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American consumers see drop in restaurant, retail quality from labor shortage, study finds

This Monday, June 27, 2016, file photo shows an Olive Garden restaurant in Methuan, Mass. The coronavirus pandemic's labor shortage has plagued restaurants and their customers according to a new consumer survey from Premise, a global marketing data collector. The survey's result show that "customers are becoming increasingly dissatisfied as a result" of companies struggling to retain their workforces (AP Photo/Elise Amendola)

Poor service. Limited menus and inventories. Shorter hours of operation. The pandemic’s labor shortage has plagued restaurants, retailers, and their customers, according to a new consumer survey from Premise, a global marketing data collector.

And the near-term prognosis is none too cheery, says former Wall Street trader Charles Mizrahi.

“Shortage of labor is a temporary problem because demand is decreasing as the economy slows,” said Mr. Mizrahi, founder of Alpha Investor. “Businesses will soon not be worrying about too few employees, but having too few customers or sales.”

Premise reported this week that 61% of U.S. consumers noted a decline in service quality at restaurants, 76% cited reduced hours of operations and 60% pointed out fewer menu choices since the start of the pandemic in 2020. Nearly half — 46% — said these changes have diminished their feelings about eating out.

Patrick Fahey, a manager at The Dubliner restaurant in Washington, D.C., said the popular tourist spot near Union Station on Capitol Hill has kept employees and customers “happy enough” by focusing on in-person service.

The Irish pub does not have online ordering, he said, despite the District of Columbia’s mask and vaccine card requirements keeping some people away from restaurants.

“We did have a lot of staff come back to us gradually, so we’ve been lucky in that,” Mr. Fahey said.

But Ruth’s Chris, a high-end steakhouse chain, has closed at least two dozen locations during the past two years — including one in Bethesda, Maryland, that shuttered Christmas Eve.

And national chains California Pizza Kitchen, Friendly’s, Logan’s Roadhouse, Pie Five, Ruby Tuesday, and Sweet Tomatoes also closed locations last year.

Joe Walch, a manager at Logan’s Roadhouse in Bull Run, Virginia, said he’s hiring servers and customer volume has been “up and down” lately.

“When there are reports of higher cases, it tends to keep people away more,” Mr. Walch said. “And I definitely notice a slower influx of job applications than what I’ve seen in the past.”

Premise CEO Maury Blackman said the survey’s results show that “customers are becoming increasingly dissatisfied as a result” of companies struggling to retain their workforces.

According to the survey, 51% of consumers said these experiences have changed their opinion about the minimum wage of restaurant workers and 64% said restaurant workers are under-compensated.

In the retail industry, 55% of consumers said the service quality has decreased at their most frequented store over the last two years and 52% said their shopping experience at their favorite store has “negatively impacted their perception of in-person shopping.”

The Premise study comes as the U.S. Department of Labor reported Wednesday that 4.3 million Americans quit their jobs in December, a slight drop from the record 4.5 million who resigned in November.

While firings and layoffs dropped to record lows, the government found 330,000 more job openings in December than November and a total of 11 million job openings that exceeded the number of people available to fill them.

Christine McDaniel, a senior fellow at George Mason University’s Mercatus Center free-market think tank, said the Premise study reinforces the trend of older workers aged 55-74 to retire even as other age groups return to work.

“There is a lot of reshuffling going on in the labor market right now,” she said. “As those workers exit, their jobs are freed up and that spurs lots of movement for existing workers. There are new opportunities for existing workers to move up or move to new jobs or industries altogether.”

Ms. McDaniel, a former U.S. Treasury assistant deputy secretary, said that’s why the leisure and hospitality industry — which includes restaurants — remained understaffed in December even as the construction and professional services industries recovered their workforces.

“The restaurant business tends to require a lot of face-to-face contacts, and that makes those jobs harder right now, wearing masks, dealing with abstinent customers, and the risk of getting COVID,” she said. “With all the movement in the labor market, there are more options these days for workers that would otherwise work in a restaurant.”

Sean Higgins, a research fellow specializing in labor and enforcement at the libertarian Competitive Enterprise Institute, said the Premise survey reflects shared unhappiness among service industry workers and customers about ordering online during the pandemic.

“For workers, taking a job as a waiter, a bartender or a cashier is riskier than ever,” Mr. Higgins said. “For one thing, you’re regularly being exposed to other people. If you’re a server or bartender, you’re nevertheless seeing fewer customers and therefore getting fewer tips.”

He said the struggle of restaurants and retailers to remain open amid reduced in-person crowds, in addition to the long shifts and hours resulting from reduced staff, have added to the discontent.

“So those workers start to look elsewhere for jobs, furthering the industry’s labor shortage,” Mr. Higgins said. “Businesses find it even harder to hire and their quality of service declines, prompting people to stay home and order online instead.”

The so-called Great Retirement also has affected the educational workforce. On Monday, the state-funded California Center on Teaching Careers launched a “we want you” campaign to address what it called an “urgent” crisis of teachers quitting the profession due to burnout during virtual learning.

Donna Glassman-Sommer, executive director of the agency that represents school districts in more than half the state’s counties, said California has more than 30,000 openings for educators due to an “onslaught of early retirements” that have negatively impacted students and their families. The campaign hopes to recruit and train replacements.

Hans Dau, CEO of the business consulting firm Mitchell Madison Group, said that retirements will have a long-term impact on these industries, the worker shortage “will be a temporary phenomenon, given the country’s attractiveness to the global labor and capital pools.”

“The tail-end of the baby boomer generation decided to retire early in the pandemic, buoyed by record stock market gains, while the GenZers started companies from home, funded by unprecedented levels of venture capital, both of which are good outcomes,” Mr. Dau said. “The overall labor participation rate today is back to about its historical trend line, and gaps in lower-skilled jobs will be filled with a mix of immigration and automation.”

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