employers like Menards are offering an extra $4 an hour on top of the company’s base wage at all locations, and many are advertising eye-popping new benefits and bonuses. CCB Packaging in Hiawatha, for example, is offering a $1,000 sign-on bonus for automated associates and flexible scheduling that allows them to work just seven out of every 14 days. But according to Iowa State University economist and research scientist Dave Swenson, no sectors of the economy are suffering from workforce shortages more than the ones that have borne the disproportionate brunt all along – leisure and hospitality. Those employers were forced to lay off most of their workers early in the pandemic, only to struggle mightily to lure them back. “Leisure and hospitality are the lowest paying sectors of our economy,” Mr. Swenson said. “They pay the worst wages, they generally have the worst working conditions with regard to employment security, benefits [and] down the line. Those jobs were absolutely hit the hardest.” The fallout is easy to see. Restaurants across the region and the country are festooned with “Help Wanted” signs and running ads touting improved wages and signing bonuses. Pizza Hut is offering shift managers in Iowa City $1,000 sign-on and retention bonuses, Tin Roof in North Liberty is advertising $200 bonuses to new line cooks and kitchen staff, and Cedar Rapids’ Granite City is supplementing wages of $14-$18 an hour with $300 bonuses for kitchen staff. In the meantime, restaurants are having to make do with less, which often means restricting hours and capacity – a bitter pill to swallow just as Americans get the official nod from health officials that it is finally safe for the vaccinated to mix and mingle in groups. Several area restaurants have closed their doors at least one day a week to give their staff a break or cut out breakfasts, lunches, or both. While Table is open for dinner only, Jake Kendall, who owns and operates Culver’s locations in Cedar Rapids, Hiawatha, Marion and Waterloo, recently switched to a drive-thru-only model due to an inability to hire enough staff. “As painful as it is to admit, that is the operational model we’re currently in,” Mr. Kendall said. “It’s working for us, we’re lucky to have that option, but it doesn’t make it any easier, by any means, to turn away business that you spent years trying to build.” Restaurant operators were wary of wading into the political waters of Gov. Kim Reynolds’ recent decision to put an end to federal enhanced unemployment benefits, although most said just about anything will help at this point. Pro-business groups, however, lauded Ms. Reynolds’ decision to end the extra $300 a week benefit early. The benefits, set to expire in September, will now end June 12. “Federal pandemic-related unemployment benefit programs initially provided displaced Iowans with crucial assistance when the pandemic began,” Ms. Reynolds said. “But now that our businesses and schools have reopened, these payments are discouraging people from returning to work.” Critics, like Ryan Bourne, the R. Evan Scharf Chair for the Public Understanding of Economics at Cato, recently wrote that due to pandemic benefits, 37% of workers were able to make more unemployed than in work, noting that a Glassdoor study suggested job search activity on Google fell 15% in early March, with the decline starting just before the American Rescue Plan passed extending elevated benefits. “The simple truth is that many low-wage businesses have been pole-axed by COVID-19 for months, with enforced closures, lower demand, and the need to invest in social distancing protocols, making them less efficient,” he said. “Extending UI benefits right through this recovery will mean fewer jobs.” Jessica Dunker, president and CEO of the Iowa Restaurant Association, said the restaurant industry overwhelmingly believes supplemental federal benefits have played a major role in the worker shortage. A just-released survey conducted by the association found that 90% of Iowa restaurant owners believe enhanced unemployment helped dry up supply. Forty percent say former workers took jobs in other industries, 20% said they believed workers were fearful about returning to work in a restaurant setting and 15% cited employee school and child care issues. “It’s not really true that they make more money staying home, but they maybe make enough to get by,” she said. “Some people were opting to sit out the summer. Maybe it gave them the opportunity to get their kids through the school year and the summer. There are a lot of reasons, and it has really very little to do with people not wanting to work. There’s no judgment from a standpoint of work, it’s that they’re just weighing decisions, and if you can make enough, you might do without some things because you have the opportunity to be home a little bit longer. That’s one piece of it.” Other pieces include a dearth of teens in an industry that has traditionally been the first job for one in three Americans, a workforce that was tight even pre-pandemic, and laid off or furloughed workers migrating to other industries. “We became the tip of the spear from the standpoint of strategies for mitigation of COVID,” Ms. Dunker said. “Our industry was the first one they took down and our workers, many of whom had careers in our industry, looked around and said, ‘You know, I can get the same amount of money and I can do one of those work-at- home jobs like customer service or great phone jobs.’ We were kind of easy pickings for other industries that were a little more pandemic proof [in terms of] stability of work. We’ve lost people to other careers, and now we’re in the unenviable position of having to go out and redevelop a lot of our workforce … And, you know, I just don’t know that we’ll get those people back or what the solution is.” The restaurant association’s recent survey indicates that 87% of restaurants say they are stretching existing staff by giving them more hours and duties, while 57% are reducing capacity, making fewer seats and tables available for customers. An additional 35% are closing for at least one day a week, while about 20% have dropped breakfast or lunch service. The shortage is particularly frustrating because “we’re on the cusp of everybody wanting to come out,” Ms. Dunker said. “We could be doing record sales because people are so anxious to get back. What is that saying? We can’t win for losing.” Mr. Kendall said he tries to remain hopeful. His restaurants have always paid far above minimum wage in addition to offering benefits unheard of in the fast-food industry, including health care, a matching 401(k) plan and short-term disability benefits. Now he is starting new employees at $14 an hour – a level he had long strived for but hoped to approach over a longer period. “You always had the peaks and valleys, but we never closed or laid anyone off, and as we continued through [the pandemic], we noticed how our application flow was nowhere near what it typically is. And it never rebounded,” he said. “We’re starting to see a little bit more now … but, boy, are we tired. We’re probably as thin as we have ever been at the same time our customer demand is as high as it gets. And that’s great news, but by the same token, it’s a perfect storm.” Mr. Kendall said the workforce was scarce in the region even pre-pandemic, and while cutting off supplemental benefits was not the entire solution, he hoped it might motivate “a group out there that was ready to come back anyway.” Mr. Swenson said he doubted the end of the federal benefits would move the needle much, and that the CDC giving vaccinated workers a green light to return and calming anxiety was probably equally valuable. “And there was a good fraction of those workers who did not qualify for unemployment benefits by virtue of how many hours they had been working or how long they had been working,” he said. “Another big bunch of those workers very well may have been foreign-born, or for one reason or another were not in the system. I suspect those workers who weren’t getting benefits may have moved on to other sectors of the economy, and they’re unlikely to come back.” Another chunk likely retired, he said, adding, “I don’t believe a club, a whip or demeaning workers is going to bring people back. It’s got to be a perception of safety in the workplace and the right kind of pay.” In addition, far from helping the economy rebound, ending additional benefits could discourage spending. A multi-university study of spending in 15 Illinois counties after federal benefits were reduced from $600 to $300 weekly showed consumers spent 5% less – a significant number in a still-fragile environment. “If you’re denying the federal money, you’re by definition shrinking the Iowa economy, because that money coming in is going to be consumed by those households,” Mr. Swenson said. “It’s going to have a least a consumption-related economic impact that is negative among your retailers, your service providers.” Mr. Swenson noted that enhanced benefits were similarly cut in 2011 as the nation was climbing out of the Great Recession. “People decided that the reason the economy wasn’t improving was because of those extended unemployment benefits and they voted to stop them, assuming that that would induce more employment,” he said. “The rate of recovery did not change a bit for the next three years.” Mr. Carty said he prefers not to get into the politics of pandemic benefits. But he acknowledges he is tired of spending money on advertising and longs to get that money into the hands of local workers. “We just don’t want to be turning anybody away, especially as a new restaurant,” he said. “We want to be able to introduce as many people to our staff and our food and our space as we can. And we just can’t do that right now … I feel we’ve tapped every resource we could possibly think of.”