Labor Dilemma Not Likely to Improve Anytime Soon

We always strive to share positive information to build optimism among the franchise owners who read our blog. Even when we touch upon challenging subjects, we prefer to offer practical advice for making the most of the situation. Yet when it comes to the long-term challenges of the labor supply, it’s hard to find the bright spot for franchisees.

Of course, the frustratingly tight labor market is a sign of a healthy economy, which suggests that more people will be willing to spend more money to eat out. That’s a good thing for your business. But that raises the question of how will you serve those people if you can’t hire enough people for your service counters and kitchens?

Pointing to the current economic situation as the primary cause may be accurate, but it implies something that just isn’t true: that we’re in a short-term cycle that will correct itself sooner rather than later. What we’re seeing today is the result of several long-term demographic and economic changes that are happening simultaneously.

A generation ago, franchisors could count on a surplus of teenagers who were seeking work. On average, 56 teenagers were available in the labor force for every “limited service” restaurant. But as birth rates have fallen and the number of restaurants has seen dramatic growth, fewer than half that number of teens are available to work.

Two decades ago, nearly 45% of people in the 16-to-19 age group were working, compared to just 30% today. High school students are more focused on the classroom and extracurricular activities than on picking up minimum-wage work for spending money, and Mom and Dad are less likely to urge them to work.

Members of the baby boomer generation are retiring at an increasing rate, with massive retirements expected over the next decade. You say you don’t hire boomers? That’s fine, but employers who do will be scrambling for replacements and looking at the other age groups that supply most of your workers. At the same time, a much smaller group is entering the workforce and immigration has been declining. Right now, the growth rate of the nation’s population is at its lowest level since 1937, and that means fewer available workers.

Another phenomenon has economists scratching their heads. You’ve heard the tales about adults moving into their parents’ basements and refusing to work. There’s some truth to that, reports the Census Bureau, as millions of men have simply stopped looking for work. You have jobs to fill, but they’re just not interested.

Plus, with the healthy economy and more open jobs than available workers, people are more willing to quit jobs to land a heftier paycheck down the street. The Labor Department reported that 3.4 million Americans walked away from jobs in June 2018, double the 1.7 million who were laid off during the same period. The Atlanta branch of the Federal Reserve Bank reported that people switching positions saw 4 percent increases in wages, compared to an average 3 percent for those who stayed put.

Given all these factors, it’s clear that the tight labor market is going to be a way of life for quite some time to come, perhaps a decade or even longer. Where does that leave you? Franchise owners who develop creative approaches to hiring, compensating, and retaining employees (especially given that research shows it costs restaurants about $2,000 to replace each hourly worker) are those who will be the most likely to prosper and sleep well at night.

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