BAD LUCK: First Restaurants Raise Wages. Then What?
Restaurants are running out of chefs. The work is astonishingly unglamorous: hot, manual labor performed in a tiny space. It also pays abysmally; the median hourly wage is just $11 an hour, and the 90th percentile, the elite of the profession, makes a princely $15.35. As student loan burdens have gotten more burdensome and urban real estate prices have soared, restaurants in pricey areas are finding it harder to attract workers willing to endure a long commute in order to spend hours getting hot and dirty.
Why don’t they just pay more, demands Kevin Drum? “Offer them, say, $15 per hour, and who knows? Maybe there are plenty of good entry-level cooks available. This would raise your total cost of running the restaurant by, oh, 2 percent or so, but it’s not like restaurants are competing with China. They’re competing with other restaurants nearby that have the same problem. If the price of a good cook is going up, it’s going to affect everyone.” . . .
Would people really stop going to restaurants over a measly 7 percent of the check?
Well, yes. But not all people, and not all the time. Many people would eat fewer meals outside the home. There’s a restaurant near my house that I’d say is 20 percent overpriced for the neighborhood and the quality of the food it serves. It had no competition nearby but still opened empty, and remains mostly that way a year later. The food is good — not stellar, but I’d be happy enough to eat there, if it weren’t for the fact that everything costs too much. If prices at the pub that opened nearby went up by the same amount, I wouldn’t simply start splitting my time between the two; I’d eat out less.
Americans spend a phenomenal amount of money consuming food outside their homes, and a major reason is that with restaurant labor so cheap, the convenience and price are attractive to people who don’t feel like cooking. If the wages go up, that calculus shifts. And unfortunately those “rich bosses” can’t just take it out of their profits, because margins in the industry are under 5 percent, and the difference between making that profit and closing up shop can be surprisingly thin.
People who have never run a business are good at airily dismissing such things.