Operations

Restaurants' labor situation has improved, but it's far from perfect

The industry has regained workers, and more operators are likely to say they’re fully staffed. But labor is more expensive. Retention remains a key stressor. And jobs have moved.
Restaurants gained more expensive workers. | Illustration by Marty McCake

For Honeygrow, 2020 was one problem, with the pandemic wiping out much of its business for a time. But 2021 would prove to be altogether different.

The 40-unit fast-casual chain was getting customers. It just couldn’t find workers. “We had folks coming into the restaurants,” founder and CEO Justin Rosenberg said. “We couldn’t get folks to want to work in the restaurants. We were unfortunately temporarily closing locations.”

That’s not a problem these days. It has both customers and workers and is adding locations again.

For Honeygrow and other restaurant chains, the labor problems that dominated 2021 and 2022 are in the past. The industry has recovered jobs that it lost when the pandemic hit in 2020. People have returned to the workforce, providing a labor pool that is enabling operators to remain open and expand hours.

But that doesn’t mean the labor picture is perfect. Far from it, in fact. Labor remains more expensive than it was four years ago, and that’s not including the wage increase about to take place in California. Labor retention remains a key stressor for operators, and restaurants have more job openings than almost any other industry.

What’s more, the hiring picture looks different based on the sector of the industry you look at and the location of the restaurant in the first place.

“It is better than it was two years ago,” said Hudson Riehle, SVP of the research and knowledge group with the National Restaurant Association. “But it’s still the No. 1 ranked priority for operators.”


First, let’s look at the total labor picture. Restaurants and bars lost a ton of jobs in March and April of 2020, when states shut down restaurants for dine-in service and restaurants responded by furloughing much of their workforces.

Restaurants were hit harder by the pandemic than just about any other industry because governments deliberately stopped in-person dining. As such, they were far slower to recover their lost workforces.

But the industry recovered lost jobs last year. Restaurants hired about 300,000 workers in 2023. And they are expected to continue hiring workers in 2024. The association said it expects the industry to hire about 200,000 more workers this year.

Nearly two-thirds of operators told the association they were “very likely” to hire additional workers this year. “Even in an environment of higher throughput and productivity efficiency, this is still a situation where demand remains high,” Riehle said.


But demand for restaurants increased more quickly than did hiring. With relatively few people re-entering the workforce coming out of the pandemic, restaurants were among the last places that could pick up people. As such, restaurants couldn’t hire enough people to meet demand.

The best way to examine the state of the industry’s labor shortage is to look at job openings. And the industry’s job openings rate has declined steeply over the last year but remains elevated when compared with other industries.

The rate of job openings for hotels and restaurants has fallen from 9.6% in November 2022 to 6.4% in November of 2023. That is a substantial improvement. Yet it remains higher than almost any other industry, with the exception of health care and social assistance jobs.

More than half of operators say that recruiting employees is the top challenge. That is better than it was two years ago, but remains the top challenge for the industry, Riehle said. Meanwhile, more than two-thirds of restaurant workers told the footwear company Kuri that there remains a labor shortage. That was roughly unchanged from a year ago.

In short, restaurants’ labor picture has improved over the past year. But restaurant jobs remain one of the hardest to fill.


On the other hand, people aren’t quitting their jobs as much anymore.

The “quits” rate by industry is an interesting way to examine the labor shortage. The more people quit, the more they’re confident in their job prospects.

The quits rate for restaurants and hotels has fallen steeply over the past year. In November 2023, according to U.S. Labor Department data, that quits rate had fallen to 4.3%. And it had declined by 80 basis points in just two months.

What’s more, the quits rate is lower than it was in the year before the pandemic. It’s worth noting that pre-pandemic operators struggled to find labor, too. Still, it’s one area of the labor market that has actually improved.

That may also be a sign of the improvement in benefits and working conditions inside restaurants. Operators, fretting their turnover rates, have invested in technology designed to improve the lives of workers. They’ve also invested in benefits to keep people around, such as paid time off, retirement benefits, tuition reimbursement and other perks.


That said, the average worker is a lot more expensive now.

Average hourly pay rates took off in 2021 and 2022. Average hourly wages in the restaurant business were up 29% between November 2020 and November 2023, according to federal data.

That said, the rate of increase slowed over that time, from an annual increase of 14% in 2021 to 6% in 2022 to 5% in 2023. Slowly, the increase is improving. But with labor still in demand, wages continue to head northward.


And where restaurant workers are employed is also different. They are more likely to work in a limited-service concept, probably in the South and the West.

Full-service restaurants, which lost the most employees in 2020, have yet to recover the lost jobs. They’re more than 200,000 jobs short of where they were in February 2020, a likely result of closed restaurants and a slow recovery of that business. Buffets and cafeterias, hit hardest by the pandemic, have lost nearly half their pre-pandemic workforce.

By contrast, limited-service restaurants lost only about one-quarter of the employees full-service restaurants did and have added 130,700 jobs since 2020. Snack and beverage concepts have seen a surge in employment by 100,000 jobs. People are less likely to sit down for a meal and are far more likely to grab some fast-food or a beverage.

As for the states, we leave you with this map that probably says as much about where people are living as anything else. They’ve moved from cooler Northern states with more classic urban markets that have struggled coming out of the pandemic, to warmer Southern and Western states.



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