Traveling across the state the last 18 months and meeting with our members and others in the hospitality industry, one issue has continued to dominate the discussions: labor shortage.
Oregon’s economic growth is outpacing the rest of the country, people are moving here and visiting here in record numbers and unemployment is extremely low. Those factors are all contributing to fewer people seeking employment or looking to change jobs or companies.
But in Oregon, we are also experiencing the consequences of recent regulations and laws passed making it difficult for businesses, small and large, to continue to grow, expand or even survive.
In the last two years, Oregon’s legislature has passed an annual minimum wage increase, paid sick leave law, scheduling law (the first state in the country to do so) and implemented a mandatory retirement savings plan administered by the State. Alone, these laws and regulations would be difficult to adapt to and implement. Taken together, they have challenged many businesses to find new and different ways to adjust to so much regulation so quickly.
To make matters worse, in Oregon, like seven other states, there is no tip credit for restaurants with servers. What this means is that unlike 43 other states, Oregon pays its servers at least the minimum wage plus tips - with many restaurants paying above minimum wage. Unfortunately, without a tip credit and with increasing minimum wage hikes annually, Oregon restaurants are left with little choice but to raise prices. Restaurants already have razor-thin margins; 95% of every dollar taken in by restaurants, on average, goes into the customers’ experience through food costs, labor costs or operating costs, so employers have few options. But as prices increase, a customer’s check increases and tips increase, raising wages even higher for servers and bartenders.
Finally, the U.S. Department of Labor changed a rule from the Obama Administration disallowing tip pooling with the back of the house employees like cooks and dishwashers in states without a tip credit. The rule previously allowed for non-tip credit states like Oregon to utilize tip pooling to help with the wage inequity between front of the house and back of the house. Surveys indicate more than half of customers in full-service restaurants believe the tip is already being shared among all staff.
As labor costs increase and a scarcity of labor continues to persist, employers will need to look for innovative ways to solve those problems.
Some businesses are eliminating the need for “brick and mortar” locations and are moving to online stores. Some restaurants have moved from full-service to counter-service, cutting down on the number of employees needed.
Another way has been the use of technology. McDonald’s has announced self-order kiosks for customers to use when ordering, robots can now be used to deliver coffee and towels to hotel guests, and some full-service restaurants are using tableside tablets to allow customers to not only order and pay for food but play games as well.
A recent report from the Portland Business Alliance notes that automation is a bigger threat to foodservice and accommodation jobs which are at a higher risk than healthcare professionals. Certain geographic areas, especially in rural Oregon, are also at higher risk of losing jobs to automation.
But the news is not all gloomy. Steve Brown, a futurist, speaking at the recent Oregon Leadership Summit noted the highest category of job growth is “Other” and went on to say there are jobs in the future we haven’t even created yet and ones that will be created because of technology. Automation and robotics will likely create new jobs for the industry that have them working alongside robots.
For every kiosk or tablet used, there will need to be someone to manufacture new ones, repair existing ones and write the software for the programs. Robots may be used to deliver towels, but someone will still need to put the towels in the robot’s “hands” and keep up the maintenance.
Many of these technological solutions will still need human interaction. Customers will still want to talk with the person in charge when they have a complaint or personally pass along a compliment to the chef.
Technology or automation and people can work together to make sure we still provide customers with what they want to keep them coming back.