Pete DeQuattro felt overworked and underpaid. After nine months of unemployment, he was finally working at a downtown Memphis restaurant and bar. But he was making around $2 an hour less than he did at his previous eatery job, where he was a cook before the pandemic hit and it closed.
So one Sunday last month, DeQuattro approached management with an ultimatum: Bump his pay from $12 to $15, or he’d put in two weeks notice. He was fired that Wednesday, he said.
But the next day, he interviewed for and accepted a job as a cook at another downtown restaurant at $15 an hour.
DeQuattro doesn’t remember exactly what he said in his interview when pay came up, but he remembers the gist. “The point was basically: I’m worth a living wage,” he said.
Hospitality workers like DeQuattro are finding a curious thing happening as they re-enter the job market after losing employment during the coronavirus pandemic. After a year of feeling undervalued, unsafe and overworked, they now see a high demand for their services, often at competitive wages and benefits. Suddenly, they have what appears to be the upper hand in the labor market.
Reopening hospitality and retail businesses are desperately searching for staff and are even increasing wages, while some former employees are transitioning to more stable industries like logistics and warehouse work. According to May 2020 estimates by the U.S. Bureau of Labor Statistics, the average restaurant server in Memphis made just over $20,000 a year compared to around $31,400 for hand laborers and material movers.
While corporations such as Amazon and FedEx and their massive operations in Memphis supplement pay with benefits such as health insurance, tuition assistance and sign-on bonuses, independent restaurants don’t regularly offer those things, workers and industry experts say.
Restaurants had to cut staff as people stopped eating out or businesses were mandated closed at the beginning of the pandemic. Now, many are short-staffed and are begging for employees.
Some employers have put the blame squarely on people being unwilling to work, thanks to unemployment insurance checks. The economy only netted 266,000 jobs last month, leading the U.S. Chamber of Commerce and some Republicans to ask Congress to end the extra $300 a week in federal unemployment payments that were extended in President Joe Biden’s American Rescue Plan in March. Some Republican governors, including Tennessee Gov. Bill Lee, have done so.
Calling the programs “short-term, federal fixes” in a press release, Lee said Tennessee was turning down the benefits because there are 250,000 jobs open across the state. The extra benefits will end July 3.
Unemployment in the state was around 5% in March, though it was 6.8% in Shelby County.
Research does not support the belief that unemployment payments prevent people from seeking work, said Pamela Loprest, a senior fellow and labor economist in the Income and Benefits Policy Center at the Urban Institute, an economic and social policy research think tank. There is no evidence of a widespread phenomenon of people refusing to work because they’re getting government aid, she said.
Those who are relying on unemployment insurance tend to be very low-wage workers for whom the extra $300 a week makes a big difference, Loprest said. If an employee finds it makes better financial sense to rely on federal pay they know is temporary than return to a workplace they might find unsafe or that has few benefits, “that means you’re paying a fairly low wage.”
Studies of the original $600 enhanced unemployment benefits that started in March 2020 back the idea that the extra money didn’t stop people from seeking work, and that ending the payments didn’t encourage people to look for jobs.
In Tennessee, eligible unemployed workers can currently earn up to $275 a week for 26 weeks in state unemployment, with the $300 in federal payments bringing the total up to $575 a week. At 40 hours a week, that works out to just over $14 an hour. The state legislature voted May 5 to raise the benefit by as much as $50 but limit the payout period to as few as 12 weeks, starting Dec. 2023.
According to the Massachusetts Institute of Technology’s Living Wage Calculator, a living wage for one adult with one child in Shelby County is $26.52 an hour. But the minimum wage remains $7.25, with the tipped minimum wage at $2.13 an hour. MIT estimates that the required annual income for the same adult after taxes is just under $47,500, yet the typical annual salary for “food preparation and serving related” jobs is less than half of that, at $20,420.
Back-of-house workers – cooks, chefs and dishwashers, for example – are generally paid an untipped wage. Front-of-house workers – including servers, bussers, bartenders and hosts – are typically paid the tipped minimum wage, which in Tennessee is among the lowest in the nation. The tipped minimum wage can be lower than the federal hourly minimum wage because it relies on tips to make up the difference.
Calculating benefits and drawbacks
The federal government’s April jobs report shows the leisure and hospitality industry added 331,000 jobs last month, with more than half the gains in restaurants and bars. And even though the industry added 5.4 million jobs over the past year, it’s still down 2.8 million jobs or just under 17% from before the pandemic.
As the hospitality industry lost jobs last year, logistics and warehousing saw gains. The recent jobs report showed that air transportation and warehousing added 126,000 jobs between February 2020 and April 2021, while almost every other industry experienced net losses.
People have individual scales of the benefits and drawbacks when considering whether to return to work and where to look, Loprest said. Right now, those drawbacks – including safety worries from the virus, low tips, lack of childcare and unstable hours – might outweigh the benefits of a hospitality job.
With each wage increase, more and more people are more likely to change their personal calculus and return to work, Loprest said.
“There’s a continuum, so every person is making their own decision based on their own circumstances. And it’s a combination of whether they’re getting unemployment, their kids, their safety – all of those things figure in.”
Supply and demand
Mike Miller, president of the Memphis Restaurant Association, agrees that unemployment benefits aren’t the main driver of staffing shortages. Wages across the city have increased for back-of-house employees over the past 18 months by a dollar or two an hour, but pay alone won’t be enough of an incentive for workers, he said.
The reputation of ownership and how staff are treated affect whether employees want to work at a business, Miller said. The combination of incentives offered – including competitive pay, vacation days, health insurance, and signing bonuses – are all draws for workers, and many Memphis restaurants are offering them to potential employees, he said.
DeQuattro found being fired after asking for a raise especially galling since his restaurant was already operating on a “skeleton crew,” he said.
“Now not only you gave me this curveball but now the rest of the back of the house has to pick up the slack and then maybe you’re going to be paying overtime until you hire somebody too. It just seems foolish.”
But DeQuattro recognized that as an experienced cook in an industry desperate for workers, he had options. In conversations with other hospitality workers, they’ve acknowledged the market has shifted to their advantage, he said.
“This is a supply and demand. There is a low supply of workers and a high demand for them. Ergo, you pay them more money,” he recalled a labor organizer friend telling him.
Front-of-house workers are also finding they’re wanted. Chris Cleasant loved making his favorite cocktails, old fashioneds and Sazeracs, at his pre-pandemic job as a head bartender at the Holiday Inn University of Memphis. At $10.80 dollars an hour, plus tips, he felt he was paid well and enjoyed his work.
He was furloughed last year in March. That June – on his 15th work anniversary – his position was eliminated. He received $875 a week in unemployment benefits from April through August, until he got a bartending job at Curfew downtown, which opened in September. The work was enjoyable and he was excited to meet celebrity chef Fabio Viviani, but even with larger tips, the pay of $2.13 an hour was a severe pay cut.
He fell one month behind on rent, his car broke down and he found it a struggle to pay bills. In February he left that position and got a job distributing beer for $13.50 and soon a raise to $15 an hour.
Last week, itching to return to bartending, he went to a job fair held by Memphis Tourism at the Renasant Convention Center downtown where nearly 50 employers set up tables. The flow of job seekers was constant, but light. Some employers, like the Hyatt Centric on Beale Street, were hiring on the spot.
Cleasant applied to the Hyatt, interviewed and was offered a position as a bartender – all before noon.
He is still considering his options and has an interview scheduled at another establishment, he said Wednesday. At the Hyatt, he was offered a position at one of the hotel’s two bars, making $9 plus tips, with health, dental and vision benefits, he said.
“If something’s your passion, you should still go for it,” Cleasant said about bartending. “It’s alright to take a look to see what’s out there, but your passion’s going to call you back.”
Changing jobs ‘out of necessity’
It’s possible that a mismatch in the labor market is contributing to the shortage, Loprest said. Some workers may have simply shifted industries as the pandemic forced some businesses to reduce staff, hours or close for good.
Miller suspects the logistics and warehousing industries, which exploded in 2020 as Americans turned to online shopping, might have been big draws for Memphis employees. Large companies like Amazon and FedEx are offering at least $15 an hour across the board as a starting salary. Though they come with their own host of labor-related concerns, some workers may have found stability or better pay there, Loprest and Miller said.
From September through December, when the company does the bulk of its hiring, just over 3,380 people were hired across the city, said a FedEx spokesperson. Some of those workers are part-time or temporary, but many stay on as full-time employees after the holidays, the spokesperson said.
“I don’t think there’s any way you could slice it and say otherwise. … We lost people to that industry out of necessity,” Miller said. “It’s not like you can blame them (the workers) for doing that but it is a fact of life at the moment,” Miller said.
Increasing base wages – the pay front-of-house staff makes before tips – is a fine line between what employers can afford and what the market demands, said Miller, who also owns Patrick’s Neighborhood Bar and Patio in East Memphis. He argued that with thin margins, increasing pay from $2.13 to $15 or even $10 an hour wouldn’t be feasible for most independent restaurants, and small increases in pay aren’t as big a draw for workers as big tips are.
DeQuattro, the cook, said that might be true, but even raising wages to $5 an hour at 40 hours a week would increase servers’ pay by just under $115 before taxes. It might be a small bump, but every bit can help.
“Take care of your workers,” he said. “If you take care of your workers, then they’re going to stick around.”
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