Hospitality businesses have complained of being unable to fully resume operations with the bottleneck of demand and a slower-than-expected return of workers to the labor market. The number of workers newly applying for unemployment benefits has been slowly dropping this summer, but some weeks have also seen the number of applications slightly tick up.
But labor groups and worker advocates have argued that businesses could attract more staff by paying more, noting the added risks of viral transmission in often already grueling customer-facing jobs.
Still, economists caution that tightness in the labor market could have the effect of further fueling technology investment. According to a recent survey from the Census Bureau, nearly 1 in 10 small businesses say they believe they will need to provide online offerings in the next six months.
“If companies are having problems finding workers, that’s going to accelerate technology innovation,” West said. “You know they’re going to find an app, an algorithm or a robot that can do what the human being was going to do. So there definitely will be incentives for companies to innovate in that way.”
For some groups of workers, that means they’ll have to acquire new skills in order to find work, said Madgavkar of McKinsey Global Institute. That ask will acutely affect women and workers with less education, the groups hit hardest by pandemic layoffs.
“Women will need to make more transitions on a relative basis than male workers. People with less education … will need to make more transitions,” said Madgavkar of McKinsey Global Institute. “We’re talking, really, about how do you actually upskill groups that have traditionally found it difficult?”
McKinsey estimates that the share of U.S. workers in jobs involving on-site customer interaction that will have to transition to new occupations by 2030 jumped 8 percentage points because of the disruptions caused by the Covid-19 pandemic.
“Covid-19 has accelerated forces of automation and technological change that were already underway, but brought them in with the new urgency. And some of this will stick and persist because consumers like some of these new business models,” Madgavkar added. “And in the long term, what this means is that the workforce is going to have to adapt and adjust much faster.”
The pandemic-induced disruption and evolution of customer-facing jobs means business models are changing, and for some that means downsizing and spending that money elsewhere.
Food and beverage businesses reduced their team sizes by nearly 25 percent in April 2020 compared to the year prior, according to data from Square. And while staffing sizes have returned to pre-pandemic levels in other sectors of the economy, food and beverage staffing levels remain below where they were in 2019.
“People are eager to get out and go to restaurants. But if they’re not hiring more people than they did two years ago,” said Grech, “that is in itself an interesting symbol and sign.”
Business investment — a metric that measures money spent on new equipment — has also been stronger than expected given the shortfalls caused by the pandemic, Moody’s Zandi noted.
But for others, the change also means rethinking the tasks that workers do and how their business makes money.
“It feels like it’s going beyond the pandemic effects, something more fundamental is happening,” Zandi added. “Those are pieces of evidence that perhaps businesses are more focused on trying to improve the productivity of the workforce.”
And that may not be a bad thing for workers. There might be fewer jobs going forward, but Mahaney says they will be better jobs.
Scratch & Co.’s restaurant now operates with just seven employees, half of the staff as before the pandemic. Mahaney says they also have two other employees running the kitchen at a nearby bar and an event coordinator. The company plans to hire three more employees this fall when they expand to another kitchen — putting their crew closer but still one employee shy of the 14 staff they had prior to the pandemic.
For Mahaney, he realized that what he had to do wasn’t just to put wait staff into new jobs to bridge the gap during the pandemic, but to change the entire business model for Scratch & Co. in order to retain employees and keep his staff invested in their work.
“I said, ‘Hey, you know, we’re going to start this out, that’s not going to be a ton of money,‘” Mahaney recalled telling his staff when he informed them they were going to be salaried starting at $30,000 and offered more as the company’s bottom line improved, an incentive he hoped would keep workers on board and get them interested in management. “‘As income stabilizes for the restaurant, however that shakes out, if you’re willing to work with us, we’re going to create this thing, and it’s something really special.‘”
Now, he said, nearly all of his workers are making more than $50,000 a year.
For David Kost, a 19-year veteran of the service industry, the skills realignment that policymakers warn about has already happened. Kost started as a bartender at Scratch, but is now a salaried service manager in charge of contacting vendors, delivering lunches for the company’s charity program and representing Scratch at public charity events. He also still assists with restaurant service.
Coming out of the pandemic, he said, many businesses have been unwilling to make the necessary changes to their business model like Scratch to pay workers more.
“A lot of employers and business owners are just not willing to accept this fact, they’re just not willing to do the extra work in order to make it,” Kost said. “They just want to open back up and operate as per usual, when many of their employees or former employees and possible returning employees want to be paid better and want to be treated better.”
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