Pandemic leads to a wage reckoning in the restaurant industry
As dining opens back up, local spots such as Pierogi Mountain, White Castle and Yellow Brick Pizza have increased wages for employees, but the idea remains controversial
In 1997, Faith Pierce got her first job at a restaurant making ice cream sundaes. Even then, she noticed pay disparities that didn’t seem to make sense. Some of the staff, mostly in the back of the restaurant, were making minimum wage with no tips. In the front, servers were making even less of an hourly wage, known as a subminimum wage, but with tips on top.
Sometimes, when business was booming, servers went home flush with cash from tips while line cooks got the same low wage. Other times, when the place was dead, servers were stuck making a few bucks an hour while kitchen staffers were grateful for their minimum wage. (Legally, a restaurant is required to make up the difference when a tipped employee’s earnings don’t meet the state minimum wage, but the law is rarely enforced.)
The pay structure, the business model — it never seemed fair, but that’s just the way it was. After countless jobs in the service industry, Pierce eventually opened up her own restaurant, Yellow Brick Pizza, with business partner Bobby Silver, and for the past 11 years, the wage inequities continued to nag at her. In the back of her mind, she’d mull over different models but never landed on a solution that felt right. Plus, new pay structures were risky. What if it didn’t work?
Then the pandemic hit.
“Having this catastrophe forced me to take some steps that I was maybe afraid of before,” Pierce said.
When Ohio’s health orders banning dine-in service went out in March of 2020, Yellow Brick shifted to a carry-out pizza shop overnight. Pierce said the restaurant laid off the front of house staff, then immediately rehired them and trained them to make pizza. Conversely, kitchen staff were trained to answer phones and use the restaurant’s point of sale system.
“Everybody very quickly got cross-trained, and everybody shared tips, because you can't just pay the counter person a lower wage and give them all of the tips for an amount of work that everyone is doing together,” Pierce said. “We started hiring people at a higher wage and training them around the different stations in the restaurant, and then everybody splits the tips. … Right now, nobody at Yellow Brick makes less than $15 an hour after tips, and it's been that way since the pandemic started. I cannot ask these people who have stuck with us through this ordeal to suddenly return to a pay structure that's not equitable and doesn't value their labor. So we are going to make it work. We're going to continue this model where everyone is sharing tips.”
Yellow Brick isn’t the only local restaurant rethinking pay structures and landing on a higher wage for its workers. Recently, Pierogi Mountain made headlines after announcing it would pay all employees at least $15 an hour. “Anybody making less than a living wage, it's just ridiculous anymore, and I think it's time for employers to evaluate [their situation] and do whatever they can to get there,” Pierogi Mountain co-owner Matthew Majesky told Alive last month. “I think it's important for us as an industry to reevaluate how we value our people. … It should keep you up at night if your people can't afford to pay their rent.”
Earlier this week, Columbus-based fast food chain White Castle followed suit, announcing it would raise employees’ starting hourly wage to $15 an hour locally in hopes of hiring 100 more workers. (Most Columbus White Castle employees previously started at $11.50.) In Ohio, the minimum wage is $8.80 an hour for large employers and $7.25 an hour for small employers; the subminimum wage (for employees who receive tips) is $4.40 an hour. At the federal level, the subminimum wage is $2.13 an hour.
Raising hourly wages to $15 is a national conversation, with a particular focus on the service industry, where staff shortages are hurting restaurants still struggling to bounce back after more than a year of upheaval. Earlier this year, Democrats reintroduced the Raise the Wage Act, which would increase the federal minimum wage to $15 an hour by 2025.
The idea remains controversial. While representatives of White Castle and smaller, independent restaurants like Yellow Brick and Pierogi Mountain agreed to speak to Alive about the topic of employee wages in recent weeks, larger local restaurant groups such as Cameron Mitchell Restaurants, Corso Ventures and Northstar Café all declined to comment for this story, as did the Ohio Restaurant Association.
Earlier this year, the National Restaurant Association came out against the Raise the Wage Act. “A nationwide increase in the minimum wage will create insurmountable costs for many operators in states where restaurant jobs are most needed for recovery,” a spokesman said in a statement earlier this year.
But after a pandemic year when hospitality employees were deemed “essential workers,” Pierce and others said the industry is overdue for a reckoning on wages. “I think it's time that we treat the people that make and serve us our food with dignity and start considering it an industry that is a legitimate profession,” she said.
Transparency and education as a way forward
Profit margins are slim in the restaurant industry — often between 3 and 6 percent, which makes many restaurant owners hesitant to increase costs sharply, especially when the hospitality industry is still trying to zero out accumulated debts from a tumultuous year.
Plus, more money for workers can mean higher menu prices for customers. At Pierogi Mountain, for example, Majesky estimated the average customer will see about a $1 increase in their food orders. And Jamie Richardson, a vice president at White Castle, said that when costs go up, menu prices often follow. “There are going to be pressures on menu pricing that will increase the cost of menu items for most people in most cities,” Richardson said.
Sangeeta Lakhani, former chef-owner at The Table and cofounder of local hospitality industry nonprofit Service!, doesn’t have a problem with raising prices on menus. In fact, she thinks it needs to happen. “The way things stand right now, I don't see how people will pay [employees] more and be able to still run a profitable business. I think what needs to happen is a systematic change from the bottom up. People need to recognize that food costs money, and prices across the board need to go up,” Lakhani said. “You can't make and sell a sandwich for $10 that's actually costing you $14 and still be able to pay somebody $15 an hour.”
Lakhani said the change can’t happen overnight, though, and it has to be coupled with transparent communication. “We need to educate our customers on why it costs so much to put food out, especially for the clientele that wants to go eat at Polaris or the Short North. I mean, those rents aren't cheap!" she said. "Talk about it. There's no shame. There's nothing to hide."
Pierce echoed the sentiment. “People have to know,” she said. “If they're going to accept the higher cost of eating out, they need to know why.”
Part of that education also involves explaining the differences between small, independently owned restaurants and huge national chains. “The customer doesn't understand the difference between why the costs are different for a small restaurant as opposed to a franchise or a larger restaurant group that is buying food in bulk and their costs are lower,” Lakhani said.
That transparency should extend to a restaurant’s employees, too, Lakhani said.
“[Restaurant owners] separate our business so much from the staff. You don't want them to know how much you made or your profit margin or your loss,” Lakhani said. “What I learned at The Table is that the more I educated my staff, and the more my books were open to them, the harder they worked to keep labor costs down and to keep food costs down, because they saw how it was affecting their raises.”
Gender, race and government advocacy
Others are looking to tackle the wage issue through political advocacy on a national level. RAISE, which stands for Restaurants Advancing Industry Standards of Employment, is a network of more than 1,000 restaurants around the country that prioritize race and gender equity, with a focus on improved working conditions for service industry employees. RAISE is part of the High Road Restaurants group and an affiliate of One Fair Wage, which supports raising the federal minimum wage and eliminating the subminimum wage. “We want $15 with tips on top,” said RAISE co-director Jeanie Chun.
According to Chun, the restaurant industry encounters three times the rate of poverty as any other sector and uses food stamps at twice the rate of any other sector. But it’s not just a money issue. Chun said wage inequities in the service industry are also directly related to gender and racial inequities.
According to One Fair Wage, 68 percent of tipped workers are women, and the restaurant industry has the highest rates of sexual harassment of any industry. “As a young woman, you are getting all of your money from your customers. That is who is paying your bills. That is who is paying your rent, who is feeding you. And so you subject yourself to horrific conditions and mistreatment because you don't have a choice,” said Chun, who noted that in the seven states that have gotten rid of the subminimum wage (requiring employers to pay the full minimum wage instead), sexual harassment claims decreased by 50 percent.
The wage issue is also a race issue, Chun said, because of the way the service industry is segregated. Looking at the sector in terms of casual and fine dining restaurants, the majority of workers at casual restaurants are populated by people of color, which pay lower wages than fine dining, Chun said. Fine dining restaurants also tend to be racially segregated, with a majority of white employees in the front and mostly people of color in the back.
“In raising the wage to $15 an hour and eliminating the subminimum wage, what we're doing is protecting the people of color so that their base rate is above poverty wages,” said Chun, who emphasized that “there’s no social justice without wage justice.”
While movement on an increased minimum wage seems to have stalled at the federal level, in Ohio, state senators Hearcel Craig and Cecil Thomas presented a bill in March that proposed increasing wages to $15 an hour by 2025.
“We are exploiting our workers because of the way that the system is currently set up. It's broken, and COVID has given us the opportunity to all stop and fix it together, and I think that the best way to do that is the policy change that starts with raising the wage,” Chun said. “Matthew Majesky from Pierogi Mountain, he's able to make it work, which is fantastic. But it would be so much easier for him if everybody had to do it.”
A pivotal moment
Outside of a policy change, restaurants in Columbus are left to figure out wage issues on their own. At Yellow Brick Pizza, rate of pay is based on general knowledge of different stations within the restaurant. “It works for us because it's a little simpler. It's not fine dining,” Pierce said. “There’s definitely not a one-size-fits-all solution to the problem, but it's working for us.”
Pierce is also thinking through a possible system where employees split tips but get commissions on sales (“The person who's hand-selling that bottle of wine gets a small commission from that bottle of wine”), but she hasn’t implemented it yet. And she knows there are risks and costs associated with the commitment to pay employees more. “For us as owners, that means making a little bit less money, and that's OK,” she said.
At White Castle, the pay increase in Columbus, which was preceded by a similar raise in Detroit, has already led to more applications for the 100 local positions the company is hoping to fill. "We're not intending this as an experiment. This is intended to be our starting pay,” Richardson said. “If we want to say we've got values, then we need to live them.”
While industry-wide change could come down the road, most service industry workers interviewed agreed the pandemic has provided a unique moment for a rethinking of wage issues in the near term. “I've been holding on to the hope that this [pandemic] is the catastrophic event that we, as an industry, needed so that all of our flaws, all of the dysfunction, could be laid bare for everyone who appreciates and uses our industry but has maybe never experienced it from the inside, so they can see and maybe come to the realization that, ‘Hey, this has got to change,’” Pierce said.
“From the people I speak with in our community in Columbus, there is definitely an awareness, and people are starting to say, ‘OK, we do need to pay more, and we do need to make these changes.’ But I hope there's legs to that. I hope it's not just a momentary reaction,” Lakhani said. “It's different for everyone, but everyone has to make the change. Otherwise, nothing changes.”