Long before the pandemic persuaded so many restaurant employees to abandon the business, Corrinna Stum chafed at the illogic of the pay.
She started as a server at age 15, and quickly discovered how stressful it could be to earn only the federal minimum wage for tipped employees (now $2.13 an hour) and hope that tips would make her whole. Her husband, Matt, a cook, was never entitled to a share of diners’ largess.
So last spring, when the couple opened Ruby’s West End, a cafe in Portland, Maine, they decided that every aspect of their restaurant would diverge from business as usual. Stum, 30, spurned pricey subscriptions for reservation and scheduling software, and instead used that money to help pay every member of her small team $12.15 per hour, Maine’s full minimum wage. She also added a 20 per cent service charge to every check, to be shared with the kitchen staff, which traditionally doesn’t benefit from tips.
Word of those plans was enough to lure one server, Olivia Shipsey, from her job at a busy downtown restaurant, even though it meant giving up the generous tips she earned there. “I knew that was something I wanted to be a part of,” said Shipsey, 23, who is now Ruby’s morning manager. On a good day, the service charge can lift her wages to as much as $27 an hour, on par with what she earned downtown.
Low, inequitable or unpredictable wages, long hours and few benefits have long been accepted hallmarks of the American restaurant industry. But in the pandemic, many workers — whether laid off or facing health risks on the job — have concluded that those conditions are intolerable.
Since the mandatory shutdowns of last year, restaurant workers have left their jobs in droves, and many have quit the industry for good. The latest numbers from the federal Labor Department show that after respectable increases in the previous six months, hiring in the hospitality industry stagnated in August. As of late July, restaurants were nearly 1 million jobs, or 8 per cent, below pre-pandemic levels, and 75 per cent of restaurant operators report that recruiting and retaining employees was their top challenge, the highest level recorded in two decades, according to the National Restaurant Association.
The hiring crisis has prompted many restaurants to raise wages: Pay for hourly workers in leisure and hospitality jumped 13 per cent to an average of $16.60 in August, from $14.72 a year ago. Many big chains and some high-end restaurant groups — including Starr Restaurants, which owns Upland and Buddakan in New York City — have made headlines by offering signing bonuses to new employees.
But a growing number of restaurants are trying to get at the root causes of inequitable pay by moving away from the tipped minimum wage. That wage allows servers the chance to earn more than cooks, but also puts them at the mercy of customers, who in the wake of the pandemic have become less generous tippers and more unruly diners. Some owners are also trying to instigate some measure of work-life balance in an industry where late-night hours and 80-hour workweeks were once a badge of honor.
In a two-week survey released Monday, One Fair Wage, an advocacy group for service workers, found more than 1,600 restaurants that were paying an average wage of $13.50 plus tips across 41 states — states where earlier this year the vast majority of restaurants paid a tipped minimum wage of $5 or less.
“For me, it would have been difficult to stop the business I had been running for 22 years, because everything was moving so fast,” said Jason Hammel, the chef and owner of Lula Cafe, in Chicago. “The pandemic gave me an opportunity to start with a blank slate and say, Let’s rebuild the model and the way we’ve always done things.”
Hammel had ample time to reflect on how to restructure. After closing in March 2020, Lula Cafe didn’t reopen its dining room until last June. Hammel hosted a job fair, hoping to hire 40 workers, and explained to potential employees his plans to pay higher hourly wages — somewhere between $18 and $24 for most — by adding a 20 per cent service charge to every check. Any additional tips would go into a pool to be split by all employees. As he did before the pandemic, Hammel also offered health benefits, paid vacation time and a 401(k) plan.
As Lula Cafe explains to patrons on its website, and often tableside, the service-fee system is not a smart move in terms of profits. The 20 per cent fee doesn’t come close to covering the wages and benefits Lula provides, Hammel said. Because a service fee is categorized as income, Hammel must pay taxes on it, while forgoing a federal tax credit for employers who pay the tipped minimum wage.
But Hammel noted a significant upside: He hasn’t struggled to hire.
Certainly, tipping has its defenders, including servers who see it as a key part of their compensation. And a tacked-on charge can offend potential customers who bristle at the idea of an obligatory tip, regardless of the quality of service they receive. At Ruby’s, in Maine, Stum noted that one customer asked to have the 20 per cent service fee taken off the bill, then added it back as a tip. “People like to have the power in their hands,” she said.
Amanda Cohen, the chef-owner of Dirt Candy, on the Lower East Side of Manhattan, is a pioneer of and evangelist for eliminating tips. She moved to a service-inclusive system — in which menu prices cover everything — in 2015, the same year Danny Meyer’s Union Square Hospitality Group instituted a “hospitality included” policy with great fanfare. (Meyer ended that practice last year.)
For Cohen, it was an effort not only to challenge the very concept of tipping, which she called “inherently racist and sexist,” but also to attract and keep workers. “Everyone is making it seem like the difficulties finding staff is a post-pandemic issue,” she said. “But it was real before the pandemic, too, especially in New York City.”
Her new system was costly. Cohen says that, despite enthusiastic reviews and hard-to-get reservations, she often barely broke even. Profits hovered at about 1 per cent, she said. “We were always teetering on the edge of collapse.”
The pandemic changed that. Like many restaurateurs, Cohen streamlined her menu, serving a tasting of three courses instead of the five or 10 previously on offer. Fewer choices drastically lowered her food costs and the number of people needed to prepare the intricate dishes she is known for, like an eggplant tiramisù served with a cloud of cotton candy.
Today, Dirt Candy offers just one five-course menu, and starts all employees at $25 an hour. Last month, its profits hit 5 per cent, Cohen said. “The only way I could pay fairly was to start running a better business,” she added. “It’s not the restaurant I dreamed of having, but it’s the one that functions.”
Some restaurants that aren’t ready to make the leap to a new wage structure are tweaking around the edges, offering additional benefits and less grueling schedules. Ellen Yin, a partner in the Philadelphia-based High Street Hospitality Group, has long offered a health plan, but will soon add one with lower premiums, and a student-debt reduction program. This month, Jason Berry, a founder of Knead Hospitality, a restaurant group in Washington, D.C., will start introducing a four-day workweek for his restaurants’ managers.
Berry proposed the schedule switch — four 12-hour days instead of five 11-hour shifts — after losing two valued longtime employees this summer. One quit to sell wine, the other to follow a dream and write children’s books.
“It’s a sign of what’s happening in the industry,” Berry said.
The changes will require more hiring, and will increase operating costs — an added $250,000 a year, for example, at the first restaurant to make the switch, Berry said. But he feels the math still makes sense. Losing workers costs money in time, recruiting and training. And despite the pandemic, the company is expanding fast; it plans to grow from five restaurants this spring to 14 in 2022.
“How do you differentiate yourself in a city where everyone is hiring and everyone wants the best people?” he said. “We hope to bring some balance back to people’s lives who still love the industry.”
Whether such changes will be enough to stem an exodus of employees is yet to be seen. In May, a survey by One Fair Wage showed that 53 per cent of restaurant workers in the United States were considering leaving their jobs, with concerns about low wages and tips outpacing COVID health risks as the reason by more than 20 percentage points.
Saru Jayaraman, president of One Fair Wage, says new laws are needed to protect workers and level the playing field for restaurants trying to make change. The Biden administration has called on Congress to do just that by passing the Raise the Wage Act, which would phase out the tipped minimum wage — though the bill is opposed by the National Restaurant Association and lacks support from key Democrats.
“It has to be universal, permanent change that makes a worker feel like it’s worth coming back to this industry,” Jayaraman said.
In the meantime, chefs and restaurateurs will continue to try to test new models. At Ruby’s West End in Maine, Stum is building a new patio, and hopes that with more seats she will soon be able to raise base wages to $15 an hour.
“It’s not that hard,” she said. “It just takes the will to do it.”